What Is the Difference In a Closed and Recorded Mortgage?

Closing

During the closing process of the loan, you and the current owner of the property must sign documents enabling the property to change hands. You must also sign documents to secure the financing on the property. If you are buying a home, the title agent who oversees the loan closing must transfer funds from you or your lender to the seller. If the seller makes any concessions to you, these funds must also change hands during or immediately after the closing. The loan has closed once funds have changed hands and paperwork has been completed.

Your lender or the title agent that oversaw the loan closing must take the signed loan documents to the county clerk. The clerk must inspect the documents and ensure all the documents were signed correctly. If any signatures are missing then the clerk will reject the documents and the lender must contact you and if applicable, the seller, to make the necessary corrections. If the loan documents are in order, then the clerk will file the documents in the county records. Documents are recorded once filed with the county.

When you refinance your primary residence, federal law entitles you to a three-day right of rescission. This means that you can cancel the loan any time in the three business days following the loan closing. However, the three-day right of rescission normally does not apply if you refinance with the same lender unless you receive cash back in which case you have a three-day right of rescission for that portion of the loan. The loan officially takes effect after midnight on the third business day after you sign the loan documents. Lenders do not record refinance loans until this three-day period has passed because you cannot record a loan that has yet to take effect. You have no right of rescission for a purchase mortgage or a mortgage on a non-primary residence.

Mortgage documents are recorded so the lender can prove that you agreed to have a lien placed on your home. If you default on the mortgage, the lender uses the recorded mortgage lien as the basis for the foreclosure filing. If you sell your home or attempt to refinance it, title agents check the county records to find out about any liens on the property. If liens were not recorded, people would have no way of knowing about liens, and legal disputes could arise between current property owners, former property owners and lien holders.