# Legal Question: documenting mortgage payoff receipt **URL:** \ **Category:** In My Humble Opinion\ **Created:** [November 7, 2017, 5:47pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982 "2017-11-07T17:47:57Z")\ **Posts on this page:** 12\ **Page:** 1
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [November 7, 2017, 5:47pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/1 "2017-11-07T17:47:57Z")
Here’s the situation: You loaned Person A $100K in exchange for a mortgage on his property. Later, Person B, an associate of A, pays off that mortgage - he presents you a $100K from the account of an entity he controls, you deposit the check and weeks later everything has cleared and should be good. Now B asks (on behalf of A) for you to sign off on the “Discharge of Mortgage” document. Problem is that there’s no documentation that the check you received was in payment of the loan. So in theory, someone could come along and claim that that $100K check was a new loan from that entity (which as it happens is an entity which does make loans) which you need to pay back, and has no connection to the mortgage loan. At that point you would want to turn around reclaim your mortgage on the original property, but you’ve already signed a discharge of that mortgage. Is this an issue? ---
**Author:** ![Moriarty](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/moriarty/32/49_2.png) [@Moriarty](https://boards.straightdope.com/u/Moriarty)\ **Post date:** [November 7, 2017, 5:58pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/2 "2017-11-07T17:58:58Z")
That’s why you deliver good funds (i.e. a wire, not a check which must still clear a bank) in exchange for a signed Discharge at the moment of payoff. Or you document the payoff with a “payoff letter”, which should include instructions on how to associate the payoff with the account, and then follow those instructions when delivering the payoff (i.e. the memo on the check should, at a minimum, say “payoff of loan #…” or “satisfaction of mortgage held by X on Y property”). Paper trails are your friend. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [November 7, 2017, 6:35pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/3 "2017-11-07T18:35:21Z")
> [@Fotheringay-Phipps](#): > > Problem is that there’s no documentation that the check you received was in payment of the loan. So in theory, someone could come along and claim that that $100K check was a new loan from that entity (which as it happens is an entity which does make loans) which you need to pay back, and has no connection to the mortgage loan. At that point you would want to turn around reclaim your mortgage on the original property, but you’ve already signed a discharge of that mortgage. When you send the Discharge of Mortgage document, can’t you just also send some kind of statement that shows the last X months of payment, and would indicate that the check you got was payment for the mortgage? And if someone were to try to claim that they $100k check was actually a loan to you, where’s their paperwork that you agreed to take out a loan in that amount or that you’d pay them back? ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [November 7, 2017, 8:36pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/4 "2017-11-07T20:36:02Z")
As the esteemed **iamthewalrus(:3=** says, this part is pure fantasy: > [@Fotheringay-Phipps](#): > > … > So in theory, someone could come along and claim that that $100K check was a new loan from that entity (which as it happens is an entity which does make loans) which you need to pay back, and has no connection to the mortgage loan. > … Anyone can make a crazy claim against anyone else at any time. I hereby demand that you pay me back the $100K you owe me. Right now!!! The problem is that in order for my claim to be a problem for you I have to convince some court that I’m not making this up. That’s harder than you seem to think it is. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [November 7, 2017, 8:53pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/5 "2017-11-07T20:53:35Z")
Anyone can claim anyone owes them money. But most of those people won’t have documentation in the form of them giving you a check for $100K. As I said, this is an entity which sometimes does lend people money and there’s no direct connection between the entity and the loan payoff - it’s just that it’s run by a guy who is associated with the guy who borrowed the $100K. I am not interested in ending up in court with a good chance of winning. What I’m asking is if there’s any risk or if this is something that I don’t need to concern myself with at all. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [November 7, 2017, 9:31pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/6 "2017-11-07T21:31:23Z")
If this is a real situation in the US, you do the whole transaction through an escrow company so all the relevant documents are recorded and a neutral party holds all cards until everyone has fulfilled all their obligations according to the contract that is written between each of the parties. So in this case there’d be a contract between A and you, between B and you, and between A & B. Which contract(s) would specific exactly why B is sending you money. And what you owe them in response. If you’re trying to ask “Can I just ignore all the paperwork and do this on a handshake to save $100 in fees and have it all work out OK?”, the only possible answer is “Maybe. Do ya feel lucky? Well do ya?” ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [November 7, 2017, 10:00pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/7 "2017-11-07T22:00:09Z")
> [@Fotheringay-Phipps](#): > > I am not interested in ending up in court with a good chance of winning. What I’m asking is if there’s any risk or if this is something that I don’t need to concern myself with at all. There’s nothing that you can do that will straight-up prevent someone from filing a lawsuit against you. But when they make a demand that you pay back the money, and then you send them a letter showing the original loan from you, your copy of the discharge document and the date that coincides with the check you cashed, and that you deny that you owe them any money and require that they provide proof of a loan made to you, well. Anyone sane is going to look at their records and realize their mistake, right? ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [November 8, 2017, 12:36am UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/8 "2017-11-08T00:36:17Z")
IANAL, but I would assume that they would need a loan note signed by you saying that you borrowed the money. You don’t just give someone a check with no documentation and then claim it was a loan. I would say you are overthinking this. ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [November 8, 2017, 2:53am UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/9 "2017-11-08T02:53:00Z")
This would be easily dealt with by the extremely common practice of you giving Person B a dated receipt: > [@](#): > > I hereby acknowledge receipt from Person B of a check in the amount of $US 100,000, in full satisfaction of the mortgage I hold, granted to Person A on date so-and-so, secured by property such-and-such. Both you and Person B sign this; each receives a copy. ---
**Author:** ![UDS](https://avatars.discourse-cdn.com/v4/letter/u/ecae2f/32.png) [@UDS](https://boards.straightdope.com/u/UDS)\ **Post date:** [November 8, 2017, 4:30am UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/10 "2017-11-08T04:30:25Z")
> [@Fotheringay-Phipps](#): > > Here’s the situation: > > You loaned Person A $100K in exchange for a mortgage on his property. Later, Person B, an associate of A, pays off that mortgage - he presents you a $100K from the account of an entity he controls, you deposit the check and weeks later everything has cleared and should be good. Now B asks (on behalf of A) for you to sign off on the “Discharge of Mortgage” document. > > Problem is that there’s no documentation that the check you received was in payment of the loan . . . . Ask B to put his request for an executed discharge document in writing, referencing the repayment of the loan which he effected. Problem solved. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [November 8, 2017, 2:36pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/11 "2017-11-08T14:36:20Z")
Thanks a lot, guys. I spoke to my brother who is a lawyer who deals with a lot of this type of thing, and he agreed that I didn’t need to worry about it. (I had sent him an email before starting this thread, but he’s been extremely busy this week and didn’t get back to me for a while.) Thanks again. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 8, 2017, 4:20pm UTC](https://boards.straightdope.com/t/legal-question-documenting-mortgage-payoff-receipt/800982/12 "2017-11-08T16:20:31Z")
Generally speaking, if there’s no promissory note, there’s no loan; the money is presumed to be a gift.