N.Y. Real Property Law § 275: Certificate of discharge of mortgage required

§ 275. Certificate of discharge of mortgage required. 1. Whenever a

mortgage upon real property is due and payable, and the full amount of

principal and interest due on the mortgage is paid, a certificate of

discharge of mortgage shall be given to the mortgagor or person

designated by him or her, signed by the person or persons specified in

section three hundred twenty-one of this chapter. The person signing the

certificate shall, within thirty days thereafter, arrange to have the

certificate presented for recording to the recording officer of the

county where the mortgage is recorded. Failure by a mortgagee to present

a certificate of discharge for recording shall result in the mortgagee

being liable to the mortgagor in the amount of five hundred dollars if

he or she fails to present such certificate within thirty days, shall

result in the mortgagee being liable to the mortgagor in the amount of

one thousand dollars if he or she fails to present a certificate of

discharge for recording within sixty days and shall result in the

mortgagee being liable to the mortgagor in the amount of one thousand

five hundred dollars if he or she fails to present a certificate of

discharge for recording within ninety days. For the purposes of such

liability under this subdivision, the term "mortgagee" shall not include

a person, partnership, association, corporation or other entity which

makes less than five mortgage loans in any calendar year. The provisions

of this section shall not apply to any mortgage granted to or made by

the state of New York, or any agency or instrumentality thereof or any

political subdivision of the state or any agency or instrumentality

thereof.

2. (a) For purposes of this section, the full amount of principal and

interest due on a mortgage shall not be considered to be paid whenever

such mortgage continues to secure a bona fide debt and an enforceable

lien continues to exist, such as may occur in the following situations:

(i) the commercial practice of lenders trading or selling mortgages on

the secondary market;

(ii) the replacement of a construction loan with permanent financing;

(iii) the refinancing of an existing loan with a new lender, such as

where the original lender assigns a note and the mortgage securing its

payment to another lender in return for consideration and such mortgage

is consolidated with another mortgage which secures any funds advanced

by the new lender to the mortgagor;

(iv) the modification of the terms of a loan by a mortgagor and

mortgagee in order to avoid foreclosure; and

(v) a refinancing that occurs in conjunction with the sale of property

such that the seller conveys property to the purchaser subject to the

lien of the mortgage and the original lender assigns its note and

mortgage on the property to the purchaser's lender.

(b) No mortgagee shall return, destroy, or otherwise refuse to accept

a payment made pursuant to the terms of a payoff letter, including but

not limited to terms regarding the location and the manner of payment

specified by the mortgagee, even if such payment does not cover the full

amount of principal, interest, and any other amounts due and owing under

the mortgage, provided, however, if there is a defect with the payment

that prevents the mortgagee from identifying with reasonable diligence

the mortgage for which such payment is made, the mortgagee may refuse to

accept such payment and return the payment to the remitter. The

mortgagee shall apply such payment to the unpaid principal, interest or

any other amounts due under the mortgage, provided that a payment made

pursuant to a payoff statement shall not result in the issuance of a

certificate of discharge of mortgage pursuant to subdivision one of this

section or in the execution of a satisfaction of mortgage pursuant to

subdivision one of section nineteen hundred twenty-one of the real

property actions and proceedings law unless the payment covers the full

amount of principal, interest, and any other amounts due and owing under

the mortgage.

3. Except with respect to the assignment of a mortgage in connection

with a transaction described in subparagraph (i) of paragraph (a) of

subdivision two of this section, in order to record an assignment of a

mortgage there must be set forth in the assignment document or attached

thereto and recorded as part thereof a statement under oath signed by

the mortgagor or any other party to the transaction having knowledge of

the facts (provided such other party asserts such knowledge), that the

assignee is not acting as a nominee of the mortgagor and that the

mortgage continues to secure a bona fide obligation. With respect to the

assignment of a mortgage in connection with a transaction described in

subparagraph (i) of paragraph (a) of subdivision two of this section,

such assignment shall contain the following statement: "This assignment

is not subject to the requirements of section two hundred seventy-five

of the Real Property Law because it is an assignment within the

secondary mortgage market."