Shuttered Recording Offices Delays Loan Closings Nationwide

Although home buying has fallen victim to the pandemic-related economic stop, mortgage refinancing had previously increased for the first time in three weeks, especially from buyers wanting to refinance during these record low-interest rates. That’s the upside.

But the downside is that social distancing and quarantines during the coronavirus pandemic, for many, spring home-buying plans have been put on hold. And now as all non-essential employees in New York and other states have been told to stay at home, governmental recording offices that are vital to the title or deed searches required for buying and refinancing of homes have also been shuttered. This couldn’t be happening at a worse time.

As of now, approximately 1000 of the country’s 3,600 recording offices have shut down or have curtailed their operating hours, according to the American Land Title Association. Many of those loans processed in the last few weeks are scheduled now, and most lenders require a title search for refinancing. Although about 2,100 of these 3,600 offices allow for electronic filings, a human being has to process a deed in a timely manner to avoid a lender potentially being spooked by the possible appearance or even the suggestion of fraud. Understand that without the official public record, a conniving seller could technically sell the same house twice.

So we now have a perfect storm scenario. To date, according to the Mortgage Bankers Association, applications for refinancing jumped 26% during the final week of March 2020, that’s 168% higher than this time last year. With recording offices closed and no humans to process loan applications, there’s a severe backlog in the already crowded pipeline.

While there has been some talk about the creation of an online notarization system to support video conferencing as about half the state allows notaries to do their job virtually, no one wants to risk any system that is also prone to fraud.