April 9, 2021
I. Eligibility requirements
This is a list of the requirements that your loan account and your property must meet before we can approve a land transaction and issue a partial lien release. Note: Some of these requirements may not apply to requests for easements or rights-of-way. Be sure to check with your real estate attorney or title agent if you have questions.
Before we can process a land transaction:
- At least 12 months must have passed since your loan was originated.
- Your loan must be current (that is, your account cannot have been more than 30 days past due at any time in the previous 12 months). Exceptions: Easement, right of way, eminent domain, or correcting a legal description.
- No obligated borrower (i.e., someone whose name is listed on the mortgage contract) can be released from their liability on the loan.
- The priority of the mortgage lien cannot be affected by a subordinate lien.
- The reduction in value of the property that remains after the transaction is complete cannot be greater than the amount of any cash consideration (i.e., the amount of money you get paid in the transaction).
- The property must remain accessible by public roads.
- When you subtract the costs of completing the transaction from the amount you get paid, you must either:
- Apply the remaining funds to reduce your unpaid principal balance (UPB), or
- Use the money to improve your property after the transaction is finalized.
- The cash consideration must be equal to or more than the fair market value of the part of your property being released from the lien.
- Your loan and your property must maintain an acceptable loan-to-value (LTV) ratio (the amount you owe on the loan divided by the property’s appraised value). When your lender releases their lien on part of your property, it changes (and often reduces) the value of the remaining property—which increases the financial risk associated with your mortgage loan. Because your lender needs to minimize their risk, your LTV ratio must be acceptable to them. The ratio of your unpaid principal balance—less any cash consideration—to the value of the property that secures your mortgage after the release must not be greater than the LTV ratio before the release. Your required LTV ratio depends on who underwrites your mortgage. For example:
- Fannie Mae (FNMA) or Freddie Mac (FHLMC) loan: Before we can grant a partial lien release, you must reduce your UPB by enough to maintain your loan’s LTV ratio—unless your current LTV ratio is 59% or less.
- S. Department of Veteran’s Affairs (VA) loan: You must apply the cash consideration you receive from the transaction to reduce your UPB—unless your current LTV ratio is 80% or lower.
- S. Department of Agriculture (USDA) loan: No specific LTV ratio is required, but you must receive adequate compensation as part of the transaction. You must also apply the money you receive from the transaction to either: A) Reduce your UPB, or B) Improve your property. Note: You will receive no cash in hand from the transaction unless you pay your UPB in full.
- Non-government loan: LTV requirements vary from lender to lender. We’ll work with your lender to determine your loan’s specific requirements.
II. Appraisal requirement
We require an appraisal of your property to determine its value before and after the transaction. We then use that value determination to calculate any principal reduction that you may need to pay to get a partial lien release. Note: Do not order your own appraisal; we will arrange it.
- The appraisal will cost about $1,200, but that can vary depending on local market conditions. We’ll inform you if it costs $1,200 or less, but we’ll contact you to make sure you want to proceed if it costs more than $1,200.
- Appraisal costs are non-refundable. We’ll charge the costs to your loan account regardless of whether we approve or deny your release.
III. Document requirements
This is a list of the documents you need to collect, complete, and return to us before we can review or approve your land transaction and issue a partial lien release. Note: Depending on your specific type of land transaction, you may need to submit fewer (or more) documents than the ones listed here. We recommend that you meet with your real estate attorney or title agent to determine exactly which documents you need, but this is the basic set of documents we require from you:
- Land Transaction Request Form. This Shellpoint form must be completed to make your official request for a partial lien release.
- Third-Party Authorization Form. To ensure your privacy, we need your written consent to discuss any non-public information about your loan. Download a copy of our Third-Party Authorization Form.
- Sales contract. A copy of the sales agreement between you and whatever person or organization you’re selling part of your property to. The contract must be complete, and must clearly describe any cash consideration.
- Survey or plat map. A copy of the official property survey or plat map, as created by a licensed surveyor. The survey must clearly identify:
- Your property’s boundary points and the distances between them.
- Your property’s complete dimensions (in square footage or acreage) and the location and description of any previous or planned improvements.
- The land to be released and the remaining property still secured by the lien.
- The dwelling location.
- Release instrument/modification agreement. A copy of the release instrument or modification agreement. Your real estate attorney or title agent must prepare this document, and it must include the following information:
- A specific clause. At the appropriate place (as determined by your attorney or title agent), the document must include this exact wording: “It is expressly understood that the release of said parcel from the lien shall not in any way affect the lien of said deed of trust/mortgage upon the remaining land subject to the deed of trust/mortgage.”
- Names and dates. The document must include your name(s), the lender’s name, the original mortgage closing date, the original mortgage recording date, and the volume/page number/document number of the mortgage in the county recorder’s office.
- Ownership statement. A statement that the entity or person executing the release is the current holder, owner, assignee, or successor of the lender’s interest in the mortgage.
- Property description. A legal description of the property being released from the mortgage lien.
- MERS (Mortgage Electronic Registration System) requirements. If the deed of trust/mortgage uses MERS-related language, the release instrument/modification agreement must follow MERS documentation requirements.
- Additional document requirements. Depending on what company or organization underwrites your mortgage loan, you may need to send us additional documents. Your attorney or title agent will tell you what else you may need. Examples include:
- FNMA Form 236. If Fannie Mae underwrites your loan, you must fully complete, sign, and send us Fannie Mae’s Application for Release of Security Form (Form 236).
- USDA forms. If the USDA underwrites your loan, you may also need to complete certain forms and provide us with additional documents. Depending on where your property is located, your real estate attorney or title agent will explain what you need and will help you collect and complete any required forms and documents.
- Title insurance policy update. Depending on the details of your partial lien release, we may need to update your original title insurance policy to reflect the change in your property. If an update is needed, we’ll take care of it. The cost will range from $75 to $150, and we’ll charge it to your mortgage account.
- Proof of recordation. After we approve your partial release, your attorney or title agent will help you get the transaction recorded at your county recorder or land records office. Then you will need to send us a copy of the recorded document(s).