EMINENT DOMAIN

							OBTAINING PARTIAL RELEASE OF MORTGAGES OR PARTIAL RECONVEYANCE OF TRUST INDENTURES
UPDATE: FL, AZ Requested by: Montana Survey Deadline: August 30,2007

1. Does your state have an established $ amount (such as 10K) where any acquisition below said amount and you won't pursue a partial release? 2. How long does it take your state to obtain a partial release from a bank or lending institution? (from the time the landowner has signed the paperwork-- deed, agreement, etc. until you've received a signed partial release from the bank or trustee) 3. MDT has had considerable difficulty obtaining releases from mostly out-of-state lending institutions, especially on ones involving M.E.R.S. (mortgage electronic registration system). They all seem to have their own set of requirements and time frames for when they'll act on the request once they've received everything (such as processing fee, copy of appraisal, survey, purchase agreement, landowner release, etc.) With such delays, is your state going ahead and paying the landowner part of the negotiated compensation (before you've obtained a partial release) so the landowner has the money to perform certain cost to cures? 4. Is your state paying the total amount of negotiated compensation (to the landowner before obtaining a partial release) with the idea that if the lending institution wants part of the proceeds, they will pursue them from the landowner and not from the state? If so, are you able to still obtain partial releases in those situations? Shane Mintz, Manager Real Estate Services Section Right-of-Way Bureau (406) 444-6071 smintz@mt.gov ALABAMA ALASKA Section 6.9.1 below of the Alaska DOT Right of Way manual addresses the issue of mortgage/deed of trust releases. I understand that in some other states, there are maximum time frames set in statute in which an institution must issue a release or deed of re-conveyance. That is not the case in Alaska, so we are also at the mercy of the lending institutions. Many of our deeds of trust require that in the case of condemnation (or acquisition under threat of condemnation) that proceeds be paid to the lending institution. The anticipation of receiving a check in the mail often gives the institution an

incentive to issue the release. With regard to payment, we communicate with both the property owner and the lender and typically send the full amount for the acquisition to the lender and the cost to cure amount to the property owner. I can't provide any standard time frame for dealing with a lender but it has taken several months in some circumstances. I can't say that Alaska has had significant difficulty with this issue, but as you can see from our section on title clearance, we attempted to facilitate the process for the lower risk and lower value acquisitions. 6.9.1 Title Clearance The acquisition agent must carefully analyze every encumbrance given or listed in a current title report or provided by the owner, and make a good faith effort to clear all encumbrances noted in the title report. For instance, the property may be involved in foreclosure, divorce proceedings, or bankruptcy, or there may be a lien on the property (such as a federal tax lien filed by the IRS). If an encumbrance or break in the chain of title cannot be cleared with reasonable effort, request a review by the title examiner through the appropriate supervisor. The title examiner must make a written statement of the problem and an analysis of the potential liability to DOT&PF if the encumbrance or break is not cleared. The examiner may recommend one of the three following actions: • The agent should continue the process, with recommended instructions for clearance of specific items. • Condemnation for title purposes • No further action should be taken due to limited potential liability to DOT&PF. If the title examiner recommends that no further action be taken, written concurrence must be added to the recommendation by the acquisition supervisor, and the document must be approved by the regional chief ROW agent. The document is to be made a part of the permanent parcel file, and the item is considered to be cleared for title purposes. For acquisitions valued at $5,000 or less, it is considered unnecessary to clear encumbrances other than the current owner.

ARIZONA 1. No, there's no arbitrary amount. Decisions regarding whether to accept title subject to the satisfaction of any title requirement is made on a case-by-case basis, and evaluated on risk and liability. 2. Thirty to sixty days, depending on the lending institution, longer in some cases where lenders are burdened by their own protocols for issuing their own partial releases. 3. Absolutely not. In situations where we're unable to close escrow in time to meet the construction schedule, we typically condemn and secure possession through the court. Any funds that are released to the property owner, such as any amount

needed to perform a cost-to-cure in advance of our activities, is by subsequent agreement between the property owner and the state's attorney as a condition to possession of the property through condemnation proceedings. 4. No. Our purchase contract clearly specifies that all title requirements must be satisfied, partial releases of monetary liens included, prior to or in conjunction with the close of escrow and the disbursement of any funds. No release, no money. To do otherwise is extremely risky and puts the acquiring agency in a potential overpayment situation. Thank you for the opportunity to respond and to share our procedures. ARKANSAS 1. The Arkansas State Highway and Transportation Department (AHTD) does not obtain releases on fee simple acquisitions of $2,500.00 or less. 2. Once release requirements are submitted to the lender for processing, the AHTD allows an average 4 to 6 weeks for partial releases from out-of-state institutions. In-state mortgages normally take approximately a week to obtain a partial release. 3. The AHTD does not pay the landowner any compensation until all releases have been obtained. The property owner is kept informed throughout the process and often assists in obtaining the releases. 4. The AHTD does not pay the landowner any compensation until all releases have been obtained except for those fee simple acquisitions of $2,500 or less. If the lending institution does require some of the funds, the property owner is expected to pay those at closing. If additional information is needed, please contact: Robyn Smith, Administrative Section Head of the Right of Way Division at 501-569-2333 or Robyn.Smith@arkansashighways.com. CALIFORNIA Please find the California Department of Transportation responses to the questions posed below by Montana DOT regarding "obtaining partial release of mortgages or partial re-conveyance of trust indentures."

1. No. The California Department of Transportation does not have an established amount in which a partial release is not sought. However, we may and have taken title subject to a deed of trust or mortgage where a partial acquisition is a small part of the larger parcel, or of a nominal value. These situations are on a case-by-case basis, and normally where the lenders security for the loan is not impaired or at risk due to the proposed acquisition.

2. The normal time frame runs anywhere from 30 to 60 days, depending on the transaction. In times where obtaining a partial re-conveyance has taken longer, or times where the Department is unable to obtain the partial re-conveyance documents, we would then initiate eminent domain. 3. No. We do not pay any monies to the landowner in advance of obtaining partial releases. 4. No. Again, we do not pay any monies to the landowner in advance of obtaining partial releases. COLORADO CONNECTICUT 1. No. The ConnDot is considering proposing legislation that would permit us to do this. Nothing has been drafted to date. We do not obtain subordination agreements on nominal value "Easement" acquisitions where there are no permanent structures involved. Depending on whether we are dealing with a local financial institution or an out-of state bank, it can take as little as a week to as much as 2-3 months to obtain a partial release We do not close with the property owner until we are in possession of the partial release. If the lenders requirements are excessive or their processing time exceeds what we can afford in our project schedule, then we will proceed to acquire the property under eminent domain. We will continue to assist the property owner in applying for the monies deposited in court. If the lender wants all or part of the proceeds, we assist the property owner in satisfying the lender and obtain the partial release before we close with the property owner for any remaining funds. DELAWARE 1. $5,000 2. 6 months to a year 3. Yes. 4. No. DISTRICT OF COLUMBIA

2.

3.

4.

FLORIDA 1. No. We obtain releases for all liens regardless of their value or the size of the acquisition. 2. Our district offices tell us it normally takes six to eight weeks to receive the release. 3. We typically begin contacting lending institutions when we begin negotiations with the property owner. Our experience for partial acquisitions is that in many cases the taking does not reduce the security for the lien sufficiently that the lending institution requires payment for a partial release. When payment is required we usually pay the institution directly by separate warrant prior to closing. Where a local bank is involved we may conduct the closing at the bank and have the owner pay any monies owed the bank at closing. 4. See response for question three. GEORGIA HAWAII 1. No, although it has been considered. 2. Generally, if the lending institution is in-state, it could take approximately one month. If it is an out-of-state lender, it could take 3-4 months or longer, especially if the mortgage has been sold several times. 3. No, we will wait until the partial release has been executed by the lender. 4. No, depending on the size of our acquisition, we generally will include both the landowner and the lending institution as payee and mail the check to the lender. IDAHO ILLINOIS 1. Yes, $10,000. 2. It typically takes two weeks to one month. If the bank is out of state, it could take six to eight weeks. 3. No, we do not pay any part of the negotiated compensation before the release is obtained. 4. Both the property owner and the lending institution are co-payees on the warrant (over $10,000), unless the department receives a letter from the bank stating that they do not wish to be compensated. The amount of the split is determined between the bank and the property owner.

INDIANA 1. $20,000. Owner is provided a statement advising them to contact their mortgagee to see if they require part of the proceeds. Some mortgages, such as an FHA loan, have terms that require notification of mortgagee & proceeds be applied to loan balance. 2. Average is 2 months. 3. No. INDOT doesn’t take possession until 30 days after payment. Cost to cures should be performed within this window. If conditions (such as winter weather) prevent performing cost to cures within 30 days of payment, INDOT will make special arrangements to extend the possession time frame. 4. No. IOWA 1. Generally, no release is required for acquisitions of $25,000 or less where there is clearly sufficient remaining property to protect the interest. Regardless of the amount, the mortgage holders are notified of the pending transaction. Most local institutions provide a partial release 14-28 days after the request is made. On rare occasion out-of-state institutions may take 60 days.

2.

3-4 Our payments are often co-payable to the landowner and the mortgage holder. Under some circumstances, issue separate payments. However, we've also been fairly successful in persuading some of the lenders to waive their requirements for the items they sometimes say they must have such as a survey of the remainder. We do not get a survey of the remainder. If there are excessive delays in obtaining the release, payment is still made to the landowner. In some instances, the requirement for a release is waived. Any waiver is on a case-by-case basis with full knowledge that we take a risk but there are times when we believe we can't satisfy their requirements or wait for them and that our risk is minimal. KANSAS KENTUCKY 1. There is no established set amount for pursuing a partial release. This is determined on a parcel by parcel basis and is usually determined by the effect of the taking on the subject property and whether the taking will affect the total value of the subject property. 2. The amount of time to obtain a release depends on finding the right person or bank department responsible for releases. 3. KYTC pays for the release fees to the financial firm or reimburses the property owner for bank fees.

4. KYTC does not pay the property owner before obtaining a partial release. When the bank requires part of the owner's compensation before giving a partial release, the compensation is paid to both the owner and the bank at the same time or with two separate checks upon agreement from both parties. LOUISIANA 1. We have no established amount where we do/do not pursue a partial release. We order mortgage certificates to cover 4 different circumstances: A. B. C. D. When we are acquiring the total ownership. When there are damages to the remainder. When there are major improvements in the required right of way [the parcel]. When improvements in the remainder are adversely impacted.

2. It can take months. Sometimes the mortgage holder refuses to grant partial release. 3. We do not pay the landowner anything pending the mortgage holder granting a partial release. 4. See the answer above. MAINE MARYLAND 1. Yes - Maryland does not pursue a partial release for acquisitions under $10,000. 2. We've had varied results, depending upon the lending institution. Some banks require as little as a month, while others take several months due to documentation issues. 3. No - we do not make payment until settlement occurs, which requires waiting on the partial release if necessary. We have had similar difficulties in obtaining the partial releases. 4. The landowner does not receive the entire amount if the lender requires any of the funds. We have two checks issued for settlement in this scenario or one check with both names. MASSACHUSETTS MassHighway no longer chases partial releases. We are an eminent domain state so all of our acquisitions are through condemnation. About five years ago, we determined that obtaining partial releases was too cumbersome and unnecessary. We now notify all parties in interest of the property being acquired of the pending acquisition. In the notice, we also let them know that all parties with an interest in the parcel will be named on the check unless the $$ value is less than $5,000. We also inform them that if the damage

award is less than $5,000 and they want to be named on the check, they must send us written notification of such. This policy change has worked well and eliminated mountains of paperwork. MICHIGAN MINNESOTA This is in response to your four questions listed below regarding securing partial release of mortgages. 1. No, Mn/DOT does not have a set minimum or % of a $ amount when determining to take a risk in securing a partial release or consent from a mortgagee. We look at the overall value of the property in comparison to the value of the real estate being acquired and make a judgment call on that basis as to whether or not take a risk in securing a partial release of mortgage or consent of mortgagee. Note - In the case of parcel(s) in an eminent domain action where a direct purchase acquisition is being negotiated, Mn/DOT does not risk securing a partial release or consent of mortgagee because the lending institution has already received their legal notice of the hearing on petition. 2. It depends on where the lender is located. If the lender is a local town bank generally it only takes a few days or a couple of weeks at most to secure a partial release or consent of mortgagee. If it is a major lender such as Wells Fargo, MERS, US Bank National or other out of state lending institutions, it could easily take 2-3 months to receive a partial release or consent. 3. Payments to landowners prior to receipt of a partial release or consent from a mortgagee is very minimal. Percentage wise I would say about 1% of the time. In a case such as this, Mn/DOT requires that the lender give the state a "letter of assurance" indicating that the partial release or consent has been reviewed and approved by the officers of the lending institution and will be sent to Mn/DOT ASAP. The state's warrant payable to the landowners will be in the full amount of the negotiated compensation, the mortgagee (partial releases only) will be listed as a copayee on that warrant. 4. I believe #3 above answers your question but yes, Mn/DOT pays the total amount of the negotiated compensation to the landowner before obtaining a partial release or consent from a lender as long as the lender submits in writing a "letter of assurance". It's the responsibility of the landowner and lender to work together on the distribution of the proceeds. In rare cases, some lenders will request that Mn/DOT make out a check payable directly to the lender for either a portion or the entire amount of the proceeds. In this case, Mn/DOT will require a letter from the landowner approving such distribution of payment. I hope my answers have assisted you with your concern in securing partial release of mortgages.

MISSISSIPPI 1. No 2. It generally takes 1 to 3 weeks to obtain a PR from local banks while it takes at least 3 to 6 weeks for out-of-state lending institutions and even then, it is only after major persistence from the right of way agent or closing attorney. 3. We too often have considerable difficulty obtaining releases from out of state lending institutions, but no, we do not go ahead and pay part of the negotiated compensation while waiting on the release. However, each instance is looked at individually and at times, risk management decisions are made to proceed without the release based upon amount of acquisition and minimal impact of acquisition on the remaining property. 4. No MISSOURI MONTANA NEBRASKA 1. Yes, Nebraska uses $5,000.00. 2. In Nebraska, on average it can take one-two weeks and occasionally up to 6 months to get a partial release. Also, some lending institutions will overnight the partial release. 3. We do not have any difficulty obtaining a release from M.E.R.S. or any other banking facility. Where we send M.E.R.S. partial release requests to: Release Dept., 1595 Spring Hill Rd, Suite 310, Vienna, VA 22182; (800) 646-6377 or (703) 761-1272 No, we do not pay the landowner any amount until we have received a partial release. 4. No, we do not pay the negotiated amount (to the landowner) until we have received a partial release. No, we do not pay the lending institution part of the proceeds, both names (landowner and lending institution) are on the warrant unless the lending institution states in a written letter they do not need the proceeds and it can be sent to the landowners.

NEVADA NEW HAMPSHIRE 1. $5,000.00 2. Depends on the bank, on average 60 to 90 days. 3. No. 4. No. NEW JERSEY 1. The Closing Bureau, State of New Jersey, Department of Transportation does not automatically or categorically waive the need for a partial release of mortgage based on minimal acquisition value. The Department mandates clear title on all acquisitions. We request releases on all "fee "right of way purchases. In cases where the Department is being granted or purchasing a stand alone easement or easement parcel the Closing Bureau will accept a subordination agreement from the mortgagee. 2. The time period varies. It may take anywhere from a month to six month or longer depending on the mortgagee’s requirements. Usually the deed, affidavit of title and any partial release/subordination agreement are sent to the owner/agent with instruction to forward the release or subordination to the mortgagee for signature. Additionally, if the mortgage holder requires a pay down or a review fee the owner is informed to forward all correspondence pertaining to the mortgagee’s demands and the department will aid the owner wherever possible when dealing with the mortgagee, if written consent/authorization is given to assist. The Department will pay or reimburse the owner for reasonable fee charged by the mortgagee. 3-4 Since we are self insured we do not pay or release any portion of the consideration to the owner (except when a down payment is authorized) until title is confirmed clear through the date of the deed recording and taxes are paid through the quarter the deed is delivered or possession is taken (the earliest date). The other exception being, if there is attorney representing the owner in which case a check will be sent in escrow subject to conditions. If the check hasn’t been requisitioned when the owner notifies the Department of the mortgagee’s requirements of a pay down or part of the compensation the Bureau seeks written authorization to split or make a third party payment, at which point two checks would be solicited. Otherwise without consent we condemn. In instances where we have ordered the remittance in advance to meet deadlines the invoice maybe withdrawn or if the check is already cut it would be re-deposited in the State’s account and two checks will be ordered to pay the owner and the mortgagee, if the owner consents. Otherwise we will condemn.

The Department makes every effort to be pro-active when seeking a partial release or subordination. We do not assume the mortgagee will pursue the mortgage for a portion of the proceeds. In any event, most mortgage holders will not grant a release or subordinate until monies are paid. NEW MEXICO NEW YORK 1. For partial acquisition of property which has a mortgage with an Institutional Lender(s), NYSDOT does waive the need for a release from the Institutional Lender when the fair market value does not exceed $5,000. The property owner must sign an Affidavit stating that all payments on the mortgage(s) are current and stating that the property owner understands that the payment will be received without the execution of a release by the Institutional Lender(s) and should the lender(s) make a claim to this payment to either the State or the property owner, that the property owner will promptly pay the lender(s) the portion of the payment which the lender is entitled to pursuant to the terms of the loan documents. Property which is being donated or property which has a mortgage with someone other than an Institutional Lender are excluded from this waiver and releases are required in those situations. 2. Time frames for each case vary. Often it may take several months or longer before the bank will sign the partial release. 3. ** Except for in the cases detailed in number 1 above ** -- We do not pay the property owner for any of the fair market value until all closing requirements, including executed releases, have been met. 4. For the first question, this would only apply to the cases detailed in number 1 above. On all other acquisitions, we require that the partial releases be executed before any payment is made. NORTH CAROLINA NORTH DAKOTA 1. North Dakota gets partial mortgage releases on all permanent fee acquisitions. 2. Most partial mortgage releases are obtained within 30 days. There are some partial mortgage releases that have taken up to 60 days to obtain. 3. No. 4. No. OHIO 1. Yes, the Ohio Department of Transportation (ODOT) has a provision in the 5203.09 section of the Real Estate policy and procedure Manual.

1. When the Fair Market Value Estimate (FMVE) is $5,000 or less. 2. When the FMVE is greater than $5,000 and the value of the residue is compared to the remaining loan balance and the loan to value ratio (LTV) that does not exceed 80%. 3. Mortgage releases are not required on temporary construction easement (T takes) acquisitions unless the T taking has a permanent and negative effect on the residue property (such as the removal of a structure). 2. This could take anywhere from 30 days to 4 months. 3. No. ODOT will not pay the landowner part of the negotiated compensation. ODOT has a provision in the 5203.09 section of the Real Estate policy and procedure Manual which states, “Ultimately, ODOT may need to appropriate the property when the service fee charge by the lender is excessive or, the lender makes other demands that are considered unreasonable or, the lender is unresponsive in providing adequate information." 4. No. Please refer to the answers to question 3. OKLAHOMA 1. We do not pursue mortgage / lien releases on acquisitions under the waiver valuation limit, $10,000.00. But, the check is still made out to the property owner & the mortgage / lien holder. 2. The time frame varies and can be as much as several months. 3. We do not make partial payments. 4. No, we place both the owner and the mortgage / lien holder on the same check. While we understand the potential problems that may arise, we have found that few actual instances have cropped up that have delayed projects as a whole. OREGON PENNSYLVANIA PUERTO RICO RHODE ISLAND SOUTH CAROLINA SOUTH DAKOTA TENNESEE

TEXAS 1. At this time, Texas seeks to obtain partial releases on all liens. On a case-by-case basis where difficulties are encountered in obtaining a release, an acquisition may close without obtaining a release, where there is a remainder of sufficient value to more than cover the amount of the lien. Caution is exercised, however, so that the landowner does not violate the terms of the deed of trust or note by selling part of the property without consent of the lender (as if a due on sale clause exists, the landowner could violate the provisions and result in acceleration of the note). Where difficulties are encountered in obtaining a partial release, so the possibility of closing without obtaining such a release (so subject to the outstanding lien), is considered an effort may be made to at least obtain the consent of the lender for the partial sale (where there is a due on sale provision). 2. For Texas, the amount of time to obtain a partial release varies widely, probably averaging 4 to 6 weeks, some shorter (if a local bank or individual) and some longer. 3. Texas normally does not close until the partial release has been obtained, or a decision (case by case as discussed above) has been made to close without obtaining the release at all. If a lender has committed to provide the partial release (but the actually processing time is taking too long), again on a case-by-case basis, Texas may authorize closing before the release has been received, and then possibly request an endorsement to the title insurance policy if the release is received after the closing has been completed and policy issued showing the lien as an exception to title. 4. No, Texas does not do this (see discussion following question No. 1 above). Additional Texas comments and observations: When the large, usually out of state, lenders attempt to impose unreasonable requirements upon the landowners who are attempting to obtain partial releases (such as trying to require a new survey, a new appraisal, and possibly very high and unreasonable processing fees), TxDOT usually intervenes to assist the landowner, by informing a higher level manager at the lender (not the telephone clerk), that if the lender does not cooperate, and the State institutes condemnation proceedings, that the lender will not obtain any of these items (or even their processing fee). Usually the lender then becomes a little more reasonable. So long as the processing fee is not too high, TxDOT is willing to pay this or reimburse the landowner for such fees, as incidental fees associated with the closing. UTAH 1. Yes, $150,000. 2. Uncertain, but it takes a long time. The Banks have no incentive to process the paper work, and some have told us that they do that paper work when they have time.

3. Our new policy, as of about July 2006, is to ask for lien release for takings that have a value of $150,000 or more, or a loan to value ratio less than 80%. Otherwise we just pay the owner and we do not pursue a mortgage release. 4. On small partial takes, it has been our practice to pay the property owner the full amount and not worry about the lien release. One banker I spoke with agreed with that practice and said if the loan to value ratio was greater than 80% they don’t want to bother with the lien release. VERMONT 1. Any acquisition appraised at $10,000 or less does not require a mortgage release. This is a resent change based on the attached information. 2. The length of time to receive a partial release varies. Generally, in-state bank provide them in a few days but large banks out side of Vermont may take months to receive a partial mortgage release. We do occasionally waive mortgage releases that are over the $10,000 waiver threshold and incur the risk due to processing fees and requests for information outside of our process. 3. No, we pay property owners only once in the full amount. 4. In most situations, compensations over the $10,000 waiver threshold will include the mortgage holders name on the check. VIRGINIA WASHINGTON 1. Partial Re-conveyances or Releases are not required on partial acquisitions when the dollar amount of compensation does not exceed $10,000 (including damages, but exclusive of cost to cure/cost to move damages and compensation paid to replace or move a well or septic system) and there are no appreciable improvements (building, garage/sheds, outbuildings, etc.) in the area being acquired. If the compensation is between $10,001 and $25,000 (including damages, but exclusive of cost to cure/cost to move damages and compensation paid to replace or move a well or septic system) and there are no appreciable improvements (building, garages/sheds, outbuildings, etc.) in the area being acquired, the risk of assuming this additional liability must be made by the Region Real Estate Services Manager (RESM). Over $25,000 is reviewed on a case by case basis and requires approval by the RESM and the Regional Administrator (or delegate). 2. WSDOT has not kept statistics regarding the length of time it takes to acquire partial releases for a bank or lending institutions. What we have encountered is that most large lending institutions require processing fees, appraisals, and surveys before

they will commit to granting a release. The lending institutions have stated that it will take a minimum of 45 days and the larger lending institutions can take up to 6 months. 3. WSDOT does not enter into a final settlement until all parties have agreed to the distribution of funds. 4. WSDOT does not engage in this practice. WEST VIRGINIA WISCONSIN WYOMING