Solving Vehicle Lien Release Problems

Today in our ongoing series about vehicle lien releases, we’re going to look at some documents and instructions on how to obtain a lien release for a motor vehicle, including some specific scenarios where the lien holder may be out of business, may not be able to be contacted, and what are your responsibilities as a vehicle owner.

Example Instructions from New York Department of Motor Vehicles
First, let’s take a look at an example of instructions for lien release. This happens to come from the New York Department of Motor Vehicles. How to obtain a lien release on a vehicle is pretty straightforward. That’s the question on everybody’s mind: how do you get a lien release? We know what a lien is, so we’re not going to get into the definition of a lien.

Satisfying Loan Terms
How to obtain the lien release? Well, first, you have to satisfy the terms of a loan by paying the balance of the loan back to the lender. Now, this is assuming the loan is paid off. If the loan is not paid off, there are still some methods that can be used to get a lien release, and we’ll talk about those a little bit later in this video. But the most common method is you have to pay back the balance.

Notifying the Titling Authority
However, if you notice, this is only step one. Just because you paid off the loan does not automatically make the lien go away from the title. Here’s why: when you pay your last payment to that lender, what they normally do is they mark your account paid, just like any other loan account. They stamp your title paid and they mail it to you, or maybe they’ll mail you a lien release document. They normally do not notify the titling authority like the Department of Motor Vehicles. So that lien is still in their records. The Department of Motor Vehicles or the title agency in your state, whatever it’s called, normally does not know your lien is paid off when you pay off the last payment. Only you know it and the bank knows it. So now you have to get that information to the DMV.

Receiving and Requesting a Lien Release Document
So normally what will happen is the lender will give you a lien release document, which is an official document. Here’s what one looks like, and it’s an application for removal of lien. This happens to come from North Carolina, and we’ll come back to this momentarily. The next thing you need to do is, if you don’t receive the lien release, submit a request to the lender. This is a very common scenario. A lot of times the lien holder will either not send it to you or it might get lost. If that’s the case, you want to get another one as soon as possible.

Proper Method of Requesting a Lien Release
Now, it’s important how you request that. You don’t want to do it by phone. You don’t want to call them up. You don’t want to do it by email. You don’t want to do it through their website. The only way you want to do it is in writing, and there’s a very specific way of doing it. Let’s jump to that right now before we get to the other steps.

Preparing the Lien Release Request
If you are needing a lien release, get the form that’s the official lien release form for your state. Here’s the one for North Carolina. It’s an application for removal of lien. What you do is you fill it out: year, make, body style, model, VIN number, owner, lien holder information, and prepare this on behalf of the lender and send it to the lender. Don’t trust that they’re going to do the work because here’s why: all the people working at that bank are doing other jobs. If you just call them and say, “Hey, get me a lien release,” first of all, they have to find this form. Did you know about this form? Well, they don’t either. So they’re going to maybe try to find it, and as soon as they run into difficulty, they’re going to go back to their other job. So do the work for them. You may not think you have to, it’s not fair to do it, but if you want your lien release, this is what we recommend doing.

Mailing the Request
Send it to them by mail. In addition to sending it to them, put a return envelope already filled out with your name and address and a stamp. You want to make it as easy as possible for that lien holder to send it back because if there’s any work involved where that person at the bank has to do any kind of work, they might just throw it in the trash and not deal with it.

Submitting the Lien Release to the DMV
So then what do you do once you get that lien release? You want to go to the DMV and submit it to them and verify that the lien is removed. Okay, you don’t want to take their word for it that you just mailed it to them and it’s done. You want to verify that it’s done because if you find out three or four years later the lien’s still on your car, it’s going to be harder to take it off then.

Copy of Title and Lien Release
Sometimes you might have to provide a copy of the title along with the lien release. However, most states, like New York, don’t give you a title if there’s a lien.

Responsibilities of the Lien Holder
Now, what are the responsibilities of the lien holder? This is where you might actually have some leverage. Upon satisfaction of a security interest, a lien, the lien holder shall immediately execute a release of security interest and mail the release to the owner. The Department of Motor Vehicles encourages lien holders to cooperate by mailing or delivering a lien release immediately to the lien holder, and if not, you might be subject to action. All regulated financial institutions shall release liens and deliver lien releases no later than three business days after clearance. Now, lien holders break this rule all the time, but in most states, there’s a requirement under the law that they deliver to you a lien release document within a certain period of time. Three days is kind of quick. Most states require 30 days or a month and a half, but they have requirements, and that’s leverage you can use to do that.

Obtaining a Lien Release from a Closed or Failed Bank
Here’s another question that comes up: obtaining a lien release from a closed or failed bank. This is where it gets tricky. If a bank has been closed or they’re not operating anymore, you still have to get a signed lien release. They’re not going to take your word for it at the DMV that this form is okay without their signature. So what do you do? You have to look up who’s authorized to sign on behalf of that closed lender. The FDIC might have information, National Credit Union, Secretary of State. When we do this, we do a full research on that lien holder. We find out who’s their registered agent, who is their admitted carrier, who maybe is the merged entity, and we will prepare this document and we’ll send it out to all the different potential authorized signers because all you need is one. But you’re going to have to do some research to find out who is the authorized party that can sign on behalf. Because if the DMV gets this form and it’s not signed or not signed by the right person, it has to be notarized too. They’re not going to accept it. They’re just going to kick it back. So you want to make sure that you do the research and find out where that lien holder’s authorized agent is.

Importance of Authorized Agents
Just because they shut down doesn’t mean that the lien goes away. And here’s the other thing: most financial institutions, when they stop operating as a lien holder, they don’t just disappear. They don’t just shut the door, turn off the lights, and walk away. Their assets go to some other entity, another bank, another lender because they’re worth money. Even the mailing list of that bank is worth money. So some other bank or institution has a right to the assets and activity of that lender, so they can sign that lien release. You have to find out who that is. That’s the tricky part, and that’s where the research comes in. And usually, we average about an hour or two worth of research to find out who those lien holders are. And you can do the same thing yourself if you need that lien release.

Alternative Document: Letter of Non-Interest
Now, one last thing about this document: make sure that you get the proper document. Every state has an official lien release form like this one. However, sometimes a bank or lien holder is not comfortable signing a lien release because they don’t know the lien is released. If it’s an older loan, it’s charged off, written off, they’re out of business, they might not know about that lien being released. They don’t see it in their system. So instead of a lien release, you might offer them the option of signing what’s called a letter of non-interest. It’s another official form that is an alternative document to a lien release where the lender can sign that instead to clear the lien off of the title.

Conclusion
Hopefully, that gives you information. You can reach our website car titles.com which has more information about how to get a lien release. We have all the forms, we have all the instructions, and there’s also title services available. The main thing is, though, if you have a lien on the vehicle that you want to title, you want to get it off as soon as possible so you don’t run into problems where the vehicle is not legally yours.

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