What Is a Partial Release Document?

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A partial release document is a form used to release a portion of your liability from a mortgage obligation. Mortgage lenders may issue this partial release as part of a restructuring package when you experience difficulties in fulfilling all of your responsibilities under the terms of the original mortgage. However, a lender will not automatically grant a partial release and there are several drawbacks associated with this type of release.

Consequences of a Partial Release

While a partial release document helps you to more easily make mortgage payments on your mortgage debt by eliminating a portion of the principle balance, it does not eliminate your total mortgage debt. You will still have to make regular mortgage payments to your lender per the terms of the restructured mortgage contract. Failure to make payments under the restructured mortgage contract will typically result in foreclosure, causing you to lose your house.

Reasons For Pursuing a Partial Release

Requesting a partial release document from your lender is a viable option during the mortgage modification or restructuring process. Lenders will consider issuing the partial release document in certain cases of economic hardship. For example, if you recently lost your job and do not have sufficient income to pay the monthly mortgage payment on your property, your lender might consider issuing a partial release.

What a Partial Release Accomplishes

A partial release document removes from the mortgage some or all of the collateral used as security for the property. This effectively decreases the mortgage principle balance and results in lower monthly mortgage payments. The term “partial” indicates that the mortgage lender holding the lien does not remove all of the collateral. Lenders issue partial releases as a way of mitigating their loses with borrowers that do not have sufficient funds to meet their original mortgage obligations. After the lender files the partial release document, you will continue to make mortgage payments based on your new principle balance and the terms of your modified mortgage loan.

Things to Keep in Mind

There are a few things you must consider when requesting a partial release from your lender. Not all mortgage lenders will consider granting a partial release. Additionally, lenders vary significantly with regard to the percentage of collateral they will remove from the property through the partial release document. You should also make sure that you can afford to pay the new monthly mortgage payment prior to agreeing to the loan modification and partial release document. Failure to meet your restructured monthly mortgage obligation will typically result in foreclosure.

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References

  • "Principles of Real Estate Finance"; Charles Long; 2010
  • "Real Estate Principles"; Charles Floyd and Marcus Allen; 2002
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