Close This Chapter Cleanly

Request a written statement from your lender confirming the loan was paid in full at closing. This is your proof the debt is satisfied. Ask escrow for it too — they often have it first.

When a mortgage is paid off, the lender must record a Reconveyance Deed (or Release of Lien) at the Bureau of Conveyances (BOC) — typically within 30 to 60 days. This is the document that legally clears the lien off your title.

Do not assume it happens automatically. Follow up with the lender in writing, and confirm it was actually recorded at the BOC.

If your situation involved a judicial foreclosure — a case filed in court — selling the home does not automatically close that case. The lender's attorney should file a Notice of Dismissal or a Stipulation for Dismissal with Prejudice with the First Circuit Court in Honolulu.

"With prejudice" matters: it means the case cannot be refiled. Confirm in writing that the dismissal was filed and ask for a copy.

Here's an honest truth: a recorded Notice of Default does not get erased. Once the situation is resolved, the public record is updated to show it as resolved — but the original filing remains part of the property's history.

This is normal and expected. What matters is that the record clearly shows the matter was closed, not that it never existed. Keep your payoff letter and reconveyance deed as your own proof of resolution.

Pull your free credit report at annualcreditreport.com a month or two after closing. Confirm the mortgage account reads as "Paid," "Settled," or "Paid — Short Sale," and not as an open foreclosure.

If it still shows incorrectly, dispute it in writing with the credit bureau and include your payoff confirmation as evidence. Errors here are common and worth fixing — they directly affect when you can buy again.

If your lender forgave any deficiency as part of your short sale or deed-in-lieu, they will send you IRS Form 1099-C (Cancellation of Debt). The IRS treats the forgiven amount as taxable income — even though you never received cash. This is called "phantom income."

In a short sale, your lender typically agrees to forgive the deficiency — the difference between what you owed and what the home sold for. But "agreed verbally" is not enough. You need written confirmation that the lender will not pursue you for the remaining balance.

In Hawai'i, up to six months of unpaid HOA or condo association assessments carry "super-lien" status under HRS §421J-10.5 and §514B-146. This means they are paid before other liens — including the first mortgage — at closing. If HOA dues were past due when your home sold, they should have been settled from the sale proceeds.