Unrecorded Mortgages Pose Unique Issues For REMICs

County offices across the country are closed due to COVID-19, possibly precluding lenders from recording mortgages or deeds of trust on recently originated loans.  In counties where electronic recording is not available, many title insurers continue to provide title insurance during the gap period between the origination date and the recording date, allowing the continued closing and funding of mortgage transactions in areas with county closures.

Under section 860G(a)(3)(A) of the tax code, a mortgage is a "qualified mortgage" that may be included in a REMIC if it is "principally secured by an interest in real property."  The inability to timely record raises the question of whether an unrecorded mortgage is "secured" for this purpose.  In our view, a temporary inability to record a mortgage should not preclude an otherwise qualifying mortgage from REMIC eligibility.