A deed of reconveyance is a document that marks the completion of a mortgage loan, transferring the title of a property from the mortgage lender (beneficiary) to the borrower (trustor). This legal instrument confirms that the borrower has fully repaid the mortgage, effectively releasing the lender’s lien and granting the borrower full ownership of the property.
The deed must be recorded in the local county or recorder’s office to ensure clear title and facilitate any future sale of the property.
When to Use
- Completion of Mortgage Payments: To transfer the title of the property from the lender back to you.
- Private Lending Situations: If you lent someone money to buy a house and they have repaid the loan in full, it ensures that your interest in the property is legally terminated.
- Refinancing a Mortgage: To clear the former lender’s lien on the property, document the new lender’s interest, and ensure that there are no conflicting claims on the property title.
- Trustee Sale or Foreclosure: To re-establish clear title and remove any previous liens associated with the foreclosure process.
- Title Disputes and Legal Settlements: To clarify ownership and ensure that all parties’ interests are properly resolved.
Understanding Deeds of Reconveyance
A deed of reconveyance comes into play when the borrower has made the final payment on their mortgage and the loan is considered fully satisfied. At this point, the lender no longer has a claim on the property.
The lender or trustee prepares and signs the deed, transferring ownership back to the borrower and officially releasing the lien. Without this document, homeowners may struggle to prove ownership, especially when selling or refinancing.
Borrowers should submit the deed to their local recording office to ensure public records reflect the change in ownership. However, title companies often handle this during home sales.
Conveyance and Reconveyance
Conveyance is the act of transferring property ownership from one person or entity to another. In this process, the recipient is a new owner who did not previously hold the title to the property. Conveyance typically occurs during the sale of a property, where the seller transfers their ownership rights to the buyer.
Reconveyance, on the other hand, involves transferring the property title from the bank or mortgage company back to the borrower after they have fully repaid their debt. A reconveyance deed is a document used in this process, confirming that the borrower has met their loan obligations and the lender’s lien on the property is removed, restoring full ownership rights to the borrower.
Full Reconveyance
A full reconveyance, also known as a deed of reconveyance, is a document that signifies the complete repayment of a loan and the removal of any lien held by a mortgage lender on the property.
This document confirms that the borrower has fulfilled their debt obligations, thereby transferring them full ownership of the property without encumbrances.
In California, this document is specifically referred to as a full reconveyance form. The issuance and recording of this form ensure that the property title is clear, officially releasing the lender’s claim and granting the borrower free and clear ownership of their property.
Reconveyance in Different States
Some states recognize deeds of reconveyance and satisfaction of mortgage as legal documents used to mark mortgage repayment. While the terminology and procedural requirements may vary, both serve the essential purpose of releasing the lender’s claim on the property after the loan is fully paid off.
| State | Document |
|---|---|
| Alabama | Deed of Reconveyance and Satisfaction of Mortgage |
| Alaska | Deed of Reconveyance |
| Arizona | Deed of Reconveyance and Satisfaction of Mortgage |
| Arkansas | Deed of Reconveyance and Satisfaction of Mortgage |
| California | Deed of Reconveyance |
Timely Filing
Ensure the deed of reconveyance is recorded promptly to avoid any future legal complications. State laws often require that this document be provided to you or filed with the county recorder within a certain timeframe, usually between 30 to 60 days after fully repaying your loan.
Deed of Reconveyance vs. Satisfaction of Mortgage
| Aspect | Deed of Reconveyance | Satisfaction of mortgage |
|---|---|---|
| Type of Loan | Commonly associated with trust deed loans. | Typically used in mortgage loans secured by a mortgage document. |
| Process | 1. Loan is paid in full. 2. Trustee prepares a Deed of Reconveyance. 3. Document is recorded, transferring legal title back to the borrower, releasing the lien. | 1. Mortgage is paid in full. 2. Lender prepares a Satisfaction of Mortgage document. 3. Document is recorded in the county where the property is located, releasing the lien on the property. |
| Parties Involved | - Borrower (referred to as Trustor). - Trustee (third party who holds the real estate title until the loan is paid off). - Lender (referred to as Beneficiary, may not be directly involved in a Deed of Reconveyance). | - Lender (referred to as Mortgagee). - Borrower (referred to as Mortgagor). |
| Key Differences | - Involves an additional party (trustee), who holds the title during the loan term. - Legal title is transferred by the trustee back to the borrower upon full payment. | - Directly involves only the lender and the borrower. - The lender releases the lien directly. |
| Legal Instrument | A document that transfers the title held by the trustee back to the borrower, indicating that the loan terms have been satisfied. | A document that certifies the mortgage has been paid in full and releases the lien created by the mortgage. |
What Information to Include in a Deed of Reconveyance
A deed of reconveyance includes several key pieces of information to ensure the transfer is legally binding and properly recorded:
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Borrower’s Information:
- Name: Full legal name of the homeowner or mortgage borrower.
- Address: Current residential address of the borrower.
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Lender’s Information:
- Name: Full legal name of the lender or trustee holding the mortgage.
- Address: Official business address of the lender or trustee.
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Property Details:
- Legal Description: Provide a detailed legal description of the property, including boundaries and any relevant parcel numbers. This description should match the original deed.
- Parcel Number: A unique identifier assigned to the property, often used for tax and record-keeping purposes.
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Proof of Obligation Fulfillment:
- Statement of Debt Satisfaction: A declaration that the borrower has fully repaid the mortgage. This statement confirms that the lender no longer has a claim on the property.
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Signatures and Notarization:
- Signatures: Signatures of the involved parties, typically including the lender or trustee and sometimes the borrower.
- Notary Stamp: The document must be notarized to verify the authenticity of the signatures. This process often includes a notary public’s stamp or seal.
How to Complete a Deed of Reconveyance
Before creating and recording a deed of reconveyance, ensure that all obligations have been met according to your state’s requirements. This due diligence helps avoid any legal complications and guarantees the clear transfer of property ownership. Below is a step-by-step guide on how to get started with your document:
Step 1: Prepare the Recording and Heading Sections
Enter the details of the individual or entity preparing the deed. This typically includes the preparer’s name, address, and contact information.
Enter the details of the individual or entity to whom the recorded deed should be returned. This generally includes the name, address, and contact information. Fill in the state where the property is located.
Step 2: Identify the Parties Involved
Provide the lender’s (trustee) name, type of entity (individual or corporation), and address. Fill in the borrower’s (trustor’s) name, type of entity (individual or entity), and address.
If there is a beneficiary, provide their name, type of entity (individual or entity), and address.
Step 3: Add Recitals
Insert the date of the original deed of trust, the county and state where it was recorded, and the book and page number.
Step 4: Execute the Reconveyance
Complete the consideration amount (typically symbolic, e.g., $10) and any additional acknowledgments. Ensure all parties involved sign the document.
Fill in the state whose laws will govern the deed.
Step 5: Include Signatures
Ensure all signatures are added, including those of the trustee, beneficiary, and a witness, if applicable.
Step 6: Review the Document
Ensuring all information in the deed is correct is crucial. Any errors, such as incorrect property details or missing signatures, could complicate future real estate transactions or title transfers.
Step 7: Notarize the Deed
The notary public must acknowledge the document and verify the signers’ identities and the authenticity of their signatures.
Step 8: Obtain a Copy
Depending on the state, the lender may send the deed directly to the borrower or to a county clerk or register of deeds office.
If the deed is sent to the borrower, it is the borrower’s responsibility to file it with the local recording office. Maintain a copy of the recorded deed for your records as proof of full ownership.
What Happens if a Deed of Reconveyance Isn’t Recorded?
The deed of reconveyance must be recorded with the county recorder’s office where the property is located. Failing to record can lead to significant complications for homeowners. Here’s what you need to know if this situation arises:
- Immediate Consequences: If a deed is not recorded, the property still appears to have an active lien. This can cause issues, especially if you plan to sell or refinance the property. The title will not be clear, and potential buyers or new lenders may be reluctant to proceed with the transaction.
- Proof of Mortgage Payoff: While recording the deed is essential for public records, paying off the mortgage extinguishes the lien. As long as you have documentation proving the mortgage is paid off, such as a final payment statement from the lender, you should not face claims from the lender. However, this documentation might not suffice to clear the title during property transactions.
- Legal and Financial Implications: Lenders are typically obligated by state laws to provide and record the deed of reconveyance within a specific timeframe after the mortgage is paid off. Failure to do so can result in statutory penalties for the lender. Some states impose strict deadlines, such as within 30 to 60 days of loan repayment, and non-compliance can lead to fines and potential litigation.
Resolving the Issue
If you discover that the deed of reconveyance has not been recorded, take the following steps:
- Contact the Lender: Contact your lender to inquire about the status of the deed of reconveyance. They are usually responsible for handling this process and ensuring the deed is properly recorded.
- Verify Documentation: Ensure all your mortgage payoff documents are in order. These documents serve as evidence that the loan has been fully repaid.
- Seek Professional Help: If the lender is unresponsive or the issue persists, consider hiring a real estate attorney or contacting a title company to assist in resolving the matter.
- Check for Errors: When dealing with property documents, always verify that all information is accurate. Any discrepancies can cause further delays and complications.
Preventing Future Issues
To avoid problems with unrecorded deeds of reconveyance in the future, homeowners should:
- Follow-up: After paying off your mortgage, contact your lender to confirm that the deed has been recorded.
- Maintain Records: Keep all payoff statements and related documentation in a safe place.
- Stay Informed: Understand your state’s specific requirements for recording deeds of reconveyance and ensure compliance.
Deed of Reconveyance Sample
Below, you can download a deed of reconveyance form in PDF or Word format.
Frequently Asked Questions
How does a deed of reconveyance and security interest differ?
A deed of reconveyance indicates that the mortgage has been fully paid off, releasing the lender’s claim on the property. This document ensures that the homeowner cannot be foreclosed upon by the lender and confirms their full ownership, allowing them to transfer the property freely.
On the other hand, a security interest allows the lender a legal claim on your property while the mortgage is still active. If you default on your loan, the lender can foreclose, evict you, and take possession of the home.
Can homeowners be foreclosed upon after receiving a deed of reconveyance?
Yes, even with a deed of reconveyance, homeowners can be foreclosed if they fail to pay property taxes. Local governments can initiate foreclosure proceedings for unpaid property taxes, sometimes without court involvement in states that permit nonjudicial foreclosures. A deed of reconveyance does not protect property owners from tax-related foreclosures.
Can I get a deed of reconveyance if I refinance my mortgage?
Yes, when you refinance your home, the original mortgage is paid off and replaced by a new one. As part of the refinancing process, you will receive a deed of reconveyance for the original mortgage, confirming that it has been fully repaid.