Also known as a reconveyance deed, a deed of reconveyance is a legal document that is presented to a borrower at the time he or she settles a loan connected with the purchase of a piece of real estate. The text found within the deed indicates that the owner has completely settled the balance due on the mortgage loan and no longer has a financial obligation to the lender. At the same time, the lender also releases all claims on the property that were granted by the acceptance of the property as security for the mortgage, or the inclusion of a defeasance clause within the original mortgage contract.
A lender will prepare a deed of reconveyance shortly after receiving the full repayment of the mortgage loan. In many jurisdictions, the lender is required by law to tender a copy of the deed to the homeowner within a specified period of time after that last payment is accepted and posted to the borrower’s account. The lender is also often required to submit the deed to the probate or other department within the local or county jurisdiction, so that it can be recorded in the public records. Doing so makes it possible to verify with the use of those public records that all liens or claims previously held by the lender are now relinquished and the homeowner now holds a clear title, assuming that there is not a second or mortgage or other type of loan using the property as collateral.
While the lender is usually responsible for preparing the deed of reconveyance, it is the responsibility of the homeowner to make sure the document is prepared in a timely manner and is also forwarded to the local probate office or municipal recorder for entry into the public record. Doing helps to minimize the potential of finding out later on that the document was not executed properly, which in turn could lead to difficulties when and if the owner attempts to sell the home or deed the property over to a loved one. In some cases, the local jurisdiction may provide some support in contacting the lender and determining when the deed of reconveyance will be submitted. More often, the homeowner along with legal counsel may have to deal directly with a lender who has failed to prepare and submit the deed in a timely manner.
The use of a deed of reconveyance is not universal, although there is usually some sort of legal document that confirms that the debt to the lender is now settled in full and that lender no longer has any claim on the property. In some jurisdictions, a document known as a satisfaction of mortgage may be used instead. The determination of which document type to use is usually based on the nature of real estate and probate laws that apply in the jurisdiction where the property is located.
