A deed to reconveyance is a document which transfers the title a property from a lender to the borrower after the loan has been paid.
How a Deed of Reconveyance works
Once a mortgage loan is paid in full, borrowers receive a deed to reconveyance. This document is signed by the lender and includes a legal description of property. It is also recorded in the county where it is located.
Any title searches performed on the property will indicate that the lien was paid in full. The borrower is now free from foreclosure risk since the loan has been paid off.
A lien on a property can prevent it from being sold. If an existing mortgage is paid out of the proceeds of the sale of a home, however, the recording and recording of the deeds of reconveyance become part of the closing process. This is often done by a title insurer company.
Refinance homeowners their homes by obtaining a new mortgage. They also receive a deed to reconveyance proving that the original mortgage was paid and that a new mortgage has been established.
Lending institutions can obtain a second mortgage or home-equity loans to secure a security interest in the house. The property is often used as collateral for the loan. If a borrower defaults in repayment of these loans, lenders can foreclose the property. The deed to reconveyance for the first mortgage does not affect the second loan and protects the homeowner.
The state of the deeds of reconveyance varies from one state to another or from lender to lender. A trustee, also known as a third party, will hold the mortgage in states that use trust documents instead of mortgages. While satisfaction mortgage documents is sometimes used in some states, they serve the same purpose.
What is included in a Deed Of Reconveyance
Usually, the deed for reconveyance will include:
- Name and address of homeowner/mortgage holder.
- Name of the lender/trustee
- Based on the original deed, a description of the property is provided along with the parcel number.
- Documentation proving that the borrower has met their obligations to the lender. The property that was secured by the mortgage, trustded now belongs the borrower.
- Lines for all parties to sign and a section for the notary to verify that they were present at the signing.
Example of Deed to Reconveyance
The property will be used as collateral in a deed-of-trust if an individual buys a house and takes out $400,000 mortgage, borrowing from a bank, or mortgage lender.
After the loan has been fully paid, the lender will issue a deed to reconveyance. This usually takes several weeks.
The deed to reconveyance will show that the mortgage loan has been paid in full and that the borrower holds title and full ownership.
Most Frequently Asked Questions
What is the difference between security interest and deed of reconveyance?
While the mortgage is still outstanding, the lender holds a security right in the property. They can foreclose, evict, or take possession of the house if the borrower defaults. The deed to reconveyance shows that the lender does not have a security interest in your home. If the homeowner defaults on the loan, they cannot foreclose on you. They can also transfer the clear title of the property free and clear at any time.
What happens if the Deed Of Conveyance is not filed or filed incorrectly?
It creates a title problem if the deed of reconveyance has not been recorded or is incorrectly recorded with the record’s offices, such as the county courthouse. The homeowner could face difficulties selling the house if the deed of trust remains a burden on the property.
A Deed of Conveyance can be used to foreclose a homeowner’s home.
A homeowner can still be subject to foreclosure even after they have received a deed-of-conveyance. In states that recognize a unjudicial foreclosure process, this process can be initiated with a written notice. The deed to reconveyance doesn’t protect homeowners who have not paid their property taxes.
What is the difference between Conveyance & Reconveyance?
Conveyance transfers property ownership from one entity to the other. A deed, an instrument of conveyance, describes the parties and the property being conveyed. To transfer title to property to the borrower, a lender must issue a deed to reconveyance.