What is a deed of reconveyance?

A mortgage holder issues a transfer deed or deed of reconveyance, in English, to indicate that the borrower was released from mortgage debt. The deed transfers title to the property from the lender, also called the beneficiary, to the borrower.

This document is normally used when a mortgage has been paid in full. Include a legal description of the property as well as the parcel number. It is usually a notarized document.

Some states use a mortgage satisfaction document instead of a transfer deed. States that recognize trust deeds, such as California, will instead issue a full deed, signed by the trustee and notarized.

How do the deed of reconveyance or transfer deeds work?

The deed of reconveyance is registered in the county where the property is located. Once the deed is recorded, any search on that property will show that the lien has been paid in full.

A property with a lien against it cannot be sold unless the lien is a mortgage and arrangements have been made to pay it in full with the money received from the sale.. In such situations, the registration of the transfer deed or deed of reconveyance is part of the closing process and its registration is usually handled by a property control entity.

Deed of reconveyance vs. Guarantee right

The bank has security rights on the house while the mortgage is outstanding. The bank can foreclose on the borrower, evicting him and taking possession of the home, if the borrower defaults on the mortgage. The lender may then sell the property to try to satisfy the unpaid mortgage obligation after the foreclosure process is complete.

The transfer deed or deed of reconveyance shows that the bank no longer has security rights over the house. A homeowner who received a transfer deed cannot be foreclosed on by the lender. Plus, you can transfer ownership at any time, lien-free. You must register it with the county in which the property is located.

Key information:

  • The deed of reconveyance is issued when a mortgage has been paid in full.
  • A homeowner who received a deed of reconveyance cannot be foreclosed on by the lending institution.
  • Second mortgage or Home Equity Line Of Credit (HELOC) lenders who hold a security interest in the home after the first mortgage is paid off may continue to assert their interest and foreclose on the property.

Special considerations on transfer deeds or deed of reconveyance

A homeowner may be at risk of foreclosure by the local government if they do not make property tax payments on time.. This process can be initiated by written notice and without court involvement in states that recognize a non-judicial foreclosure process, so these homeowners may not receive much information. A deed of reconveyance or transfer deed has no effect or interaction with property taxes.

Second mortgages or HELOCs often give the lender a security interest in the home. This happens when the property serves as collateral for that particular loan. These lenders can still enforce their foreclosure rights as well in the event that the borrower defaults. A deed of reconveyance or deed of transfer related to the first mortgage would have no effect on these loans..

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