Deed Of Reconveyance

AAA

DEFINITION of 'Deed Of Reconveyance'

A document issued by a mortgage holder indicating that the borrower is released from the mortgage debt. The deed of reconveyance transfers the property title from the lender (also called the beneficiary) to the borrower (also called the trustor). This document is most commonly issued when a mortgage has been paid in full. It contains a legal description of the property and the property’s parcel number and is often notarized. Some states use a satisfaction of mortgage document instead of a deed of reconveyance.

INVESTOPEDIA EXPLAINS 'Deed Of Reconveyance'

The deed of reconveyance is recorded in the county where the property is held. Once the deed has been recorded, any search on that property will show that liens have been paid in full. A property with a lien against it cannot be sold, unless the lien is a mortgage that will be paid in full from the proceeds of the home sale. In such situations, recording the deed of reconveyance is part of the closing process of the home’s sale, and its recording is commonly handled by a title insurance company.

While the mortgage is outstanding, meaning that the borrower still owes the bank something for the loan used to purchase the home, the bank has a security interest in the home. If the borrower stops paying the mortgage, the bank can foreclose on the borrower, evicting him or her and selling the home to fulfill the unpaid mortgage obligation. The deed of reconveyance proves that the bank no longer has a security interest in the home because the borrower has repaid the debt in full. A homeowner with a deed of reconveyance cannot be foreclosed on by the bank. That being said, the homeowner is still at risk of foreclosure by local government if he or she doesn’t make timely property tax payments.

RELATED TERMS
  1. Deed Of Surrender

    A legal document that transfers property ownership for a specified ...
  2. Security Interest

    A legal claim on collateral that has been pledged, usually to ...
  3. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  4. Defeasance Clause

    A mortgage provision indicating that the borrower will be given ...
  5. Property Lien

    A property lien is a legal claim on a tract of real estate granting ...
  6. Lien

    The legal right of a creditor to sell the collateral property ...
Related Articles
  1. Holding Titles On Real Property
    Retirement

    Holding Titles On Real Property

  2. Attention Home Buyers! Why You Need ...
    Home & Auto

    Attention Home Buyers! Why You Need ...

  3. Measuring The Benefits Of Home Ownership
    Home & Auto

    Measuring The Benefits Of Home Ownership

  4. Investing In Property Tax Liens
    Investing Basics

    Investing In Property Tax Liens

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center