Defeasance Clause


DEFINITION of 'Defeasance Clause'

A mortgage provision indicating that the borrower will be given the title to the property once all mortgage terms are met. The defeasance clause is not required in states using property liens as collateral for a mortgage. In this sense, the clause is a substitute for collateral.

BREAKING DOWN 'Defeasance Clause'

Most states allow property liens when mortgages are issued, and don't follow the common law theory requiring a defeasance clause. In real estate, a lien gives the mortgagee the right to foreclose the property upon default of the terms in order to recoup what was owed.

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  3. Deed Of Reconveyance

    A document issued by a mortgage holder indicating that the borrower ...
  4. Lien

    The legal right of a creditor to sell the collateral property ...
  5. Title

    The right to the ownership and possession of any item that may ...
  6. Encumbrance

    A claim against a property by a party that is not the owner. ...
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