The Importance of a Deed of Reconveyance
Imagine the shock and frustration of being told that you do not qualify for a mortgage on a second home because your principal residence shows an outstanding mortgage that you paid off 7 years ago. This recently occurred with one of our clients and significantly delayed the purchase of their second home. They spent several months seeking a resolution that was only complicated by the fact the mortgage had changed lenders several times and the mortgage company that showed a lien had been acquired by another company.
Save yourself the headaches and ensure that you receive a Deed of Reconveyance when you pay off your mortgage. A Deed of Reconveyance is defined as a document issued by the holder of a mortgage indicating that the borrower is released from the mortgage debt. The Deed of Reconveyance transfers title of the property back to the borrower.
What happens when the lender cannot be found or is unwilling to sign the Reconveyance? Is there anything that the borrower can do to clear the title? Although each state is different, many may have a procedure similar to California.
In California, when a Deed of Reconveyance is not executed and recorded within 21 days of the trustee’s receipt of all documents and money necessary to pay off the debt, a title company may prepare and record a release of the obligation within 72 calendar days from payment of the debt. This release is considered equivalent to a Deed of Reconveyance, releasing the borrower from any further obligation under the deed of trust.
Save yourself time and frustration by making sure this simple step is completed once your mortgage has been paid off.
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