Reconveyance Deed certifies that the lender or trustor has released its lien and conveyed all rights and interest in the real estate to the borrower upon full repayment or discharge of loan. Simply stated, it is a document stating the borrower has fully repaid the loan and the lender is releasing its claim on the title. The deed is issued by the mortgagee (lender) or the trustor to the borrower.
The purpose of the Reconveyance Deed is to obtain a definite evidence of release of any lien/claim on the real estate by the former mortgagor. Reconveyance Deed is one of the final steps in the life cycle of a mortgage loan. It marks the full repayment and release of all liens by the mortgage lender.
State laws govern the timing of the issuance of the Reconveyance Deed. States require lenders to issue the document within 60 to 90 days of full repayment of loan.
You should review the deed to ensure it is accurate and correctly identifies the lien that is released, subject property, and the lender.
You should ensure that the Reconveyance Deed has been recorded with the Country Clerk to demonstrate free and clear title to the real estate. It may become difficult to prove that the loan is paid in full and the lender has no claim on the property if the Reconveyance Deed is lost or if it was not recorded.
Your servicing department should verify the contents of the deed to ensure deed is being issued for the correct loan and that the borrower has completely satisfied all the terms of the loan. You should consider incorporating a second level review before it the deed is issued.
Updated: Sep 08, 2013