Deed of Reconveyance

A deed of reconveyance is the instrument that releases a lender's security interest in real property once the debt it secured has been satisfied, and that is recorded in the public land records so the title no longer shows the lien. The name belongs to states where loans are secured by a deed of trust, an arrangement involving three parties: the borrower as trustor, the lender as beneficiary, and a neutral trustee who holds the power of sale. When the debt is paid, the beneficiary asks the trustee to reconvey, and the trustee executes and records the reconveyance.

Where a loan is secured by a mortgage instead, there is no trustee and the counterpart instrument is executed by the lender. California, whose Civil Code treats both in a single section and is used here as a worked example, calls it a certificate of discharge; other states call the equivalent document a release or a satisfaction of mortgage. The names differ, the recording step does not, and the borrower's practical question is identical: has anything actually been filed at the county.

The three-party structure is what makes the reconveyance somebody else's job. A deed of trust conveys the property to a trustee to hold as security. The lender is the beneficiary of that arrangement rather than the holder of the interest, so when the debt is satisfied the lender's role is to release the trustee's obligation rather than to sign a release itself. California's Civil Code sets the sequence out: within 30 calendar days after the obligation secured by a deed of trust has been satisfied, "the beneficiary or the assignee of the beneficiary shall execute and deliver to the trustee the original note, deed of trust, request for a full reconveyance, and other documents as may be necessary to reconvey", and the trustee then "shall execute the full reconveyance and shall record or cause it to be recorded" within 21 calendar days of receiving that package together with the applicable fees. Two parties, two deadlines, and a borrower who is a spectator to both.

The mortgage-state counterpart is the same idea with one party removed. Under the same California section, "[w]ithin 30 days after any mortgage has been satisfied, the mortgagee or the assignee of the mortgagee shall execute a certificate of the discharge thereof", and shall record it. The certificate is defined elsewhere in the code as one "signed by the mortgagee, his personal representatives or assigns", stating that the mortgage has been paid, satisfied or discharged, and referring to the book and page where the mortgage is recorded. The words a state uses vary, and the same document is called a release or a satisfaction of mortgage in many of them. What does not vary is that the document has to reach the recorder.

The statute anticipates that this goes wrong, and its fallbacks are the most useful thing on the page. California provides that if the trustee has not executed and recorded the full reconveyance within 60 calendar days of satisfaction, the beneficiary, on the trustor's written request, "shall execute and acknowledge a document ... substituting itself or another as trustee and issue a full reconveyance". If nothing has been recorded within 75 calendar days, "a title insurance company may prepare and record a release of the obligation", after mailing 10 days' notice to the trustee, trustor and beneficiary, and the release must state the beneficiary's name, the trustor's name, the recording reference to the deed of trust, a recital that the obligation has been paid in full, and the date and amount of payment. When recorded, that release "shall be deemed to be the equivalent of a reconveyance of a deed of trust." The statute adds that neither fallback excuses the beneficiary or the trustee from their own duties, and that a violation makes the violator liable for all damages plus a forfeiture of five hundred dollars to the person affected.

What it may cost is capped and conditioned, and the condition points back to the payoff statement. California permits a reasonable fee for "all services involved in the preparation, execution, and recordation of the full reconveyance", plus official recording fees, and provides that a fee not exceeding forty-five dollars "is conclusively presumed to be reasonable". Then comes the condition: that fee "may not be charged unless demand for the fee was included in the payoff demand statement". Beyond what the section expressly authorizes, "[n]o fee or charge may be imposed on the trustor in connection with, or relating to, any act described in this section." And where a beneficiary collects a reconveyance fee and then learns, or should have learned, that no reconveyance was recorded, it must cause the reconveyance to be recorded, or refund the fee if a title company's release was already recorded first. A borrower who wants to know what the release will cost should therefore look for it on the payoff statement, which is the document the statute ties it to.

The consequence of no recorded release is not academic. An unreleased deed of trust remains an encumbrance of record. It surfaces when the property is sold or refinanced, at the point where a title search runs and a title insurer is asked to insure clear title, and clearing an old lien then means chasing a lender that may have merged, been acquired or ceased to exist. That is the reason the statutory fallbacks exist, and the reason it is worth confirming the recording rather than filing the payoff letter. The confirmation is a public record: the county recorder's index will show the instrument, its recording date and its document number, and in many counties it can be searched online for nothing.

The borrower pays the loan in full. The beneficiary assembles the original note, the deed of trust and a written request for a full reconveyance and delivers them to the trustee. The trustee executes the reconveyance and records it in the county where the deed of trust was recorded, then delivers a copy to the beneficiary and, on written request, the original note and deed of trust to the borrower. The recorded instrument names the deed of trust it releases by its own recording reference, so a later search of the record shows the lien and its release together. Where a mortgage secured the loan, the mortgagee executes and records a certificate of discharge instead, and no trustee is involved.

A hypothetical, on California's timetable, to show what a borrower can do and when. The loan is satisfied on 3 March. The beneficiary's 30-day deadline to deliver the package to the trustee falls on 2 April, and the trustee then has 21 calendar days from receipt to execute and record. If nothing has been recorded by 2 May, which is 60 days after satisfaction, the borrower may make a written request and the beneficiary must substitute a trustee and issue the reconveyance. If nothing has been recorded by 17 May, which is 75 days after satisfaction, a title insurance company may prepare and record a release, after giving 10 days' notice, so that route completes no earlier than about 27 May. Throughout, a violation exposes the violator to the borrower's damages plus a $500 forfeiture. Those are California's periods and not a national standard; another state's are its own.

The follow-through is to search the county recorder's index a few weeks after payoff rather than waiting for a document to arrive in the post. If nothing is there, the payoff statement, the final payment record and the date of satisfaction are what any request or complaint will rest on, and the state's own deadlines are what give the request teeth.

Pros

• Recording produces public evidence that the lien is gone, which is what a future buyer's title search will actually look at.
• Where a state sets deadlines, the borrower has a date to measure against rather than an open-ended wait.
• Statutory fallbacks exist for the case where the lender or trustee does nothing, including substituting a trustee and, later, a title company's release.
• Confirming it is free or nearly free, because the recorder's index is a public record and many counties publish it online.
• Where the fee is capped and tied to the payoff statement, as in California, the cost of the release is knowable before the loan is paid off.

Cons

• Nothing happens automatically. A satisfied loan can sit for months with the lien still showing on the record if no one follows up.
• The borrower depends on two other parties in a deed-of-trust state, and the one who must record is the trustee rather than the lender they have been dealing with.
• An unreleased lien usually surfaces at the worst moment, during a sale or a refinance, when the timetable is someone else's.
• Chasing a release years later means finding a lender that may have merged, been acquired or wound up, which is slower than doing it at the time.
• The rules, the deadlines, the fees and the remedies are state law and differ, so nothing here can be assumed from another state's experience.