60% of states use deeds of trust as their primary security instruments. Once a borrower has paid off their loan, the deed of trust must be removed from the public records. This is done with a deed of reconveyance (also known as a full or partial reconveyance) which must be signed, notarized, and recorded in the county recorder’s office. Here’s a look at that process, and what the lender’s responsibilities are.
What is a Deed of Reconveyance?
A deed of reconveyance is the document that transfers the title of a property from the trustee named in the deed of trust back to the borrower or property owner (called the trustor). The trustee may be anyone who qualifies under state law to act as a trustee. Examples are an independent trustee, an attorney, a loan servicer, etc.
Once a loan has been paid off, and at the express direction of the lender (called the beneficiary), the trustee executes and delivers the deed of reconveyance to the trustor along with the original note (marked “canceled” or “paid in full”) and deed of trust. In some cases, the trustee will arrange to have the reconveyance recorded for the benefit of the trustor.
What Lenders Need to Know About Deeds of Reconveyance
Upon payoff, states require lenders to execute and record a deed of reconveyance within a certain time after the debt has been paid. If the lender fails to provide the borrower with a deed of reconveyance, problems can arise. For instance, the lien remains of record and will be revealed in a title report or prelim. And although innocent clerical mistakes or missed steps in the process may inadvertently lead to lenders failing to deliver a deed of conveyance to the borrower, many states provide for statutory penalties against the lender for failing to timely provide a reconveyance deed.
Beyond what states can do to penalize lenders, there’s considerable risk of lawsuits brought against them by borrowers if the lender’s failure to deliver the deed resulted in hardships, financial or otherwise.
Related Post: Understanding the Reconveyance Process
How Total Lender Solutions Can Help
Drafting and sending reconveyances to title holders and county officials in a timely manner is crucial. If you’re faced with a backlog of reconveyances, it may be time to outsource the work. We’ve assisted clients with their reconveyance processing, and we can help you get a handle on this important element of your business.
At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.
