What is Reconveyance?
Reconveyance refers to the transfer of property ownership from a lender to a borrower after the borrower has successfully paid off their loan. It is essentially the process of releasing the lender’s lien or legal claim on the property. This legal procedure is crucial in mortgage or trust deed transactions, as it confirms that the loan obligation has been fulfilled, and the borrower now has complete ownership and control over the property.
The Reconveyance Process
The reconveyance process involves several steps that ensure the transfer of property ownership is legally recognized:
- The borrower fulfills the loan terms and pays off the remaining balance.
- The lender prepares a reconveyance document, also known as a Reconveyance Deed or Deed of Reconveyance.
- The reconveyance document is recorded with the appropriate government agency, typically the county recorder’s office where the property is located.
- Once recorded, the lender’s lien is released, and the borrower officially becomes the sole owner of the property.
Importance of Reconveyance
Reconveyance plays a pivotal role in the loan process and offers significant benefits for both borrowers and lenders:
- Clear Title: Reconveyance ensures the borrower obtains a clear title free of any encumbrances or liens, allowing for easy transfer of ownership in the future.
- Proof of Loan Repayment: It serves as legal proof that the borrower has fulfilled their loan obligation and repaid the entire borrowed amount.
- Elimination of Lender’s Interest: Reconveyance eliminates the lender’s interest in the property, reducing their liability and ensuring the property is solely the borrower’s asset.
Differences between Reconveyance and Release of Mortgage
Although often used interchangeably, reconveyance and the release of mortgage are distinct legal concepts:
| Reconveyance | Release of Mortgage |
|---|---|
| Applies to trust deeds or deeds of trust where the lender holds the legal title until the loan is paid off. | Applies to mortgage loans where the borrower holds the legal title while the loan is being repaid. |
| Transfers ownership from the lender to the borrower. | Clears the lien or encumbrance on the property once the loan is paid off. |
| Recorded with the county recorder’s office. | Registered in the local land registry or similar governing body. |
Reconveyance Costs and Fees
During the reconveyance process, certain costs and fees may be incurred:
- Reconveyance Fee: Lenders might charge a fee to prepare the reconveyance document and fulfill any administrative requirements.
- Recording Fee: The borrower is responsible for paying a fee to the county recorder’s office for recording the reconveyance document.
- Document Preparation Fee: Borrowers may need to pay a fee to a third-party service for preparing the reconveyance document accurately.
The Role of a Reconveyance Company
Many borrowers enlist the services of a reconveyance company to handle the reconveyance process effectively. These companies specialize in navigating legal requirements, ensuring the accurate preparation and recording of the necessary documents, and streamlining the overall process for borrowers.
Reconveyance marks a significant milestone for borrowers, granting them complete ownership rights over a property after successfully repaying their loan. It is a legal procedure that finalizes the transfer of property ownership by releasing the lender’s lien. Understanding the reconveyance process and its related terminology is essential for individuals and businesses engaged in loan transactions involving real estate property.