In a Deed of Trust, the owner/borrower transfers title to a “Trustee” in order to secure the debt owed to the Beneficiary. Once the loan is paid, the Beneficiary should instruct the Trustee to issue a “Deed of Reconveyance”. Once recorded, the Deed of Reconveyance transfers title to the borrower or current owner. This services to release the lien from the property.
If an owner of property pays off the entire debt that he or she owes under a Deed of Trust, but no Deed of Reconveyance is recorded, then the debt will still be registered against the property.
There’s a few ways to obtain release of a Deed of Trust besides a Deed of Reconveyance; such as:
A Release of Obligation:
This document can be issued when a payoff of the loan is done by a Title Company as part of a closing. If a Reconveyance isn’t provided by the Beneficiary, within certain time periods, the Title Company can prepare and record a “Release of Obligation”. This has the same effect as a Deed of Reconveyance.
Usually used when a loan has been previously paid but the Beneficiary can’t be located or refuses to provide the Reconveyance. In this situation, a Bond can be obtained. Providing there are no objections within 30 days of recording, the bond can be presented to the “Trustee”, who can then issue the Deed of Reconveyance.
This article and information is from California Title Company and Cam Hunter.
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