Reconveyance documents are used to transfer all or part of a mortgagee's interest in real property to the owners of record or other entity. When homeowners pay off their mortgage loans, a deed of reconveyance is recorded granting the homeowners the title to their home free and clear of the mortgage obligation they've paid off. The reconveyance document "reconveys" clear title of the property to the owners of record, and the process of reconveying title is called a loan reconveyance.
Deed of Trust and Reconveyance
A deed of trust is a type of mortgage document incorporating an independent trustee between a mortgagee and homeowners named in a deed of trust. When the mortgage is paid off, the trustee prepares and records a full reconveyance of the deed of trust. When recorded in the county or jurisdiction where the mortgaged property is located, the full reconveyance removes the mortgage lender's lien against the real property securing its mortgage loan. States using mortgage documents in place of deeds of trust use a similar document called a satisfaction of mortgage.
When title to a parcel of real property is partially transferred, a document called a partial reconveyance is used to document the partial transfer of the property to a new owner. The legal description and title insurance associated with the property are updated to show the new lot lines and location of the remaining parcel. Partial reconveyances typically occur when property is subdivided or a government agency acquires part of a property for widening a road or other public infrastructure. The entity taking over the property pays the property owners' mortgage company for a partial reconveyance. The mortgage loan amount is reduced to reflect payment received for the partial reconveyance of the property.
Reconveyance and "Chain of Title"
Before approving a mortgage loan on a piece of property, a mortgage lender orders a title report to ensure that title to the property is clear of liens that could compromise its security interest in the property. The only liens superior to a mortgage company's first deed of trust or mortgage are property taxes and assessments. A chain of title typically includes a legal description of the subject property, describes covenants, codes, and restrictions affecting the property, and shows the tax agency collecting the property taxes on the property.The mortgage lender's interest appears next as documented by a recorded mortgage or deed of trust. Home equity loans are listed after the primary mortgage loan.
A partial or full reconveyance does not alter a property's legal description until it is recorded in the county or recording jurisdiction where the affected property is located. Reconveyance documents typically require multiple signatures of mortgage company officers and notarization. They may also require witness signatures depending on state law. A reconveyance containing an incorrect or incomplete legal description of the property or the mortgage document being fully or partially reconveyed is invalid and may be subject to legal challenge or litigation. Legal review and verification of reconveyance documents can prevent problems caused by errors in reconveyance documents.