States that use a deed in trust in place of a mortgage document to secure repayment of a loan use the reconveyance document to transfer the title from the trustee to the borrower after the loan is fully paid. The trustee, usually a title or escrow company, holds the title for the lender during the loan repayment period, and handles the reconveyance for the both parties.
The purpose of the reconveyance document is to clear the title of any liens. The three parties involved in a reconveyance procedure are the trustor, or borrower; the beneficiary, or lender; and the trustee, as the escrow/title company is known. After the trustor makes full payment to the beneficiary, the trustee clears the title of the loan. The title is then transferred to the trustor, free and clear of any further obligation to the beneficiary.
When it's Not Recorded
If the deed of reconveyance is not properly recorded, the trustor may find out years later than the beneficiary still has a lien on the property. If this occurs, the borrower must contact the lender, or seller in case of seller financing, and ask that a deed of reconveyance be signed and recorded. After this occurs, the lien is removed. If a trustor is attempting to sell his property, he will not be able to pass clear title to the next buyer until this lien is removed via the deed of reconveyance.
When the Beneficiary Won't Cooperate
Although procuring a deed of reconveyance is usually simple enough for the trustor to accomplish on her own, occasionally a beneficiary won't cooperate. Each state has its own laws regarding the procedure for securing a reconveyance. Typically, states proceed as they do in California. In California, if the lender doesn't record a lien release within 21 days, a trustee may prepare a lien release within 72 calendar days from payment of the debt, assuming the proper documentation has been filed with the trustee. The lien release is equivalent to the deed of reconveyance.
Following Local Laws
If you have a question or concern regarding a deed of reconveyance or lien release, contact your local county clerk or recorder; that's where these documents are filed, and they're public information. You can also contact your title or escrow company or a real estate attorney. Keep in mind that the reconveyance only releases you from the lien to which it pertains; it will not release you from other liens, such as second mortgages, property tax liens or Internal Revenue Service liens.