Depending on your area, you may hear the term Deed of Reconveyance instead of Satisfaction of Mortgage. These two documents basically signal the same thing: the mortgage on a property has been paid in full. A mortgage holder issues a deed of reconveyance to transfer the title from the lender to the borrower and officially release the lien on the property.
Both the satisfaction of mortgage and the deed of reconveyance release or extinguish the lien created by the mortgage.
These are the most common instruments that are tracked with release tracking services. HELOCS and home equity loans (second mortgages) are the second most common.
Which document is used in your area is largely based on the jurisdiction’s prevailing legal theory.
Industry Best Practices Clash with Industry Expectations
Part of the title agent or agent-attorney’s responsibility is to ensure all documents listed in the Title Commitment are recorded properly.
All of the documents related to the previous owner like the mortgage, a Home Equity Line of Credit (HELOCs), or any judgements or liens must have a release filed to officially extinguish the lien.
During the post-closing process, the title agent confirms that documents are properly notarized, executed, and in recordable form. These documents are sent to the appropriate recording authority where they will appear in public records.
If a lien isn’t properly released this results in a defect, or cloud, on the new owner’s title.
In order to protect a homebuyer’s property rights, it’s important to track these documents after closing. This follow up search is often referred to as a “continuation search.” This is usually done before or when the title insurance policy is issued.
Best practices suggest issuing the policy within 30 days of settlement (the closing date) or when all of the commitment requirements have been met.
Unfortunately, title agents have no control over when or whether the document is properly recorded. Some states have statutory time frames for the public recorder to enter the documents into the public record, but some don’t. There’s also no guarantee that the documents will be recorded. In fact, it’s estimated that 10 million documents are rejected by county and city recorders every year. Despite the advent of e-recording, which helps reduce rejections not all recording offices offer this option.
Additionally, settlement agents face pressure to issue policies before the statutory time frame that require the documents to be recorded. In order to meet these expectations, some agents issue policies in the hope that post-closers won’t miss any documents in a continuation search or that a mutual indemnity agreement will cover any future problems.
In order to meet both industry expectations and best practices, title agents, like the team at Liberty Title, use PropLogix Release Tracking to check after every closing and resolve any issues.