A deed of trust tells the world you have a lien against your home. Once you've paid off the loan, your bank releases the lien so you can do other things with your home, such as getting another loan or selling. You'll need a surety bond if you can't get your deed of trust released even though you're paid up.
Deed of Trust
The bank has to file something in the county land records to put others on notice that you've got a loan against your home. But the lender can't file your loan note, which has sensitive personal information, in a place the public could see it. Your bank uses another set of paperwork that shows just basic information about your loan, including the amount, instead. In some states, including New York, the lender files a copy of the mortgage, while in other states, such as California, the lender will file a deed of trust. You give bare ownership interest to a third-party -- the trustee -- on the deed of trust. Your lender is the beneficiary and you're the trustor. This is the lender's security for your repayment; if you don't pay, the trustee can foreclose.
Once you've paid off the home loan, one of two things should happen: The trustee deeds the home back to you or the lender files a lien release in the land records. Either option removes the lien from your home. But you have to get the release from the lender or the deed from the trustee, who is often a title company. If the title company or lender has closed or merged with other companies, you'll need to do a little homework to figure out who is responsible for your loan. If you can't get anywhere, you'll need a surety bond.
A surety bond, issued by a bond company, is basically a contract between you, the surety company and the lender. The bond guarantees what you're saying is true: The loan is repaid. If you haven't paid off your loan, the surety company might have to pay if the lender makes a claim against the bond later. You give the bond company all the repayment proof you have and pay a fee to get the bond. You'll pay a percentage of the original loan amount for the bond, but the amount depends on where you live and the bond company. The total bond amount will also depend on your loan and your state's requirements.
Getting a Release
Once you've got your deed of trust surety bond, you'll have to find out what else you have to do to get the lien released. States have rules for a deed of trust release using a surety bond, and your bond company should have the rules available for you to read. In California, for example, you must file a declaration and the bond in the land records to get the lien released. You'll explain that you can't get a release from the lender on the declaration and explain how you tried to do so. If you're not sure what else to do after getting the bond, ask a real estate attorney for help.
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