Who Holds the Deed to the Property When a Satisfaction of Mortgage Is Filed?

Paying the final installment on your home loan is a momentous event, but before you celebrate there are a couple of documents that need to be completed and submitted before you can obtain the deed to the property. The most important of these is the Satisfaction of Mortgage, sometimes referred to as a letter of satisfaction, which the lender sends to the borrower to indicate the home loan is paid in full. The letter removes the lender’s claim on the property, but you won’t receive the title or deed to your property until the Satisfaction of Mortgage document is filed or recorded with the county where your property is located.

How Mortgages Work

When you borrow money to buy a home, you become the legal owner of the property. Your mortgage is a promissory note that promises that you will repay the loan. The mortgage places a lien on your property by the lender. This lien is a security instrument that gives the lender some control over the property. If the borrower breaks the promise of the mortgage by missing payments, the lender can exercise the lien and initiate foreclosure to collect the outstanding money due on the loan.

Paying Off a Mortgage

Mortgage satisfaction and release of the property lien occur when the terms of the loan are satisfied. If the mortgage is through a bank or other large financial institution, a Satisfaction of Mortgage document is usually sent automatically. The lender may also file or record the document with the county where the property is located. If your mortgage loan is with a private party, be prepared to complete the Satisfaction of Mortgage yourself. After this document has been signed by the borrower or lender and notarized, it can be filed with the County Recorder or Recorder of Deeds. Requirements for this process vary by state, so check with your county to find out how to proceed.

After Your Satisfaction of Mortgage

Even though your mortgage is paid off, you won’t receive your deed until the Release of Mortgage Form is properly filed. It’s important to do so promptly since some counties place a time limit on filing the document after the mortgage is paid off and impose legal fines for late filing. Once the Release of Mortgage is filed, the deed for your property should be transferred to you, and within a few weeks, you should receive a physical copy of the deed that names you as the owner of the property.

Deeds of Trust Versus Mortgages

In some states, the mortgage agreement is replaced by a deed of trust. This legal document is similar to a mortgage in one important way: it secures a loan by placing a lien on a piece of property. Unlike a mortgage agreement between a borrower and a lender, the deed of trust agreement involves a borrower, a lender and an independent third party known as a trustee. The trustee holds the deed on the property and has the power to sell the property at public auction if the borrower defaults on the loan. Unlike a mortgage foreclosure, which must be processed through the court system, a deed of trust foreclosure can take place without judicial intervention.

The Deed of Reconveyance is the equivalent of the Satisfaction of Mortgage document. It states that the debt defined in the Deed of Trust has been paid and transfers ownership from the trustee back to the borrower. The Deed of Reconveyance should be filed with the correct county agency. Not filing the document promptly after the home loan is paid could result in penalties payable by the property owner.

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