Defeasance Clause
A defeasance clause is a provision in a mortgage or deed of trust that automatically voids the lender's claim to the property once the borrower has fully satisfied the debt obligations. This clause ensures that the lender's lien is released and clear title transfers back to the borrower upon final payment.
Example
“The defeasance clause in the mortgage stated that once the final payment was made, the lender's lien would be automatically released.”
Memory Tip
Defeasance 'defeats' the lender's hold on your property - when you pay off the loan, this clause defeats their claim.
Why It Matters
This clause protects borrowers by guaranteeing their property title will be cleared once they pay off their loan, preventing lenders from maintaining claims on paid-off properties.
Common Misconception
Some people think they need to take additional legal action to clear their title after paying off a mortgage, but the defeasance clause typically makes this automatic.
In Practice
When Maria made her final mortgage payment, the defeasance clause in her loan automatically triggered the release of the lender's lien, and she received a clear title to her property within 30 days.
Etymology
From Old French 'defesance' meaning 'undoing' or 'defeat,' referring to a clause that defeats or undoes the lender's claim when conditions are met.
Common Misspellings
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