What is a return deed?
A deed of return is a document that transfers title to the property from a mortgage lender to the borrower, indicating that the borrower has fulfilled his obligation to repay the loan and now owns the property.
- A deed of return is commonly issued when a mortgage has been paid in full.
- An owner who has received a deed of return cannot be enforced by the lending institution.
- Second mortgage or home equity loan lenders who maintain a collateral in the home after paying off the first mortgage can still enforce their right to foreclose on their individual loans.
How a return deed works
A deed of return is commonly issued to borrowers, or mortgages, once their mortgages have been paid in full. It includes a legal description of the property, with the property’s parcel number and other information, and is often notarized. Some states use a mortgage satisfaction document instead of a deed of return, but it is essentially the same.
The deed of return is recorded in the county where the property is located. Once the deed has been recorded, any search on that property will show that the lien has been paid in full.
A property with a lien against you cannot be sold unless the lien is a mortgage and arrangements have been made to pay it off in full with the proceeds from the sale of the home. In such situations, recording the deed of return is part of the closing of the sale process, and its recording is commonly handled by a title insurance company.
When homeowners refinance their homes with a new mortgage, they must also receive a deed of return showing that the old mortgage has been paid off.
Return deed against security interest
The lender has a collateral in the home while the mortgage is still outstanding. You can foreclose on the borrower, evict him, and take possession of the home, if the borrower defaults on the mortgage. The lender may sell the property to try to get your money back.
The deed of return proves that the lender no longer has a collateral in the home. An owner who has received a deed of return cannot be enforced by the lending institution, and can transfer the property at any time, free and free of lien.
Return deed example
A deed of return is a relatively simple form that can differ from state to state or from one lender to another. In states that use deeds of trust instead of mortgages, a third party known as a trustee will participate in the transaction. (The trustee technically “holds” the mortgage on behalf of the lender, who is referred to as the “beneficiary”).
The return deed will normally include:
- The name and address of the homeowner / mortgagee.
- The name of the lender / trustee.
- A description of the property based on the original deed or similar legal document.
- Language in the sense that the borrower has fulfilled his obligation to the lender and the property that had been secured by the mortgage or deed of trust now belongs to the borrower.
- Lines for all parties’ signatures and a section for a notary to indicate that they witnessed the signature.
Even after receiving a deed of return, a homeowner can still be at risk of foreclosure from the local government if they fail to make property tax payments on time. This process can be initiated by written notice and without involving the court in states that recognize a non-judicial foreclosure process, so homeowners in this situation may not get a lot of warnings. A deed of return has no effect or interaction with property taxes.
Second mortgages or home equity loans generally provide the lender with a collateral in the home when the property serves as collateral for that loan. These lenders can also enforce your foreclosure rights in the event the borrower defaults. A deed of return related to the first mortgage would have no effect on these loans.