Defeasance Clause
Standard Definition
A mortgage clause requiring the lender to release their lien on the property (via a satisfaction piece) once the borrower fully repays the loan.
Detailed Examination Analysis
The Defeasance Clause is a protective provision for the borrower. It states that once the borrower satisfies the mortgage debt by making all payments, the lender's interest in the property is terminated. The lender is required to execute and record a release document (such as a satisfaction of mortgage or deed of reconveyance) to clear the lien from the property title.
Real-World Examination Scenario
"A homeowner makes their final mortgage payment on a 30-year loan. Under the defeasance clause, the lender must issue a release deed, proving that the mortgage has been fully repaid and the lien on the home is cleared."
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