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How the Deed of Reconveyance Works in California

June 28th, 2011 · 2 Comments · California Lending & Mortgage Law, Trust Deeds

I have had a surprisingly number of clients run into the problem of an old Deed of Trust (old loan) that was paid off, but remains against title.  This can be fairly time consuming to clean up and I've written an article about this for my firm's blog here.

A brief excerpt:

California Civil Code section 2941 (b)(1) requires the beneficiary, upon payoff, to “execute and deliver to the trustee the original note, deed of trust, request for a full reconveyance....” The trustee then executes and records the full reconveyance within 21 days of receipt of the documents from the beneficiary, delivers a copy of the reconveyance to the beneficiary and, upon request, delivers the original note and deed of trust to the trustor. (Civ.Code § 2941, subd. (b)(1)(A)-(C).)

What happens if the Trustee or the Benficiary does NOT do this? The statute provides two backup methods to help the owner clear title to their property. First, upon request by the trustor, the beneficiary must substitute itself in as trustee and execute a full reconveyance. (Civ.Code § 2941, subd. (b)(2).) Second, if neither the trustee nor the beneficiary has executed the full reconveyance within 75 calendar days after the loan payoff, “a title insurance company may prepare and record a release of the obligation” after giving notice of its intent to do so to the trustor, trustee, and beneficiary. “The release issued pursuant to this subdivision shall be entitled to recordation and, when recorded, shall be deemed to be the equivalent of a reconveyance of a deed of trust.” (Civ.Code § 2941, subd. (b)(3)(B).)
 

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2 Comments so far ↓

  • Rich Gozin

    What government entity enforces Civ Code 2941? Is the consumer entirely at the mercy of the lender or title company to file this?

  • Walker

    I am baffled, because I can’t follow the legal labels through a typical situation. Let me give an example:

    Party A buys a home from party B, with a loan from mortgage company C, through the mediation of escrow company D. Mortgage company C sells the loan to company E. Party A refinances the loan with company F. Party A finally pays off the loan to company F. Party A then receives in the mail a sheet of paper labeled “Reconveyance”, with no explanation or instructions. Which of these parties is the trustee? Which is the beneficiary? Which is the trustor? Which is the owner? Is the property free and clear, and recorded in the necessary way? Does party A need to do anything else to assure his title?

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