What occurs when a mortgage is paid off and the lender releases their claim on the property?

When a mortgage is paid off, the lender releases their claim on the property through a process known as reconveyance. This term refers specifically to the action taken by the lender to provide formal documentation indicating that the debt has been satisfied and that they no longer have a security interest in the property. As a result, the borrower regains full ownership and title without any encumbrances from the mortgage.

This process is crucial as it ensures that the borrower's credit report reflects the satisfaction of the mortgage and clears any potential confusion regarding ownership. After reconveyance, the lender typically records a release of mortgage with the appropriate governmental authority, which updates public records to show that the property is free from the mortgage lien.

Other terms, such as foreclosure and default, refer to different processes where a lender retains or takes back property due to non-payment or breach of contract. Assignment usually pertains to the transfer of rights or interests in the mortgage, but it does not imply a release of claim following payment. Thus, reconveyance is the precise term that encapsulates the release of the lender's claim when the mortgage is fully paid.