A deed of reconveyance is also known as a release deed. The deed transfers all rights granted to a trustee under a deed of trust loan back to the grantor after the loan has been fully paid. The purpose is to release the lien after the debt is paid so the borrow is no longer responsible for the debt, and the title is clear from liens should the borrower decide to refinance, obtain an equity line or credit or sell the property at a later date.
Procedural requirements must be met. The note must be paid in full before the deed of reconveyance can be recorded. The lender must record the deed of reconveyance under statutory law or they can face a penalty or fine. The laws vary in each state.
The borrower should request a copy of the recorded deed of reconveyance. You can also search the county recorder's recorders to make sure the deed was recorded properly. The deed of reconveyance must be recorded releasing the lien by statute. Since each state has different real estate laws, you will need to check the laws of your state. The lender is subject to fines and penalties if they do not comply and record the deed of reconveyance and release the lien. Generally the title or escrow company will record the deed of reconveyance on behalf of all parties after the real estate closing.
If for some reason the deed of reconveyance never gets recorded and shows up years later on a title search, the borrower can have the title company or their lender prepare a release and record it. It is a simple procedure. If the Trustee is no longer available, the title company may be able to prepare a release. Each state has different laws. It is recommended that the deed of reconveyance is taken care of at the time of the sale to avoid any issues later though.