Loan mechanics
Defeasance clause
A clause requiring the lender to release its claim when the debt is paid
It is the mechanism that undoes the security. In a mortgage the lender releases the lien with a satisfaction; under a deed of trust the trustee issues a deed of reconveyance returning title to the borrower.
How the exam asks about it
"Defeat" is the root: the clause defeats the lender’s interest on payoff. Pair it with reconveyance in deed of trust states.
Related terms
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