What is the purpose of a defeasance clause in a security document?

The purpose of a defeasance clause in a security document is to indicate loan satisfaction and the release of the title. This clause is significant because it provides that once the borrower has paid off their debt in full, the lender must formally acknowledge the satisfaction of the mortgage or deed of trust. This acknowledgment results in the title being released back to the borrower, effectively removing the lender's claim against the property.

A defeasance clause serves an essential function in protecting the rights of the borrower, ensuring that they regain full ownership without lingering obligations. It clarifies the process for both parties, making it easier for borrowers to understand when they can expect their property to be free and clear of the lender’s interest. This understanding fosters trust and transparency in the lending process, allowing borrowers to confidently navigate their repayment obligations.