When a borrower pays off a mortgage or deed of trust, the lender on the mortgage or deed of trust must record a notice that it no longer holds a security interest in the mortgaged property. The laws governing such notifications vary from state to state, and the laws of each state must be consulted individually for further details. A satisfaction of mortgage may also be known as a release or cancellation.

What Must Be Recorded?

Here again, the answer lies in state law. Generally speaking, however, the notification must be in proper written form according to state law, and it must set forth the particulars of the borrower’s satisfaction of the indebtedness.

What Happens if a Lender Fails to Record the Notice of Satisfaction?

If a lender fails to record the appropriate documentation once a mortgage indebtedness has been satisfied, the lender may be liable for monetary damages. The issue is governed by state law.

Advice for Borrowers

If a borrower satisfies a mortgage indebtedness, the borrower should follow up within a couple of months to be sure that he or she receives a copy of the satisfaction documentation. The documentation should be kept in a safe place, among other important papers, so that it may be easily located in the event the need to do so arises in the future.