A deed of reconveyance is an official document issued by a mortgage lender that transfers the property title of a home to the borrower from the lender and releases the borrower from the debt associated with the mortgage, according to Investopedia. It is typically awarded to the borrower after he pays off his mortgage debt. A deed of reconveyance is composed of a legal description of the property and a description of the tax parcel number of the property.
The county where the property is located keeps a copy of the deed of reconveyance in its public records, states Investopedia. The deed of reconveyance proves there is no lien on the property and that the property is legal to sell. Having a deed of reconveyance also means the mortgage lender cannot foreclose on the home, as it no longer has a security of interest in the property. However, the government may still foreclose on the home in the event the homeowner fails to pay his taxes.
If the deed of reconveyance is lost, destroyed or not properly recorded as a result of a short sale, refinance error or other mistake, this may create a negative situation for the homeowner in regard to the title, especially if he wishes to sell the home, as the deed or reconveyance is the only proof the homeowner has that he paid off the mortgage, states About.com.