In California, when a borrower finishes paying off a home loan, the trustee files the deed of reconveyance to record full repayment of the loan, clearing the title to the property, which was held as collateral, and turning it over to the homeowner. By law, this must happen within 21 calendar days of the loan payoff, according to attorney Julia Wei of the Law Offices of Peter N. Brewer.
When purchasing a home in California, the lender designates a trustee to sell the house as collateral if the borrower fails to repay the loan, explains Juila Wei. Upon repayment, the lender gives the trustee the promissory note for the loan, the deed of trust designating the home as collateral and a request for a full reconveyance of the deed. The trustee then executes and records the reconveyance within 21 days of receiving this documentation.
If delays prevent the borrower from receiving the clear title to the home, he can request that the lender substitute itself as trustee and execute the reconveyance, says Julia Wei. After 75 days, if the trustee still does not execute the reconveyance, a title insurance company may do so, and the lender and trustee become liable for all damages and subject to a $300 penalty payable to the homeowner. If the homeowner is able to prove damages, he has only one year to file suit against the lender and trustee.