What Is a Substitution of Trustee and Full Reconveyance?
A substitution of trustee and full reconveyance is a combined document that allows lenders to appoint new trustees who then release liens held against properties, states the Office of the Clerk Recorder at the County of Santa Clara. The process of releasing liens is referred to as reconveyance.
When a person borrows money from a bank and purchases a house, the structure becomes collateral for the loan, states Julia Wei, an attorney with the Law Offices of Peter N. Brewer. The lender issues a promissory note, and the entire transaction is recorded in a legal instrument known as a deed of trust that involves three parties.
The first party, known as the beneficiary, is the individual or institution that lent money to purchase the property in question, Wei explains. The second party is the trustee, whose role is to ensure that a borrower abides by the requirements in the deed of trust. If the borrower violates the terms, such as by failing to keep up with payments, the trustee is authorized to sell the property and recover the lender’s money. The third party is the trustor, the individual or organization that borrowed money to purchase the property.
When the loan is paid in full, the lender is required to deliver to the trustee the promissory note, deed of trust and a request for full conveyance, Wei states. The trustee then executes a full reconveyance. The trustee sends a copy of the reconveyance to the beneficiary and delivers the original deed of trust and promissory note to the trustor.
However, if the loan is fully paid and the trustee doesn’t execute a full reconveyance, the beneficiary is allowed to use the substitution of trustee and full reconveyance document to appoint a new trustee, which can then expunge the lien, Wei states.