Defeasance Clause Definition

The defeasance clause arose out the English common law. The defeasance clause is a provision that states when the borrower satisfies the terms of his or her contract that the title to the property will his or hers. Very few states still allow the defeasance clause as part of the mortgage. Most states defer to the lien theory. The lien theory state that the loan creates a lien on the property, which allows the borrower the right to possession only after the mortgage has been foreclosed. If the mortgage has no deafeasible title, then the defeasance clause is not necessary.

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