Substitution of Trustee and Full Reconveyance documents


#1

Hi Sean, Michelle, and everyone. I didn’t see any other posts regarding this so I’m going to ask this question. During our title searches we’ve seen documents such as “reconveyances” and “substitution of trustee and full reconvenyances” that refer to specific instrument numbers (deeds of trusts) in prior years. When we see those documents, is it 100% positive that the trust deed liens that these reconveyance docs are referring to are cleared? The reason is that we’re looking at a trust deed that we bid on that looks like the 1st. However, there are previous liens that have an earlier date than this lien. But, there are matching (by referring trust deed instrument numbers) “substitution of trustee and full reconveyance” documents in the later years that refer to these liens. Hence, which comes to our concern, if the trust deed liens are not 100% cleared by these various reconveyance documents, then we’ll end up liable for these liens since they’re earlier in date (and there is no subordination recorded).

Also, we notice that the “substitution of trustee and full reconveyance” documents are followed up quickly by another deed of trust. We’ve talked this over and we think that these docs “substitution of trustee and full reconveyance” are issued instead of “reconveyance” documents because of a refinance. Is that the case?

Thank you.


#2

The “SUBSTITUTION OF TRUSTEE AND DEED OF FULL RECONVEYANCE” is the document that is used to “RECONVEY WITHOUT WARRANTY, TO THE PERSON OR PERSONS LEGALLY ENTITLED THERETO, ALL the estate, title and interest now held by said trustee under said Deed of trust.” This is the preferred document used to reconvey a loan. This would be used on a refi and a purchase. You undoubtedly see a new Deed of Trust immediately following a sub and recon because the loan was paid off from the proceeds of a sale or refi.


#3

Let me just add that nothing is a “100%” guaranteed when it comes to title research. For example a reconveyance could be fraudulently recorded by a 3rd party. If you really could be sure, there would be no reason for title insurance. When buying without title insurance, you are ALWAYS taking a risk. By being good at title research you can minimize that risk and have a profitable business, but you can not completely eliminate the risk.


#4

Thank you both, Michelle and Sean, for your answers. Definitely great to have your support on top of the great auction tools (we’re all paying members of foreclosureradar) on foreclosureradar.com.


#5

Very cool, thank you. If you are all working together be sure to check out our team accounts where you can share photos, notes, saved searches, etc.


#6

I would add that it’s always wise to check (Google, Intelius, etc.) the property owner’s background. In one case I found that the owner had a court judgment against him for (you guessed it) falsely recording a reconveyance on a prior loan.


#7

Awesome tip Danny, thanks!


#8

If I am the trustee on deed of trust that I did not reconvey even though the title company paid the lien off. The beneficiary has issued a substitution of trustee and is foreclosing. Can I issue the reconveyance since the lien was apid off 5 years ago?


#9

My guess is no since you are no longer the trustee. Is this a hard money deed of trust? If the bene was really paid off, it would seem to me they are in no position to foreclose, whether or not the reconveyance was recorded. Are they trying to rip the homeowner off, did they simply lose track, or perhaps did some intermediary steal the funds? There was an issue years ago in Stanislaus County with a mortgage broker making new loans, but colluding with a title officer to steal the funds such that the earlier loan was never really released. Please tell us more.


#10

i have a substitution of trustee and full reconveyance letter from the county recorders office, with a back up letter from the lender that that the loan has been paid in full.? my question is if I’m the original trustor and have paid my home off, is it legal for the current beneficiary (JP Morgan Chase) to name itself as the new trustee.? should that be the names of the original trustor?