What is the purpose of a defeasance clause in a mortgage?

What is the purpose of a defeasance clause in a mortgage?

• A. For the protection of the lender
• B. For the protection of the borrower
• C. For the protection of the seller
• D. For the protection of the broker

Answer: (B)

A defeasance clause in a mortgage serves primarily to protect the borrower. Its main purpose is to ensure that, once the borrower has fulfilled their obligations under the mortgage agreement—specifically, the repayment of the loan—the lender’s claim to the property is released. This clause effectively allows the borrower to clear the title to the property, which is essential when they have completed all their mortgage payments. This legal mechanism helps to reassure borrowers that once they have paid off their debt, they will gain complete ownership free from the lender's claims or encumbrances. In the context of the other roles mentioned, the lender typically has their interests secured through the mortgage agreement itself. The seller's and broker's interests are not directly affected by the defeasance clause, as it specifically pertains to the relationship between the borrower and the lender regarding the mortgage. Thus, the correct focus on borrower protection highlights the importance of ensuring their equity in the property is ultimately honored upon full repayment.

A defeasance clause in a mortgage serves primarily to protect the borrower. Its main purpose is to ensure that, once the borrower has fulfilled their obligations under the mortgage agreement—specifically, the repayment of the loan—the lender’s claim to the property is released. This clause effectively allows the borrower to clear the title to the property, which is essential when they have completed all their mortgage payments. This legal mechanism helps to reassure borrowers that once they have paid off their debt, they will gain complete ownership free from the lender's claims or encumbrances.

In the context of the other roles mentioned, the lender typically has their interests secured through the mortgage agreement itself. The seller's and broker's interests are not directly affected by the defeasance clause, as it specifically pertains to the relationship between the borrower and the lender regarding the mortgage. Thus, the correct focus on borrower protection highlights the importance of ensuring their equity in the property is ultimately honored upon full repayment.