Question

the clause in a mortgage that best describes the requirement of the mortgagee to execute a satisfaction of mortgage when the note has been fully paid is

Answer 1

The clause in a mortgage that best describes the requirement of the mortgagee to execute a satisfaction of mortgage when the note has been fully paid is defeasance

What Is Defeasance?

When the borrower sets aside cash or bonds big enough to pay the obligation, the contract's defeasance clause renders the bond or loan worthless on the balance sheet. The outstanding debt and cash balance on the balance sheet are equal, thus they do not need to be reported because the borrower sets aside funds to pay down the bonds.

Buying commercial real estate is one instance of using defeasance. Due to commitments to bondholders having a stake in the commercial mortgage-backed securities (CMBS) that houses the loan, commercial loans may have hefty prepayment penalties in contrast to home mortgages.

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