FinancingMortgage_instrumentsMEDIUM
Tara's lender tells her that once the debt is fully paid, the borrower's title becomes free of the mortgage lien under the clause that defeats the security instrument. Which clause is the lender referring to?
Correct Answer
A) A defeasance clause that releases the lien when paid
A defeasance clause provides that once the debt is paid according to the loan terms, the lender's security interest is defeated and the lien is released. That is why the property becomes free of the mortgage lien after full payoff.
Answer Options
A
A defeasance clause that releases the lien when paidB
An acceleration clause that matures the debt after defaultC
A prepayment clause that changes the interest rateD
An alienation clause that governs unauthorized transferWhy This Is the Correct Answer
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Background Knowledge for Financing
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Related Topics & Key Terms
Key Terms:
defeasancelien_releasemortgage_lienloan_payoff
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