A mortgage clause that cancels the debt when it is paid is known as?

A mortgage clause that cancels the debt when it is paid is known as?

• A. Acceleration
• B. Defeasance
• C. Subordination
• D. Release

Answer: (B)

Defeasance is the mortgage covenant that cancels the debt and releases the lien once the loan is paid in full. It works as a promise from the lender that, upon full repayment, the mortgage is satisfied and the property is free of the lien. This is different from an acceleration clause, which speeds up repayment after a default; subordination, which changes lien priority; and a release, which is the document delivered after payoff to formally clear the lien. The key idea is that the defeasance clause ensures the debt is extinguished and the lien removed when payment is complete.

Defeasance is the mortgage covenant that cancels the debt and releases the lien once the loan is paid in full. It works as a promise from the lender that, upon full repayment, the mortgage is satisfied and the property is free of the lien. This is different from an acceleration clause, which speeds up repayment after a default; subordination, which changes lien priority; and a release, which is the document delivered after payoff to formally clear the lien. The key idea is that the defeasance clause ensures the debt is extinguished and the lien removed when payment is complete.