What is the term used when a borrower's compliance with mortgage terms extinguishes the lender's interest in the property?

The correct term for when a borrower's compliance with the terms of a mortgage loan extinguishes the lender's interest in the property is known as a defeasance clause. This clause is an integral component of many mortgage agreements, specifically establishing that once the borrower fulfills all obligations, such as making all required payments, the lender's rights to the property are rendered void.

In practical terms, the defeasance clause ensures that the lender must release their claim to the property once the mortgage is paid off. This mechanism is beneficial for borrowers because it provides them with assurance that after satisfying their financial responsibilities, they will regain full ownership of their property without additional encumbrances.

In contrast, a waiver agreement relates to the relinquishment of a right or claim but does not specifically address the extinguishment of the lender's interest in the property upon fulfilling mortgage terms. A subordination agreement typically involves two parties where one lender agrees to subordinate their lien position to another lender, which does not pertain to the borrower satisfying their mortgage obligations. Lastly, a release deed is a document that formally conveys the lender's interest back to the borrower upon payment but is not the term that defines the automatic effect of a borrower's compliance as encapsulated within the context of the mortgage