Which of the following is true about a deed of reconveyance?

A deed of reconveyance is a legal document used to transfer the title of a property back to the trustor, which is the borrower (often a homeowner) in a mortgage agreement, after the debt secured by that mortgage has been fully repaid. When a borrower pays off their loan, the lender must provide a deed of reconveyance to officially release the lien on the property and confirm that the borrower once again holds clear title. This process signifies the end of the loan agreement and restores the trustor’s full ownership rights to the property.

In contrast, the other options describe aspects that do not align with the function of a deed of reconveyance. For example, the notion that it transfers ownership of the property permanently mischaracterizes its role since it is only applicable under the circumstances of loan repayment. It also does not represent a form of foreclosure, which is a legal process that allows a lender to recover the balance of a loan by forcing the sale of the asset used as collateral if the borrower defaults. Additionally, a deed of reconveyance is not limited to commercial properties; it applies to both residential and commercial real estate transactions where loans are involved.