Wisconsin Real Estate Sales Practice Exam

After a borrower pays off a loan, what is typically recorded by the lender?

1. Notice of Default

2. Clearance certificate

3. Satisfaction of mortgage

4. Title deed transfer

The correct answer is: Satisfaction of mortgage

When a borrower pays off a loan, the correct document that is typically recorded by the lender is known as a satisfaction of mortgage. This document serves as evidence that the borrower has fully repaid the mortgage loan and that the lender has relinquished any claims against the property. Recording the satisfaction of mortgage in the public records provides a clear title to the property owner and informs potential buyers or future lenders that the mortgage obligation has been fulfilled. This is crucial in real estate transactions, as it protects the borrower from any future claims related to the loan. The other options do not appropriately fit the context of loan payoff. A notice of default is related to a borrower being in default on their loan, which is the opposite of having paid off the loan. A clearance certificate is typically associated with tax matters, informing that taxes are paid and up to date, rather than mortgage fulfillment. Lastly, a title deed transfer pertains to a change of ownership of property rather than the satisfaction of an existing mortgage.