Final answer:
The Defeasance clause allows the lender to release mortgage rights and issue a satisfaction piece once the mortgage is fully paid off. It nullifies the borrower's obligation and removes the lien from the property.
Step-by-step explanation:
When a mortgage is paid off, the clause that allows the lender to release the mortgage rights and issue a satisfaction piece is known as the Defeasance clause. Mortgages typically span 15 years or 30 years, and throughout this period, a borrower is obligated to make payments to pay down the loan. Once the loan is fully repaid, the Defeasance clause is triggered, and it ensures that the borrower's obligation is nullified, and the lien on the property is released, eliminating any claim the lender had on the property. This release of obligation by the lender is typically documented by a certificate of satisfaction or a release of mortgage, which should be filed with the local government to acknowledge that the mortgage has been paid in full and the lien on the property is extinguished.