Real Estate Law
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Was the reconveyance to you and your spouse, as the owners? The debt of the 2nd trust deed loan was discharged in bankruptcy, but technically the lien of the trust deed remains against the property. Apparently, since they cannot pursue the debt except to take the property, which they don't want because the first is still ahead of them, so they have elected to simply close their books on the loan completely. You can have a title attorney review the documents and tell you where you stand, but unless you are planning to sell or refinance, it shouldn't make much difference either way. I think it's safe to say that the result of the reconveyance is that you now have just your first mortgage to deal with.
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