Legal Definitions - reverter guarantee

A reverter guarantee is a clause in a mortgage that protects the lender from losing money if a terminating event occurs under a possibility of reverter. A possibility of reverter is a reversionary interest that is subject to a condition precedent. This means that if a certain event happens, the property will automatically revert back to the original owner.

For example, if a property owner sells a piece of land to a developer with the condition that the land must be used for a specific purpose, such as building a park, and if the developer fails to use the land for that purpose, the property will revert back to the original owner. In this case, the original owner would have a possibility of reverter.

The reverter guarantee in a mortgage protects the lender from losing money if the property reverts back to the original owner. This is because the lender would no longer have a claim on the property and would not be able to recoup their investment.