The purpose of the "Lien Satisfied/Legal Owner/Title Holder Release (REG 166)" form from the California Department of Motor Vehicles (DMV) is to provide a legal release of interest in a vehicle by a lienholder, legal owner or title holder.
When a vehicle is financed through a lender, the lender holds a lien on the vehicle until the loan is paid in full. The lender is the vehicle's legal owner until the loan is satisfied. At this point, the ownership is transferred to the borrower. Similarly, if a vehicle has been used as collateral for a debt, the legal owner or title holder may have a claim to the vehicle until the debt is paid in full.
The REG 166 form serves as a legal release of interest from the lienholder, legal owner, or title holder, allowing the owner to transfer ownership of the vehicle to a new owner without any encumbrances. The form must be completed and signed by the lienholder, legal owner, or title holder and submitted to the DMV along with the application for transfer of ownership.
Once the DMV receives the REG 166 form and the application for transfer of ownership, the DMV will update the vehicle's record to reflect the release of the lien or other interest. This is important because it allows the new owner to obtain a clear title to the vehicle and register it in their name.