When you pay off your mortgage with L2 chips, your bank settles in lower layer with other banks, so they do actually get L1 chips. Not actually with "cash" but

When you pay off your mortgage with L2 chips, your bank settles in lower layer with other banks, so they do actually get L1 chips. Not actually with "cash" but with chips tracked by Fed account for banks. (It's really chips all the way down). Similarly when you are sending your L2 chips thank bank created for when they granted you your morgage - from your bank to other places, they will want to settle L1 chips as well. The bank will use the value of of your debt to settle it (either sell the loan to someone, including FED or use as a collateral or whatever).