What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is a process where the borrower voluntarily transfers property ownership to the lender. This situation typically arises when the borrower is unable to keep up with mortgage payments and is facing the possibility of foreclosure. By choosing to execute a deed in lieu of foreclosure, the borrower aims to avoid the lengthy and often damaging process of foreclosure.

This transfer of ownership is mutually beneficial; it allows the borrower to walk away from the mortgage obligation without a foreclosure on their credit record, and it provides the lender with a quicker resolution to reclaiming the property. The lender often accepts a deed in lieu as it simplifies the recovery of their investment compared to the foreclosure process, which can be costly and time-consuming.