Deed in Lieu of Foreclosure

A deed to real property from a defaulting borrower and accepted by the lender to avoid the necessity of having the lender go through formal foreclosure proceedings.

Deed-in-Lieu of Foreclosure

Used by owners to voluntarily convey the title of their property to the mortgagee/beneficiary (lender) to avoid the negative credit consequences of a foreclosure. Lenders are generally reluctant to accept a “”deed in lieu”” unless the title is free and clear of any other encumbrances junior to theirs and the owners execute an estoppel affidavit acknowledging that they are acting volitionally with informed consent. A homeowner can qualify for a deed-in-lieu of foreclosure if:

  • They are in default and do not qualify for any of the other options;
  • All attempts at selling the house before foreclosure were unsuccessful; and
  • There is no other mortgage in default.