What is Deed in Lieu of Foreclosure?
A deed in lieu of foreclosure is when a struggling homeowner voluntarily signs the property’s deed over to the lender to satisfy the loan, instead of going through a full foreclosure. It can be less damaging to the homeowner and faster for the lender. Lenders usually accept it only when there are no other liens and the owner has genuinely tried to sell or repay.
Example: A homeowner who can no longer afford the mortgage and could not complete a short sale hands the title back to the bank by deed in lieu, and the bank cancels the remaining loan.