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Deed in Lieu of Foreclosure

Definition - What does Deed in Lieu of Foreclosure mean?

A deed in lieu of foreclosure is a mechanism allowing a borrower to escape foreclosure. A deed in lieu of foreclosure is issued when a borrower gives the deed to collateral property back to the lender. In return, the lender agrees to release the borrower from all the mortgage’s obligations.

Justipedia explains Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is usually only considered after a borrower seeks a forbearance, loan modification or new repayment plan from the lender. If the lender denies these requests, a deed in lieu of foreclosure saves the borrower from the embarrassment of foreclosure, and also leaves the borrower free from obligations under the mortgage.

Lenders may prefer a deed in lieu of foreclosure to avoid lengthy and expensive foreclosure proceedings. Short sales are a similar tool for avoiding foreclosure, and are often considered with a deed in lieu of foreclosure.

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