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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 mortgageā€™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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