What does "deed in lieu of foreclosure" entail?

A "deed in lieu of foreclosure" is a legal process that allows a borrower who is struggling to make mortgage payments to voluntarily transfer the ownership of the property back to the lender to avoid the lengthy and costly process of foreclosure. This option benefits both parties: the borrower can avoid the negative consequences of foreclosure on their credit report and the lender can take possession of the property without going through formal foreclosure proceedings, which can be time-consuming and expensive.

The process streamlines the resolution of a defaulted mortgage by allowing the borrower to hand over the deed for the property in exchange for a release of the mortgage obligation. This often prevents further legal actions, simplifies the situation for both the lender and the borrower, and allows the lender to quickly move forward with the property.

In contrast, transferring ownership to a new buyer would involve a sale, which is not the intent of a deed in lieu of foreclosure, as it focuses on relinquishing the property directly to the lender rather than to a third party. A legal dispute over property lines pertains to boundary issues, and reassessment of property value during foreclosure is a separate process that evaluates the property’s worth in the context of foreclosure, but is not relevant to the deed in lieu process itself.