Sternberg Law Group

Deed in Lieu

What Is A Deed In Lieu Of Foreclosure?

When you can’t keep up with your mortgage payments, the best option is often to sell your home and use that money to pay off the balance of your mortgage loan. However, many homes are now “underwater,” meaning they’re worth less than the mortgage loan – selling the home won’t pay off the full debt. If you can’t sell your home at a price that will pay off the remainder of your mortgage loan, you may be able to give your lender the deed to your home instead of going through the foreclosure process. It’s called a “deed in lieu of foreclosure.” If the lender agrees, you walk away from the home and your mortgage loan is considered paid. The lender will receive property that is worth less than the loan balance, but it will avoid incurring the expense and delay involved in a foreclosure.

Lenders won’t always agree to take the deed instead of foreclosing, especially if the home has been used to secure additional debts (like a second mortgage or home equity line of credit). They don’t want the burden of maintaining and selling homes – that’s not their line of business. So, lenders often require a homeowner to place the home on the market for a period of time before they will agree to accept a deed in lieu of foreclosure. They’ll also require you to disclose your income and assets and to provide other proof of the financial hardship that prevents you from making your mortgage payments.