Deed in Lieu of Foreclosure: Why is it required?

Deed in Lieu of Foreclosure is a legal document through which a grantor (mortgagor) transfers all property interest to the grantee (mortgagor). This happens when the borrower has defaulted on mortgage payments. This helps the borrower to avoid foreclosure proceedings.

Required information for the deed

Deed in Lieu of Foreclosure requires the following information.

Name of the grantor (borrower, mortgagor)
Name of the grantee (lender, mortgagee)
Name of the County where the real estate is situated
Name of the State where the real estate is situated
Signature of the grantor with date
Signature of the grantee with date
Signature of the Notary Public

Purpose served by Deed in Lieu of Foreclosure

A borrower may attempt a Deed in Lieu of Foreclosure when he/she is unable to make the home loan payments as per the mortgage agreement. Through this deed, the borrower hands over the property to the lender, who sells the real estate and tries to retrieve the loan amount. In this way, the borrower gets rid of the financial liability to repay the mortgage. It also helps a borrower to transfer all interest in property to the lender without going through the elaborate foreclosure proceedings.

Advantages of Deed in Lieu of Foreclosure

Deed in Lieu of Foreclosure is advantageous for both lender and borrower. The advantages are discussed in the following lines.

Advantages for the borrower:

One of the greatest advantages of Deed in Lieu of Foreclosure is that it is considered to be much less damaging to the borrower’s credit record in comparison to foreclosure.

Advantages for the lender:

Lenders accept Deed in Lieu of Foreclosure as the process is faster and easier in comparison to foreclosure proceedings. It also helps them to take immediate control over the property.

However, lenders may still experience losses as they need to sell the properties themselves. Therefore, there is no guarantee that the lenders will accept Deed in Lieu of Foreclosure. It is advisable that you explain your financial hardship to your lender before you take recourse to the deed in order to get out of your mortgage loan