Deed In Lieu Of Foreclosure

AAA

DEFINITION of 'Deed In Lieu Of Foreclosure'

A potential option taken by a mortgagor (a borrower) to avoid foreclosure under which the mortgagor deeds the collateral property (the home) back to the mortgagee (the lender) in exchange for the release of all obligations under the mortgage. Both sides must enter into the agreement voluntarily and in good faith.

INVESTOPEDIA EXPLAINS 'Deed In Lieu Of Foreclosure'

A deed in lieu of foreclosure has advantages for both a borrower and a lender; mainly the avoidance of time consuming and costly foreclosure proceedings. In addition, the borrower avoids some public notoriety, and may even be able to lease the property back from the lender.The lender needs to assess certain risks which include, among other things, the risk that the property is not worth more than the remaining balance on the mortgage and that junior creditors might hold liens on the property.

Learn how Fannie Mae works with deeds-in-lieu of foreclosure to minimize the negative impact on communities; check out Can I buy a house directly from Fannie Mae (FNMA)?

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  3. Voluntary Conveyance

    Transfer of title from a delinquent homeowner to a lender to ...
  4. Involuntary Foreclosure

    When a borrower defaults on a home mortgage loan and the lender ...
  5. Underwater Mortgage

    A home purchase loan with a higher balance than the free-market ...
  6. Right Of Foreclosure

    A lender's ability to take possession of the property used to ...
Related Articles
  1. ARMed And Dangerous
    Insurance

    ARMed And Dangerous

  2. Purchasing A Short-Sale Property
    Home & Auto

    Purchasing A Short-Sale Property

  3. How Interest Rates Affect The Housing ...
    Economics

    How Interest Rates Affect The Housing ...

  4. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center