Deed In Lieu Of Foreclosure

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.

BREAKING DOWN '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)?

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RELATED FAQS
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    Understand the difference between a short sale and a foreclosure; both result in the loss of a home, either through a sale ... Read Answer >>
  2. Can I buy a house directly from Fannie Mae (FNMA)?

    Yes; you can buy homes directly from Fannie Mae. Fannie Mae (the Federal National Mortgage Association, or FNMA) is a government-sponsored ... Read Answer >>
  3. How do you use the FNMA selling guide?

    Learn about Fannie Mae Selling Guide and find out details about how its parts provide support to the business relationship ... Read Answer >>
  4. What is a fiduciary deed and when is it useful?

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