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 FAQS
  1. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  2. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
  3. What are some historical examples of debt securitization?

    The first debt securities were probably sovereign debt assets that were transferred from the British government to mercantilist ... Read Full Answer >>
  4. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
  5. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
  6. How did the Great Recession affect structural unemployment?

    The Great Recession greatly increased structural unemployment levels by creating a large disparity between the high supply ... Read Full Answer >>
Related Articles
  1. Insurance

    ARMed And Dangerous

    In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
  2. Home & Auto

    Purchasing A Short-Sale Property

    If you are looking for a good deal and have time to wait, a short-sale house may be for you.
  3. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  4. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  5. Options & Futures

    Short Sell Your Home To Avoid Foreclosure

    Are you in danger of losing your home? Protect your credit score with a real estate short sale.
  6. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  7. Options & Futures

    Avoid Foreclosure: How To Handle An Underwater Mortgage

    Foreclosure is the biggest fear of any struggling homeowner. These tips just might save your credit rating.
  8. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  9. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  10. Retirement

    Mortgage Asset-Liability Management Made Easy

    Should you refinance your mortgage to purchase other assets? Learn how to weigh your risk.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center