This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Deed in lieu of foreclosure" – news · newspapers · books · scholar · JSTOR(June 2023) (Learn how and when to remove this message)
A deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases the borrower from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms compared to a formal foreclosure. Another benefit to the borrower is that it harms a borrower's credit less than a foreclosure does.[1][2] Advantages to a lender include a reduction in the time and cost of a repossession, lower risk of borrower revenge (metal theft and vandalism of the property before sheriff eviction), and additional advantages if the borrower subsequently files for bankruptcy.
If there are any junior liens a deed in lieu is a less attractive option for the lender. The lender will likely not want to assume the liability of the junior liens from the property owner, and accordingly, the lender will prefer to foreclose in order to clean the title.
In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntarily and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Sometimes, the lender will not proceed with a deed in lieu of foreclosure if the outstanding indebtedness of the borrower exceeds the current fair value of the property; in other cases, a lender will agree since it will likely end up with the property anyway through the costly foreclosure process.
Because of the requirement that the instrument be voluntary, lenders will often not act upon a deed in lieu of foreclosure unless they receive a written offer of such a conveyance from the borrower that specifically states that the offer to enter into negotiations is being made voluntarily. This will enact the parol evidence rule and protect the lender from a possible subsequent claim that the lender acted in bad faith or pressured the borrower into the settlement. Both sides may then proceed with settlement negotiation.
The Home Equity Theft Prevention Act in New York has created some confusion regarding this frequently used method of settlement.[citation needed] It is unclear whether HETPA applies to deeds in lieu of foreclosure since there is no clear exclusion as there is for a referee's deed, for example. The 2-year right of rescission is not a risk that banks or title insurers are comfortable with, especially given the complexities of compliance, so many banks and title insurers in New York are not willing to work with deeds in lieu.[citation needed]
^"Deed In Lieu Of Foreclosure Explained". www.quickenloans.com. Retrieved 2023-06-15.
^Chang, Ellen. "What Is A Deed In Lieu Of Foreclosure?". Bankrate. Retrieved 2023-06-15.
and 26 Related for: Deed in lieu of foreclosure information
available). In the United States, there are two types offoreclosurein most states described by common law. Using a "deedinlieuofforeclosure," or "strict...
execute a deedinlieuofforeclosure. After a debtor fails to make a payment on their mortgage and before a creditor may commence a foreclosure action,...
foreclosure. These new terms are typically obtained through loan modification, short sale negotiation, short refinance negotiation, deedinlieuof foreclosure...
short sale or deed-in-lieuofforeclosure. The subprime mortgage crisis was triggered by a large decline in home prices after the collapse of a housing bubble...
believe they would recover in a foreclosure. DeedinlieuofforeclosureForeclosureForeclosure consultant Housing bubble Index of real estate articles Investment...
operates throughout the world Deedinlieuofforeclosure, a deed instrument in which a mortgagor conveys all interest in a real property to the mortgagee...
Kenyans. 23 June 2021. "DeedinLieuofForeclosure". Investopedia. Branson, Michael (2009-02-24). "Produce Me The Note Or No Foreclosure Today". Huliq News...
Consultant Registration". Department of Justice. State of California. Retrieved 19 December 2017. "Foreclosure Consultant". Deedinlieuofforeclosure v t e...
like that challenge. In early June 2011, data center operator Sabey Data Center Properties purchased the deedinlieuofforeclosure from M&T Bank for $120...
Retrieved 15 February 2019. "PREIT Turns Over Wyoming Valley Mall inDeed-In-LieuofForeclosure". Commercial Real Estate Direct. September 27, 2019. Retrieved...
to a foreclosure, which could affect credit by 300+ points. A deedinlieuofforeclosure has a much more devastating effect on one's credit. In addition...
contain a power of sale clause, also known as nonjudicial foreclosure clause, making them equivalent to a deedof trust. Most "mortgages" in California are...
“deed in lieu offoreclosure” transactions. The entire Landmark Square complex was deeded to the Metropolitan Life Insurance Company in 1991. Since 1992...
differences. In an ejectment action, it is typically done to remove a tenant or lessee in an eviction action, or an eviction after a foreclosure. [citation...
property is taken through foreclosure. A mortgage can also be described as "a borrower giving consideration in the form of a collateral for a benefit...
of families." Economic crisis of 2008 Creative Real Estate Investing DeedinlieuofforeclosureForeclosure consultant List of entities involved in 2007-2008...
in the presence of an impartial mediator to discuss the Foreclosure Lawsuit and possible alternatives (including Loan Modification, DeedinLieuof Foreclosure...
uncommon in the mortgage industry, in which many lenders require extensive documentation. 311 Foreclosure Prevention Programs Deedinlieuofforeclosure Equity...
Francisco Report: "Foreclosurein California—A Crisis of Compliance" A Nationally Significant Statistical Portrait of Problems in the Foreclosure Process". Probate...
2009 the village of Hoffman Estates, Illinois acquired the NOW Arena (formerly Sears Centre Arena) through a DeedinLieuofForeclosure process, as a result...
Florida is one of several states where the courts are required to be involved in every step of the foreclosure process. By 2012, it took three years to...
Real estate trends DeedinlieuofforeclosureForeclosure consultant Shiller RJ, Weiss AN. (1999). Home equity insurance. The Journal of Real Estate Finance...