What is a deed in lieu of foreclosure?

​A deed in lieu of foreclosure is when a homeowner voluntarily signs a deed giving the property to the bank. This saves the bank the time and expenses associated with the foreclosure process and saves the homeowner the foreclosure on their credit report. There are many pros and cons to considering whether a deed in lieu is best for you. One of the main considerations is if you have somewhere to move and the amount of equity or lack thereof in the property.

​What are the Pros of a deed in lieu?

1. It saves the borrower from having a foreclosure on their credit report, which may allow you to buy another house much sooner.
2. Sometimes a bank will pay the homeowner for a deed in lieu.
3. Often any potential deficiency on the loan may be forgiven. 

What are the Cons of a deed in lieu?

1. The process can be long and the bank may decline you at the end.
2. If there are judgment liens against your property a foreclosure will be required to pass clean title to the new owner.
3. A deed in lieu does not automatically end your obligation on the mortgage, meaning the bank could still sue you for the unpaid balance of the loan.

If the bank won’t accept a deed in lieu of foreclosure can I simply file a quit claim deed at the Register of Deeds?

​If you are continuing to receive tax bills and are concerned about liability from owning property you have abandoned that may be an option although the bank could challenge your transfer. That being said this option is becoming more popular when a bank refuses to foreclose.

Will the bank accept a deed in lieu of foreclosure?

​Call the bank and ask. Keep calling until you get an answer. Sometimes asking for a mortgage modification moves your file to the right people to review your loan.

Do I need a lawyer to do a deed in lieu?

Although the bank should mail you the paperwork to have notarized it would be prudent to have a lawyer review the paperwork to make sure you are also being released from any further liability on the loan. ​