A legal method to avoid foreclosure whereby a deed is given to the lender to fulfill the loan obligation to repay the debt. This procedure does not allow the borrower to continue to occupy the property. However it does help to satisfy the obligation of repaying the balance due on the defaulted loan and thereby avoiding foreclosure.
"Deed in lieu of foreclosure" gives title to the lender, when a person is in default and wants to avoid foreclosure. Offering to provide a deed-in-lieu, does not guaratee the lender will accept it. Either way, if the lender accepts the deed-in-lieu or not, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents to a foreclosure being recorded and become a matter of public record.
Before considering deed in lieu negotiations with your lender, evalutate your refinancing options with a lender specializing in foreclosure refinances.
Deed in lieu of foreclosure can also be called a voluntary deed or voluntary conveyance.
A Deed in lieu of foreclosure is an excellent way for a bank and a borrower to come to an agreement - specifically when the borrower is obviously in a tough spot, and it can be easily verified, and is obvious that better times are ahead. The last thing a bank wants to do is foreclose on a borrower, if they can avoid the process - as it is very costly for everyone involved, including the bank.