When a borrower defaults on its mortgage, a lender has a variety of treatments available to it. Recently, lenders as well as borrowers have significantly picked to pursue options to the adversarial foreclosure procedure. Chief amongst these is the deed in lieu of foreclosure (described as a "deed in lieu" for brief) in which the lending institution forgives all or many of the debtor's responsibilities in return for the debtor willingly turning over the deed to the residential or commercial property.

During these challenging financial times, deeds in lieu deal lending institutions and borrowers many benefits over a traditional foreclosure. Lenders can reduce the uncertainties intrinsic in the foreclosure process, lower the time and expense it requires to recuperate belongings, and increase the probability of getting the residential or commercial property in much better condition and in a more seamless way together with an appropriate accounting. Borrowers can avoid costly and drawn-out foreclosure battles (which are generally unsuccessful in the long run), handle continuing liabilities and tax ramifications, and put a more favorable spin on their credit and track record. Even so, deeds in lieu can likewise present significant threats to the celebrations if the concerns attendant to the procedure are not thoroughly considered and the files are not appropriately prepared.

A deed in lieu need to not be thought about unless an expert appraisal values the residential or commercial property at less than the staying mortgage obligation. Otherwise, there is the hazard of another creditor (or trustee in personal bankruptcy) declaring that the transfer is a fraudulent conveyance and, in any case, the borrower would clearly hesitate to relinquish a residential or commercial property in which it might stand to recover some worth following a foreclosure sale. Also, a deed in lieu transaction must not be required upon a customer