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Dena, Home Seller in Fernley, NV

What does a deed-in-lieu of foreclosure mean?

Asked by Dena, Fernley, NV Mon Apr 5, 2010

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0 votes Thank Flag Link Mon Apr 5, 2010
Hi Dena,

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 him/her 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 than he/she would in a formal foreclosure. Another benefit to the borrower is that it hurts their credit less than a foreclosure does. 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.

Best regards,

0 votes Thank Flag Link Mon Apr 5, 2010
A deed in leiu occurs when the property is given back to the lender because payments can no longer be made--see link for additional information.
0 votes Thank Flag Link Mon Apr 5, 2010
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