What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is an agreement between a borrower and lender that allows the borrower to avoid foreclosure proceedings by transferring ownership of a property to the lender. In Washington, this agreement is also known as a “surrender of deed.” This agreement is a last resort for a homeowner who is unable to make mortgage payments and is facing the threat of foreclosure from their lender. When the homeowner agrees to the deed in lieu of foreclosure, they transfer the deed to the lender in exchange for the lender forgiving any debt owed. This means that the lender will no longer pursue foreclosure proceedings, however the homeowner still receives negative credit rating impacts due to the missed payments. It is important to note that the deed in lieu of foreclosure is not always an option. The lender may decline this agreement if they are uncertain that they will recover the full amount of their loan. Additionally, the homeowner may not be able to transfer the deed if they have other liens or loans on the home. The deed in lieu of foreclosure is a way for homeowners to avoid foreclosure, however it should not be entered into lightly. Homeowners should consult with their lender and/or a lawyer to understand the full implications of the agreement before proceeding.

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What is a deed in lieu of foreclosure?

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