What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is an agreement between a borrower and a lender in which the borrower voluntarily transfers ownership of their property back to the lender in exchange for the lender forgiving the debt on the property. In Wisconsin, a deed in lieu of foreclosure is sometimes used as an alternative to a foreclosure sale. When a borrower agrees to a deed in lieu, they are relieved of the obligation to make further payments on the loan and the lender gets clear and immediate title to the property. The borrower must make a written request to the lender, and the lender must agree to the deed in lieu for it to be legally binding. The lender may also require that the borrower sign a deed in lieu of foreclosure promissory note, which obligates the borrower to pay any amount still owed on the loan. After the deed in lieu of foreclosure is signed, the lender will usually release any liens that may have been placed on the property. The advantages of a deed in lieu of foreclosure are that it is often faster and less expensive than a foreclosure proceeding. The borrower avoids the foreclosure sale and the damage it will have on their credit rating, and the lender can typically recover the loan’s remaining balance more quickly than in a foreclosure. However, this type of agreement is not always available and can be difficult to obtain. The lender often looks at the borrower’s financial situation and may deny the deed in lieu of foreclosure request. In addition, it is important to note that a deed in lieu of foreclosure does not relieve the borrower of liability for any deficiency resulting from the sale of the property.

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What is a deed in lieu of foreclosure?

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