What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is a legal document in Illinois residential real estate law. In this document, a borrower transfers the ownership of the property back to the lender to avoid foreclosure. It is seen as an alternative to foreclosure and is sometimes referred to as a "friendly foreclosure". With a deed in lieu of foreclosure, the borrower must surrender the title deed to the lender, agree to waive any right of redemption, and provide a full release of any legal claims to the property. Further, the lender must agree to recognize the deed in lieu of foreclosure. The benefits of a deed in lieu of foreclosure are that it can help the borrower avoid foreclosure and the associated damage it can cause for their credit. The borrower is also relieved of having to make future mortgage payments and generally gets to walk away from the property. On the other hand, the lender is generally relieved of the fees and charges associated with foreclosure. The lender may also receive a portion of the property’s equity. However, for the deed in lieu of foreclosure to take place, the lender may need to agree to waive some of the borrower’s debt and give the borrower time to find a new place to live. In some cases, the lender may require the borrower to continue making payments until the closing of the property.

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What is a deed in lieu of foreclosure?

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