What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is a legal agreement where a homeowner hands over their rights to a home to the lender as an alternative to foreclosure. It is typically used when a borrower is unable to make their loan payments and is likely to default. The lender will accept the deed in lieu of foreclosure as a way to avoid going through the costly and lengthy process of foreclosing on the property. The deed in lieu of foreclosure agreement will specify that the homeowner will surrender all rights, title, and interests to the lender in exchange for a release from their loan obligations. The borrower must also agree to leave the property in its current condition and release the lender from responsibility for any damage that may occur before the foreclosure sale. Although a deed in lieu of foreclosure is an alternate way to avoid foreclosure, there are still consequences associated with it. The borrower will likely be at risk of having their credit score reduced due to the property being sold in lieu of a foreclosure. The lender also has the right to pursue a deficiency judgment against the borrower for any amount that was still owed on the loan after the sale of the home. In the state of New Mexico, a deed in lieu of foreclosure is considered to be a voluntary transfer of property by the homeowner and can be used as a way to avoid foreclosure, but it does come with risks that should be considered before entering into such an arrangement.

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What is a deed in lieu of foreclosure?

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