When a borrower defaults on its mortgage, a lender has a number of solutions available to it. Over the last few years, lending institutions in addition to customers have actually significantly selected to pursue options to the adversarial foreclosure process. Chief amongst these is the deed in lieu of foreclosure (described as a "deed in lieu" for short) in which the lending institution forgives all or the majority of the borrower's commitments in return for the customer voluntarily handing over the deed to the residential or commercial property.

During these hard economic times, deeds in lieu offer lenders and customers various benefits over a standard foreclosure. Lenders can decrease the unpredictabilities intrinsic in the foreclosure procedure, lower the time and expenditure it requires to recuperate ownership, and increase the possibility of getting the residential or commercial property in better condition and in a more seamless manner together with a correct accounting. Borrowers can prevent expensive and protracted foreclosure fights (which are typically unsuccessful in the long run), manage continuing liabilities and tax implications, and put a more favorable spin on their credit and reputation. However, deeds in lieu can also pose considerable threats to the celebrations if the problems attendant to the process are not completely considered and the documents are not effectively drafted.

A deed in lieu must not be thought about unless a professional appraisal values the residential or commercial property at less than the remaining mortgage responsibility. Otherwise, there is the danger of another creditor (or trustee in personal bankruptcy) declaring that the transfer is a deceitful conveyance and, in any case, the would undoubtedly be reluctant to relinquish a residential or commercial property in which it may stand to recover some worth following a foreclosure sale. Also, a deed in lieu transaction need to not be forced upon a customer