When a borrower defaults on its mortgage, a lender has a number of remedies offered to it. In the last few years, lenders along with debtors have actually significantly selected to pursue alternatives to the adversarial foreclosure procedure. Chief among these is the deed in lieu of foreclosure (described as a “deed in lieu” for brief) in which the loan provider forgives all or most of the debtor’s responsibilities in return for the debtor willingly turning over the deed to the residential or commercial property.
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During these hard economic times, deeds in lieu deal lending institutions and debtors numerous benefits over a conventional foreclosure. Lenders can reduce the uncertainties fundamental in the foreclosure process, reduce the time and expenditure it takes to recuperate ownership, and increase the probability of getting the residential or commercial property in better condition and in a more seamless manner together with an appropriate accounting. Borrowers can prevent costly and drawn-out foreclosure fights (which are usually unsuccessful in the long run), handle continuing liabilities and tax implications, and put a more positive spin on their credit and track record. However, deeds in lieu can also position significant dangers to the parties if the problems attendant to the procedure are not completely considered and the files are not correctly drafted.

A deed in lieu must not be considered unless an expert appraisal values the residential or commercial property at less than the remaining mortgage responsibility. Otherwise, there is the threat of another creditor (or trustee in insolvency) claiming that the transfer is a deceptive conveyance and, in any case, the borrower would clearly be unwilling to give up a residential or commercial property in which it might stand to recover some value following a foreclosure sale. Also, a deed in lieu deal should not be required upon a borrower