When a debtor defaults on its mortgage, a loan provider has a number of treatments offered to it. In recent years, lenders in addition to borrowers have progressively picked to pursue alternatives 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 many of the borrower's responsibilities in return for the borrower voluntarily turning over the deed to the residential or commercial property.

During these challenging economic times, deeds in lieu deal lenders and debtors many benefits over a standard foreclosure. Lenders can decrease the uncertainties fundamental in the foreclosure process, reduce the time and expense it requires to recover ownership, and increase the probability of getting the residential or commercial property in much better condition and in a more seamless way together with an appropriate accounting. Borrowers can prevent costly and protracted foreclosure fights (which are usually unsuccessful in the long run), manage continuing liabilities and tax ramifications, and put a more favorable spin on their credit and credibility. Nevertheless, deeds in lieu can also present considerable dangers to the celebrations if the issues attendant to the procedure are not completely considered and the documents are not appropriately prepared.

A deed in lieu must not be thought about unless an expert appraisal values the residential or commercial property at less than the staying mortgage responsibility. Otherwise, there is the threat of another creditor (or trustee in insolvency) claiming that the transfer is a deceitful conveyance and, in any case, the customer would obviously be unwilling to give up a residential or commercial property in which it may stand to recover some value following a foreclosure sale. Also, a deed in lieu transaction need to not be required upon a debtor