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What is a deed-in-lieu of foreclosure?

A deed-in-lieu of foreclosure is an arrangement where you voluntarily turn over ownership of your home to the lender to avoid the foreclosure process. 

A deed-in-lieu of foreclosure may help you avoid being personally liable for any amount remaining on the mortgage. If you choose this option, a U.S.Department of Housing and Urban Development (HUD)-approved housing counselor can help you plan your next steps. 

Borrowers who are considering a deed-in-lieu of foreclosure should also ask their lenders or servicers about help with their relocation expenses through private programs that are sometimes called “cash-for-keys.” If you live in a state in which you are responsible for any deficiency, which is a difference between the value of your property and the amount you still owe on your mortgage loan, you will want to ask your lender to waive the deficiency. If the lender waives the deficiency, get the waiver in writing and keep it for your records. A deed-in-lieu of foreclosure is one type of loss mitigation. For help in exploring your options, call the CFPB at (855) 411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

Tip: See our handout for more information on how to avoid foreclosure.

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