Deed in lieu

If a borrower cannot keep the home, one path is to offer the deed instead of a foreclosure sale. The servicer must agree. The borrower leaves the property under that agreement. Whether any remaining debt is cancelled depends on the documents and the state. This page does not state a deficiency rule.

CFPB defines a deed-in-lieu as voluntarily turning over ownership to avoid foreclosure and names it as a loss-mitigation option. Fannie Mae’s consumer glossary points to the same idea.

Deed in lieu, short sale, and foreclosure are easy to mix. Only one of them is a transfer by agreement instead of a sale or court process.

A deed in lieu is not automatic. It is not a short sale, and it does not by itself state what happens to any remaining balance.