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A deed in lieu of foreclosure is a method sometimes used by a lienholder on property to avoid a lengthy and expensive foreclosure process, With a deed in lieu of foreclosure (DIL), a foreclosing lienholder agrees to have the ownership interest transferred to the bank/lienholder as payment in full. The debtor basically deeds the property to the bank instead of them paying for foreclosure procedings. The deed will be recorded in the county where the property is located. Therefore, if a debtor fails to make mortgage payments and the bank is about to foreclose on the property, the deed in lieu of foreclosure is an option that chooses to give the bank ownership of the property rather than having the bank use the legal process of foreclosure.
Lenders are not required to accept a deed-in-lieu of foreclosure. Lenders typically prefer to get their money rather than the property. Both the lender and the borrower must enter in this process voluntarily. Typically, the process begins when the borrower sends a letter to the lender requesting that they enter into negotiations. Unfortunately, there’s no way to do a deed in lieu of foreclosure without hurting your credit unless you can get the lender to report your mortgage paid in full. Talk to your financial institution and ask whether you’re a candidate for a deed in lieu of foreclosure. You might not be if you’re current on your mortgage payments. You may wish to consult a real-estate lawyer.