What are the advantages of a Deed in Lieu of Foreclosure?
The deed in lieu of foreclosure offers several advantages to both the borrower and lender. The primary advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. In most states, a lender is allowed to sue you to recover any remaining loan deficiencythe difference between what the lender can sell the house for and what you owe on the mortgage. As long as the lender agrees in writing to forgive any deficiency you have, a DIL releases the borrower from all further liability on the mortgage loan. A DIL is also beneficial to the borrower because it avoids foreclosure proceedings and is less damaging to the borrowers credit. Advantages to a lender include a reduction in the time and cost of repossessing the house, and additional advantages if the borrower subsequently files for bankruptcy.
