Why would a lender ever refuse a Deed-in-lieu of Foreclosure?
Lenders often refuse a deed in lieu of foreclosure due to the better quality and more certain title they receive at a trustee’s sale, called the “Trustee’s Deed Upon Sale”. A trustee’s deed upon sale serves to eliminate and wipe out any junior liens such as Home Equity Lines of Credit, 2nd Mortgages, judgment liens, etc. If those issues exist, it may be more challenging to convince a lender to accept a deed in lieu of foreclosure, nothing is impossible though.
