A deed in lieu of foreclosure involves signing two documents, the deed, which contains the information to transfer ownership of the property, and an estoppel affidavit, which contains the terms of the agreement, according to Tucker & Associates PLLC. The process does not always protect the borrower from a deficiency judgment.Continue Reading
Most of the time, the deed in lieu provides the full satisfaction of the mortgage. If there is a difference between the market value of the property and the amount the borrower owes, the bank does not seek a deficiency judgment; however, the bank may include the right to seek a judgment in the estoppel affidavit. In Washington state, case law protects the borrower from deficiency by applying the foreclosure deficiency protection laws to these cases, according to AllLaw.
Because the deed in lieu of foreclosure must be a voluntary offer on behalf of the borrower, the customary practice is for him to initiate the process through a letter to the bank, according to Attorneys' Title Guaranty Fund, Inc. The lender then responds to acknowledge the offer and set forth the terms under which it accepts the deed. Lenders that do not accept the offer should move forward with foreclosure proceedings to prevent stalling tactics from the borrower. The terms of the agreement should also set forth the time the borrower has to vacate the property once he signs the deed.Learn more about Real Estate