A Deed in lieu of foreclosure is a written legal instrument in which a mortgagor (the borrower) conveys all interest in a real property to the mortgagee (the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

The borrower in a deed in lieu of foreclosure is released from most, if not all, of the personal indebtedness coupled with the defaulted loan. The borrower also avoids the public dishonor of a foreclosure proceeding.

The lender in a deed in lieu of foreclosure benefits from a reduction in the time of foreclosure process.  The lender also enjoys a reduction in the cost of repossession and avoids the added delay and costs associated with the possibility of the borrower filing for bankruptcy.

The indebtedness in a deed in lieu of foreclosure is secured by the transfer of real property. In a deed in lieu of foreclosure, the borrower and the lender enter into the transaction with out any force and in good faith.  This deed must contain a total consideration equivalent to the fair market value of the real property conveyed.