A deed in lieu of foreclosure—often referred to as a deed in lieu—is a deed by which a borrower (mortgagor) transfers fee simple title to a lender (mortgagee) to satisfy a mortgage debt.

A deed in lieu of foreclosure is a substitute for the foreclosure process and a delinquent debtor or mortgagor may avoid paying a deficiency balance (if the home is worth less than the amount owed) and may lessen the impact on their credit report by signing a deed in lieu.

In Alabama, a deed in lieu of foreclosure is a legal instrument where a borrower voluntarily transfers the ownership of their property to the lender to satisfy the outstanding mortgage debt and avoid the foreclosure process. This option can be beneficial for both parties; the borrower may avoid the negative consequences of a foreclosure on their credit history and potentially be relieved from the obligation to pay any deficiency balance if the property's value is less than the mortgage debt. For the lender, it can be a quicker and less costly way to recover the debt without going through the lengthy foreclosure process. However, it's important to note that lenders are not obligated to accept a deed in lieu of foreclosure, and it may have tax implications for the borrower. Additionally, Alabama may have specific statutes and regulations that govern the execution of a deed in lieu, and it is advisable for both parties to consult with an attorney to understand the legal ramifications and ensure the process is handled correctly.