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 Montana, a deed in lieu of foreclosure is a legal instrument where a homeowner, who is unable to continue making mortgage payments, voluntarily transfers the ownership of their property to the lender as an alternative to foreclosure. This arrangement allows the borrower to avoid the lengthy and public process of foreclosure, and it may also help in reducing the negative impact on the borrower's credit history. The lender, in accepting a deed in lieu, typically forgives the remaining debt on the mortgage, especially if the value of the property is less than the debt owed. However, it's important to note that lenders are not obligated to accept a deed in lieu of foreclosure and may proceed with foreclosure if it is in their financial interest. Additionally, if the property's value is significantly less than the mortgage balance, the lender may still seek a deficiency judgment for the difference, unless otherwise agreed upon. Borrowers considering a deed in lieu of foreclosure in Montana should consult with an attorney to understand the potential tax implications and to ensure that the agreement with the lender includes a release from any further obligation.