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Real property

deed in lieu of foreclosure

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 New Jersey, a deed in lieu of foreclosure is a legal instrument where a homeowner voluntarily transfers the title of their property to the lender to satisfy the outstanding mortgage debt and avoid the foreclosure process. This arrangement 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 offers a quicker and often less expensive resolution compared to foreclosure. 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, there may be tax implications for the borrower, as the forgiveness of debt could be considered taxable income. Borrowers considering this option should consult with an attorney to understand the full legal and financial consequences.

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Real property

deed in lieu of foreclosure

Individual & Family Legal Plan

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New-Jersey State Code

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Real property

deed in lieu of foreclosure

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