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 Pennsylvania, a deed in lieu of foreclosure is a legal instrument where a homeowner, who is unable to make mortgage payments, voluntarily transfers the ownership of their property to the lender to satisfy the outstanding debt and avoid the foreclosure process. This arrangement can be beneficial for both parties as it allows the borrower to avoid the negative consequences of a foreclosure on their credit history, and it can expedite the process for the lender compared to a traditional foreclosure. However, it's important to note that whether a deficiency balance will be forgiven depends on the agreement between the borrower and the lender. In some cases, the lender may still pursue a deficiency judgment for the difference between the sale proceeds and the amount owed. Borrowers considering a deed in lieu of foreclosure should consult with an attorney to understand the implications, ensure that the agreement includes a release of any deficiency, and to navigate the legal requirements for transferring property in Pennsylvania.