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Deed-in-Lieu

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What is a Deed-in-Lieu?

A deed-in-lieu (" deed in lieu of foreclosure") is a borrower's voluntary conveyance of clear and valuable title of the residential or commercial property to Freddie Mac in exchange for a discharge of debt.

Beginning

If a customer's challenge is irreversible and they're not able to be approved for any retention options or a short sale option, the Servicer should examine the debtor for a deed in lieu of foreclosure, a faster and simpler procedure that makes it possible for struggling homeowners to leave gracefully from their homes.

The standard deed-in-lieu simplifies and improves the transaction by:

- Avoiding foreclosure.

- Offering up to $7,500 in relocation assistance for house owners who meet specific requirements.

- Accelerating the decision-making process by handing over approval of authority to Servicers.


Borrower Eligibility

All debtors are eligible for a deed-in-lieu under the following conditions:

- A debtor who does not satisfy the requirements for a streamlined deed in lieu of foreclosure must be experiencing or have actually experienced among the eligible difficulties listed in Single-Family Seller/Servicer Guide (Guide) Section 9202.2( a).

- The borrower needs to be able to convey clear and marketable title to the mortgaged properties to Freddie Mac.

- The customer isn't delinquent, hasn't gotten a new mortgage in the six months preceding the borrower's delinquency or, if the customer is present in the six months preceding evaluation for a deed-in-lieu, the debtor is only allowed to have actually gotten a new mortgage if their eligible hardship was distant work transfer.

- if the Borrower is current, in the 6 months preceding the examination of the Borrower for a deed-in-lieu of foreclosure.

- The Borrower is only permitted to have actually acquired a new Mortgage if the Borrower's eligible hardship was remote employment transfer.


Exceptions: There are some scenarios where the Servicer ought to submit a deed-in-lieu recommendation to Freddie Mac:

- If the residential or commercial property is condemned and/or broker price opinion (BPO) shows that the residential or commercial property has been poorly maintained, has structural/foundation issues or requirements significant repair work.

- If a customer doesn't fulfill eligibility requirements for a deed in lieu of foreclosure but the Servicer feels it may be the best choice for addressing the delinquency. The Servicer should likewise send a total Borrower Response Package (BRP).


However, unless alerted by Freddie Mac, all Servicers are delegated to approve a deed in lieu of foreclosure that satisfies the eligibility requirements of Section 9209.2( a)

Borrower Documentation

Borrower documentation is based upon delinquency. Borrowers who are more than 18 months delinquent ought to be assessed for a structured deed-in-lieu.

For more info about deeds-in-lieu, describe Chapter 9209.

All Resources

Guide and policy

Guided Answer: Deed-in-Lieu.
Guide Section 9201.2: Freddie Mac loss mitigation assessment hierarchy.
Guide Section 9101.4: Foreclosure suspension obligations and additional brief sale and deed-in-lieu of foreclosure requirements once the First Complete Borrower Response Package is received.
Guide Section 9208.8: Closing, reporting, drafting and remittance requirements for short sales and make-whole preforeclosure sales

Factsheets and lists

Home Affordable Foreclosure Alternatives (HAFA).

Foreclosure Sale Bidding Instructions

Helping you understand standard deed-in-lieu

Guided Answer: Deed-in-Lieu

Related resources and help

Freddie Mac Standard Short Sale FAQ.


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