A deed in lieu of foreclosure describes when you, the borrower, sign a written document that conveys all interest in a property to the mortgagee/lender to satisfy a loan that is in default.

The conveyance stops the foreclosure proceedings.

The deed in lieu of foreclosure provides numerous benefits to you and the lender. The key benefit to you is that you are immediately released from all or most of the loan, depending on the terms.

You also may receive more generous terms than if you went all the way through foreclosure.

The lender benefits because the time it takes to resolve the matter is greatly reduced. The lender also saves a substantial amount of money in legal fees than if it went through the more formal process of foreclosure.

You must provide a written offer to the lender in order for the transaction to be valid.

The parol evidence rule applies to contracts, which is what you are creating with a deed in lieu to foreclosure.

Under the parol evidence rule, a document is viewed as embodying the entire agreement between the parties involved.

You and the lender must voluntarily enter into the contract in good faith. Therefore, the lender may not suggest the idea of deed in lieu of foreclosure because it would be risking the appearance of forcing you into the contract.

If you are forced into a contract, the contract may be found invalid by a court of law at a later date.