Deed-in-Lieu

What is a Deed-in-Lieu?

A deed-in-lieu (“deed in lieu of foreclosure”) is a borrower’s voluntary conveyance of clear and marketable title of the property to Freddie Mac in exchange for a discharge of debt.

Getting Started

If a borrower’s hardship is permanent and they’re unable to be approved for any retention options or a short sale option, the Servicer should review the borrower for a deed in lieu of foreclosure, a faster and simpler process that enables struggling homeowners to exit gracefully from their homes.

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

• Avoiding foreclosure.
• Offering up to $7,500 in relocation assistance for homeowners who meet certain requirements.
• Speeding up the decision-making process by delegating approval of authority to Servicers.

Borrower Eligibility

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

• A borrower who doesn’t meet the requirements for a streamlined deed in lieu of foreclosure must be experiencing or have experienced one of the eligible hardships listed in Single-Family Seller/Servicer Guide (Guide) Section 9202.2(a).
• The borrower must be able to convey clear and marketable title to the mortgaged premises to Freddie Mac.
• The borrower isn’t delinquent, hasn’t acquired a new mortgage in the six months preceding the borrower’s delinquency or, if the borrower is current in the six months preceding evaluation for a deed-in-lieu, the borrower is only permitted to have obtained a new mortgage if their eligible hardship was distant employment transfer.
•  if the Borrower is current, in the six months preceding the evaluation of the Borrower for a deed-in-lieu of foreclosure.
• The Borrower is only permitted to have obtained a new Mortgage if the Borrower’s eligible hardship was distant employment transfer.

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

• If the property is condemned and/or broker price opinion (BPO) shows that the property has been poorly maintained, has structural/foundation problems or needs major repairs.
• If a borrower doesn’t meet eligibility requirements for a deed in lieu of foreclosure but the Servicer feels it may be the best option for addressing the delinquency. The Servicer should also submit a complete Borrower Response Package (BRP).

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

Borrower Documentation

Borrower documentation is based on delinquency. Borrowers who are more than 18 months delinquent should be evaluated for a streamlined deed-in-lieu.

For more information about deeds-in-lieu, refer to Chapter 9209.