Deed-in-Lieu
Frequently Asked Questions

A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.

Q: When a mortgagor has been approved for utilizing a DIL of foreclosure, how much time does a mortgagee have to complete the DIL?

A: A DIL of foreclosure must be completed within 90 days of initiation of the process.

Q: Does HUD allow $2,000 to pay off second liens when determining if a mortgagor is eligible for a DIL?

A: Effective with Mortgagee Letter 2002-13, HUD increased the DIL of foreclosure consideration to not to exceed $2,000. Therefore, with the mortgagor's consent, this consideration may be utilized to pay off junior liens to clear the title as stated in Mortgagee Letter 2000-05.

Q: What is HUD's process for acceptance of a DIL of foreclosure on an asset that is "structurally damaged?"

A: For servicing purposes, the mortgagee is to substantiate their business decision by what is stated within the mortgagee's Quality Control Plan. For conveyance purposes, the mortgagee is to seek approval from the REO Division Director that has jurisdiction over the property.

Q: Can a mortgagee revert from a foreclosure process to the acceptance of a DIL from a mortgagor?

A: This is a business decision the mortgagee is to decide based upon what is stated in the mortgagee's Quality Control Plan.

Q: Does a mortgagee have the ability to accept a DIL of foreclosure when there is an existing Partial Claim?

A: Per Mortgagee Letter 2000-05, page 37, paragraph E. Condition of Title, it is possible for a mortgagee to consider a mortgagor for a DIL when there is a Partial Claim lien. With the mortgagor's consent, the consideration payable to the mortgagor may be utilized to affect a discharge of lien.

Information provided by hud.gov