Deeds in Lieu: Subsequent Foreclosure of Subordinate Mortgage

First American - Deeds in Lieu: Subsequent Foreclosure of Subordinate Mortgage: "Deeds in Lieu: Subsequent Foreclosure of Subordinate Mortgage Print this Page by John C. Murray © 2006. All rights reserved. Introduction Deeds in lieu of foreclosure are often heavily negotiated. However, in many instances the lender is actually doing the borrower a favor by agreeing to accept a deed-in-lieu. The lender rarely is actively seeking to acquire a property with a value less than the outstanding debt, which may require major repairs, renovation and rehabilitation. Lenders may even refuse to accept a deed-in-lieu, for reasons including environmental contamination, the belief that there is equity in the property, and excessive or monetarily significant subordinate liens. On the other hand, the lender may agree to accommodate a cooperative borrower by delaying the delivery of the conveyance to postpone the tax consequences to the borrower. There is certainly a benefit to taking title immediately and avoiding the foreclosure process, but this benefit inures to both the lender and the borrower. It is also costly to structure a deed-in-lieu transaction, and the lender will customarily bear virtually all of the transactional expenses, including title and recording costs, and environmental inspections. In any event, a deed in lieu of foreclosure does not “wipe out” any subordinate liens,"