A deed in lieu of foreclosure—often referred to as a deed in lieu—is a deed by which a borrower (mortgagor) transfers fee simple title to a lender (mortgagee) to satisfy a mortgage debt.

A deed in lieu of foreclosure is a substitute for the foreclosure process and a delinquent debtor or mortgagor may avoid paying a deficiency balance (if the home is worth less than the amount owed) and may lessen the impact on their credit report by signing a deed in lieu.

In North Carolina, a deed in lieu of foreclosure is a legal instrument where a borrower voluntarily transfers the ownership of their property to the lender to satisfy the outstanding mortgage debt and avoid the foreclosure process. This option can be beneficial for both parties; the borrower may avoid the negative consequences of a foreclosure on their credit report and potentially be relieved from the obligation to pay any deficiency balance if the property's value is less than the mortgage debt. For the lender, it offers a quicker and often less expensive resolution compared to foreclosure. However, it's important to note that lenders are not obligated to accept a deed in lieu of foreclosure, and tax implications may arise for the borrower if the lender forgives any debt. Additionally, North Carolina law may have specific provisions regarding the execution of a deed in lieu, including the need for the agreement to be in writing and for the lender to provide a satisfaction of the debt. Borrowers considering this option should consult with an attorney to understand the full legal implications and ensure that all necessary legal steps are followed.