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 Virginia, 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 arrangement can be beneficial for both parties: the borrower can avoid the negative consequences of a foreclosure on their credit history and may be released from the obligation to pay any deficiency balance if the property's value is less than the debt owed. 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 may require the borrower to attempt to sell the property first. Additionally, if the lender does accept a deed in lieu, they may still pursue a deficiency judgment if the property's value does not cover the mortgage debt, unless otherwise agreed upon. Borrowers considering this option should consult with an attorney to understand the potential tax implications and ensure that the agreement with the lender includes a release from any further obligation.