Escrow & Title
In Oregon, when a lender is given a deed in lieu of foreclosure, what potential problem may arise regarding title?
AThe deed in lieu is not recordable in Oregon
BJunior lienholders and other encumbrances may survive the deed in lieu, since they are not eliminated as in a foreclosure sale✓ Correct
CThe lender automatically receives a clear title
DThe borrower may repurchase the property within 6 months
Explanation
A major problem with deeds in lieu of foreclosure is that they do not eliminate junior liens, second mortgages, IRS liens, mechanic's liens, or other encumbrances on the property. Unlike a foreclosure sale (which eliminates junior liens in priority), a voluntary deed in lieu leaves the lender with title subject to all existing encumbrances.
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