Escrow & Title
A 'deed in lieu of foreclosure' is when a borrower:
ASells the property at auction to pay off the lender
BVoluntarily transfers title to the lender to satisfy the debt and avoid foreclosure✓ Correct
CFiles for bankruptcy to stop the foreclosure
DRefinances the loan to avoid default
Explanation
A deed in lieu of foreclosure is an alternative to foreclosure where the borrower voluntarily conveys title to the lender to satisfy the debt. It avoids the time, expense, and public record of a formal foreclosure but requires the lender's agreement.
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Key Terms to Know
Deed
A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Abstract of TitleA condensed history of a property's title, summarizing all recorded documents and encumbrances affecting it from the earliest record to the present.
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