Multistate Bar Examination Practice Question

A deed in lieu of foreclosure occurs when a borrower agrees to transfer their property ownership to the lender as an alternative to foreclosure. This method allows the borrower to avoid judicial proceedings and mitigates the lender's need to pursue foreclosure. Unlike payment, which simply satisfies the loan through monetary funds, or prepayment, which discharges the debt with early payment, a deed in lieu of foreclosure directly transfers property as satisfaction of the debt, preventing further legal action. A short sale, another debt resolution method, involves selling the property for less than the owed mortgage balance, subject to lender approval, rather than directly transferring ownership.