Which instrument is used by a borrower to avoid foreclosure by transferring ownership to the lender?

Which instrument is used by a borrower to avoid foreclosure by transferring ownership to the lender?

• A. Promissory note.
• B. Deed in lieu of foreclosure.
• C. Redemption notice.
• D. Lis pendens.

Answer: (B)

Deed in lieu of foreclosure is a voluntary transfer of title from the borrower to the lender in exchange for the lender releasing the mortgage debt, with the goal of avoiding the foreclosure process. This arrangement can be preferable when the property is worth less than the debt or when a lender wants to save the time and costs of a foreclosure sale. It effectively resolves the loan by giving the lender ownership of the property and, in many cases, releasing the borrower from further liability, though the exact financial outcome for the borrower (such as any remaining deficiency) depends on the agreement and applicable law. The other options don’t fit this scenario: a promissory note is simply the borrower's promise to repay and does not transfer ownership; a redemption notice gives the borrower a chance to pay off the debt to stop foreclosure but does not transfer title; lis pendens is a notice that a dispute affecting the property is in court and does not transfer ownership.

Deed in lieu of foreclosure is a voluntary transfer of title from the borrower to the lender in exchange for the lender releasing the mortgage debt, with the goal of avoiding the foreclosure process. This arrangement can be preferable when the property is worth less than the debt or when a lender wants to save the time and costs of a foreclosure sale. It effectively resolves the loan by giving the lender ownership of the property and, in many cases, releasing the borrower from further liability, though the exact financial outcome for the borrower (such as any remaining deficiency) depends on the agreement and applicable law.

The other options don’t fit this scenario: a promissory note is simply the borrower's promise to repay and does not transfer ownership; a redemption notice gives the borrower a chance to pay off the debt to stop foreclosure but does not transfer title; lis pendens is a notice that a dispute affecting the property is in court and does not transfer ownership.