What is a deed in lieu of foreclosure?

It is a disposition option sometimes available to the mortgagor (borrower) to voluntarily deed the property to the mortgagee (lender) thereby avoiding foreclosure action.
When a mortgage is delinquent and loss of the home is inevitable, a borrower may negotiate with the bank to return the home. They hand over the "deed" instead of the bank paying a trustee or attorney to initate foreclosure proceedings. This is slightly less damaging to the borrowers credit and saves the bank money and time.