Short answer: Yes—many lenders allow a Deed-in-Lieu of Foreclosure (DIL), sometimes called a “mortgage release.” But it isn’t automatic, and it’s not always your best first move. Below is a plain-English guide to how it works, what it means for your credit and finances, and the other options you should compare before you decide.
This article is general information, not legal or tax advice. Talk to your servicer, a HUD-approved housing counselor, and your attorney/tax professional about your situation.
What “Giving the House Back” Really Means
A deed-in-lieu is when you voluntarily transfer ownership of your Georgia home to the lender to settle the mortgage debt and avoid a completed foreclosure. The lender must approve it. They’ll review your hardship, the property’s market value and condition, and whether there are any other liens.
Typical lender requirements
- You’ve had a documented hardship and can’t afford payments.
- You tried to sell the home (or a sale isn’t feasible in time).
- The title is clear of junior liens (or those lienholders agree to release/settle).
- You agree to vacate by a set date and leave the home broom-clean with no new damage.
- You sign documents transferring the deed and resolving the mortgage per the lender’s terms.
Credit impact: A DIL is still negative, but it generally avoids the additional damage and legal costs of a completed foreclosure.
Deficiency balance: Some lenders waive any remaining balance; some don’t. Get any waiver in writing in the DIL agreement.
Taxes: Forgiven debt can be taxable. Ask a tax professional about your state/federal rules before you sign.
Compare Your Options (pick the one that best fits your timeline and numbers)
1) Repayment plan / Loan modification / Forbearance exit
- Keep the home by catching up or changing loan terms.
- Best if your income is stabilizing and you want to stay.
2) Sell the home
- Traditional listing if you have time/equity.
- Direct, as-is cash sale when you need speed/certainty or the home needs work.
- Underwater? You may need a short sale (lender-approved sale below payoff). Ask for deficiency waiver in writing.
3) Deed-in-Lieu of Foreclosure (DIL)
- Clean, predictable exit if a sale won’t work in time and title is simple.
- Ask whether relocation assistance (“cash-for-keys”) is available and confirm deficiency terms.
4) Bankruptcy (talk to an attorney)
- A legal tool that can pause a sale date and organize debts. It has significant implications—get legal advice first.
The Step-By-Step: How a Deed-in-Lieu Works
- Call your servicer’s Loss Mitigation team.
Explain your hardship and ask for all available options—DIL, short sale, modification—and request a list of documents. - Submit a complete package.
Hardship letter, income/expense snapshot, recent bank statements, and authorization forms. Incomplete packets don’t stop timelines. - Title review & property check.
The lender/closing attorney will look for junior liens (HELOC, judgments, HOA) and may order a valuation/inspection. - DIL agreement.
You’ll receive terms covering deficiency, move-out date, property condition, and any relocation assistance. - Move-out & deed transfer.
You vacate per agreement; the deed records; the loan is resolved according to the signed terms.
Common blockers: Second mortgages, HOA liens, tax liens, or incomplete documents. If liens exist, a short sale is often more realistic than a DIL because all lienholders can be paid/negotiated at closing.
If You Want to Try a Sale First (often the better net outcome)
- Price to the market you have, not last year’s market.
- Fix quick safety items; skip big rehabs unless they close a real appraisal gap.
- Keep utilities on and allow fast access for valuations—speed matters.
- If underwater, start the short-sale package at the same time you go under contract so approvals don’t lag.
7 Mistakes to Avoid
- Silence. Not calling your servicer early limits options.
- Ignoring junior liens. DILs usually require clear title.
- No written terms. Get deficiency and relocation details in writing.
- Letting insurance lapse before transfer.
- Spending big on repairs that won’t change the outcome.
- Falling for “pay us to stop foreclosure” scams. Only work with your servicer/attorney/closing agent.
- Missing deadlines—treat every request as time-sensitive.
48-Hour Action Plan (if a sale date is looming)
- Call Loss Mitigation today. Confirm any sale date; request reinstatement and payoff quotes in writing.
- Pick a lane: modification or sell (traditional/direct), or request DIL/short sale evaluation.
- Authorize helpers. Let your agent/buyer/attorney speak with the servicer (third-party authorization).
- Send a complete document set the same day—no missing pages.
- Ask about a short rent-back if a fast sale closes before you can move.
We Buy Local Georgia, GA Houses—Can We Help?
At Middle Georgia Cash Homes, we work both sides of the problem:
- As-is cash offers with no commissions and many standard closing costs covered.
- We coordinate with your servicer and closing attorney to pursue the best path: traditional sale, short sale, or deed-in-lieu—whichever protects you and actually closes in time.
- Flexible closing (often days or weeks) and optional post-closing occupancy so you’re not rushed.
How it works
- Call 478-216-1795 or fill out the form with your address and timeline.
- Quick walkthrough (in person or virtual).
- Get a written, no-obligation offer with your net numbers.
- You choose the date; we handle the details.
FAQ
Is a DIL better than foreclosure for my credit?
Usually, yes—it avoids the completed foreclosure entry. But it’s still negative. Your history and future on-time payments drive recovery.
Will I still owe money after a DIL?
Only if the agreement says so. Push for a deficiency waiver and keep a copy of the signed terms.
What if I have a second mortgage or HOA lien?
A DIL may be denied until those are resolved. A short sale can pay or negotiate junior liens at closing.
Can I stay in the home for a bit after?
Ask about relocation assistance and move-out timing. With a sale to a direct buyer, short rent-back options may be available.