What term describes a deed given to a mortgagee when the mortgagor is in default?

The term that describes a deed given to a mortgagee when the mortgagor is in default is known as a deed in lieu of foreclosure. This legal instrument allows the borrower (mortgagor) to voluntarily transfer the title of their property to the lender (mortgagee) to avoid the lengthy and often complicated foreclosure process.

When a borrower is facing financial difficulties and is unable to meet their mortgage obligations, they may opt for a deed in lieu of foreclosure as it can provide a quicker resolution. This transfer of deed effectively releases the borrower from their mortgage obligation, and in return, the lender typically agrees to forgive any remaining mortgage debt, which can be beneficial for both parties.

Choosing this method not only helps the homeowner avoid foreclosure proceedings, which can tarnish their credit report and involve additional legal costs, but it can also streamline the recovery for the lender, as they obtain the property without the need for foreclosure litigation.

The other options represent different types of deeds or processes related to real estate and mortgages but do not apply as accurately as the deed in lieu of foreclosure in the context of a mortgagor defaulting on their loan.