A deed in lieu of foreclosure may cause a merger of estates that terminates the lender's mortgage.

Question

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A deed in lieu of foreclosure is a legal agreement between a borrower and a lender to transfer ownership of the property to the lender in exchange for the lender canceling the mortgage loan. This transfer of ownership may cause a merger of estates, which means that the ownership interest of the lender's mortgage merges or combines with the ownership interest of the borrower's property. As a result, the lender's mortgage is terminated, and the property becomes unencumbered by any liens or mortgages.

A Deed in Lieu of Foreclosure May Cause a Merger