Short answer
A deed in lieu means you voluntarily transfer the home to the lender to settle the mortgage, instead of going through foreclosure. Fannie Mae calls it a Mortgage Release. The servicer reviews your hardship, the title must be clear of other liens, and the home is usually left vacant. If it was your main home, Fannie Mae can pay a $7,500 relocation incentive in many cases, and some loans get a written release from any remaining balance.
When is it an option?
Usually after other options don't work, such as a modification or a short sale that doesn't attract a buyer. On Fannie Mae loans, the servicer reviews a complete application if you're current or less than 90 days late, and if you're less than 60 days late it must find you're at risk of falling behind. See how a short sale works and forbearance, deferral or modification.
Why does clear title matter?
The lender needs to take the home free of other liens. If you have a second mortgage or HELOC, that lender must agree to release its lien. Fannie Mae can make a limited payment to a second lienholder that also releases you from that debt. Ask for every release in writing.
Do I have to move out right away?
Generally the home must be left vacant and broom-clean. Fannie Mae has some transition options, so ask your servicer about timing before you sign.
What happens afterward?
The servicer records the deed. For Fannie Mae loans without mortgage insurance, and some with it, you get a release from any remaining balance. Forgiven debt can have tax effects, so talk with a tax professional. You can buy again after a waiting period; see a mortgage after a foreclosure or deed in lieu. A HUD-approved housing counselor or an attorney can help you weigh it.
Sources
Checked November 2, 2026. Rules and dates change, so confirm current details before you rely on them.
General information only, not tax or legal advice. Program availability, eligibility and terms vary by lender and are subject to change and to underwriting approval. Not a commitment to lend.