Deed in Lieu of foreclosure is when the lender and borrower agree to avoid the expense and hassle of the foreclosure process and the property is given over to the lender who then presumably sells it. It actually makes a lot of sense when the value is only a little less than the mortgage, because it lessens property deterioration during the FC process, speeds everything up, and is pretty common among private TD lenders. Banks have their rules and bureaucracies, and have to do everything the hard way…don’t want to admit their mistakes, etc., so they do it less frequently.