California Real Estate Practice Exam

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What is a deed in lieu of foreclosure intended to do?

  1. Extend the repayment period

  2. Reduce the loan's interest rate

  3. Avoid a foreclosure sale

  4. Secure additional collateral

The correct answer is: Avoid a foreclosure sale

A deed in lieu of foreclosure is when a borrower transfers the ownership of their property to the lender in order to avoid a foreclosure sale. This option is typically pursued by a borrower when they can no longer afford to make their mortgage payments and want to avoid losing their home. The other options, such as extending the repayment period or reducing the loan's interest rate, would not necessarily avoid a foreclosure sale. And securing additional collateral is not relevant to the question of avoiding foreclosure.

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