In March of 2013 Fannie Mae and Freddie Mac homeowners with hardships were offered an opportunity to turn over the house keys and erase their debt if they were not delinquent and only had 1  loan on the property. Loans with 2nd and 3rd mortgages could not qualify. Many may not have recognized what they were eating till tax time came around in 2014. While this was a preventative foreclosure method, it still reaped the same results as foreclosure. How so?  It could not avoid Taxable income laws for dept forgiveness, and does still harm your credit.  The deed-in-lieu transaction does erases the negative equity, but then hands you back the same results of a foreclosure and short sale, with a dent in your credit, a increase in your taxable income level, and some cash contributions to seal the deal.   This proves it’s still best to let someone assume your assumable mortgage.  Letting someone assume your mortgage has no negative impact on the home owner or buyer.  So the facts stand.  Short sales, foreclosures, and Deeds in Lieu transactions all have the same results.  They are different processes leading to the same end.

Home owners thought they were trading for something different. But in the end they were trading apples for apples.