Deeds in Lieu of ForeclosureBy Francie Cohen Spahn, Esq.

I. Introduction

Deeds in lieu of foreclosure tend to be discussed from two differ-ent perspectives the lenders perspective and the borrowers per-spective. The lenders focus, for example, is on whether it can obtaingood and marketable title upon conveyance, whether it can preservethe priority of its mortgage lien against junior lienholders andinchoate mechanics liens, or whether the deed in lieu of foreclosureprocess may be preferable to the costs and delays often associatedwith the foreclosure process. The borrowers concerns include thatthe deed in lieu of foreclosure process is preferable to a foreclosurebecause it allows the borrower to avoid the public embarrass-ment of a foreclosure proceeding. This article explains some

of the significant elements ofthe deed in lieu of foreclosureprocess from both the lenders andborrowers perspectives.

II.What exactly is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is a process. It commenceswhen the borrower is no longer able to continue makingpayments to its lender. Having defaulted under its loan, theborrower (or mortgagor) might approach its lender with anoffer to surrender the property in exchange for the lendernot foreclosing on the property, but rather accepting it asconsideration for and in discharge of the borrowers debt.See In re Anderson, No. 95-15419, 1997 WL 1102027, 6

(Bankr. E.D. Va. August 29, 1997). The lender will then determine whether it will accept theborrowers offer and, if so, under what terms. The parties will negotiate the terms of the sur-render, which will be memorialized in a settlement agreement at closing. Prior to closing, thelender will engage in a traditional due diligence process, including, among other things,reviewing the status of leases and contracts affecting the property and seeking title insurancefrom its title company. If all goes well, the parties proceed with closing, at which time theborrower transfers the deed to the lender and the lender arguably holds absolute title (ver-sus only a security interest in) the property.

III.What is the process for effectuating a deed in lieu of foreclosure?

A. Drafting the Settlement Agreement

The deed in lieu of foreclosure process should begin with a written offer from the bor-rower to convey the property to the lender. This step evidences that the transaction is vol-

THE ADVOCATEy o u n g l a w y e r s s e c t i o n m a ry l a n d s tat e b a r a s s o c i at i o n

V O L U M e 2 6 , N U M B e r 1 F A L L 2 0 1 0

Whats Inside

2 From the Chair

3 The 2010 Women

in Law Leadership

Academy: Take

Charge of Your

Own Career

5 The Courts

Perspective: Tips

and Observations

from Past and

Present Judicial

Clerks

6 Solo and Small

Firm Conference

7 What We Do,

And How to

Join Us

8 Harford Habitat for

Humanity

9 MSBA Annual

Meeting Wrap Up

courts may construe a deed inlieu of foreclosureaccompanied by []reserved rights asa security instru-ment instead of

an absolute conveyance

continued on page 10

THE ADVOCATEyoung lawyers section

maryland state bar association

EDITORSHeather r. Pruger

William N. Sinclair

ASSOCIATE EDITORSesther D. Coleman

Andrea Padley

Michael Palisano

Purvi Patel

rachel Smith

OFFICERSMarla Zide, Chair

erek L. Barron, Chair-Elect

Wendy Sare Meadows, Secretary

Wm. Carl Isler, Treasurer

elizabeth Morris, Member-At-Large

Jason Hessler, Immediate Past Chair

Gwendolyn Tate, ABA Delegate

STANDING COMMITTEESActivities Co-Chairs

Kimberly Neal and Sandy Popp

Disaster Relief Chairrob erdman

Education Co-ChairsSidney Butcher and Dolores Dorsainvil

Membership Co-ChairsThomas M. Weschler and regine Francois

Nominating ChairTamara Goorevitz

Policy ChairClaude de Vastey Jones

Pro Bono Co-ChairsMike Hudak and Meredith Martin

Public Service Co-ChairsGwendolyn S. Tate and Michael W. Siri

Publications Co-ChairsHeather r. Pruger and William N. Sinclair

Resolutions Co-ChairsGreg Kirby and Matthew S. Tidball

Annual Meeting ChairLaurie Wasserman

Diversity Initiative Co-ChairsLaKeecia r. Allen, Arielle Harry-Bess, & esther D. Coleman

Legislative Liaison ChairJulia Carolan

Historian ChairOmolade r. Akinbolaji

Technology ChairTaren N. Stanton

SPECIAL PROJECTS COMMITTEESWe the Jury / I Had A Dream Too Co-Chairs

LaKeecia r. Allen, Arielle Harry-Bess, & esther D. Coleman

Awards ChairBeverly Winstead

Wills for Heroes / Children's Law Library Co-ChairsMelody Tagliaferri Cronin and Jessica Barnes

CIRCUIT REPRESENTATIVES1stVacant (Dorchester, Somerset, Wicomico, Worcester)

2ndVacant (Caroline, Cecil, Kent, Queen Anne's, Talbot)

3rdChristine Britton (Harford, Baltimore County)

4thVacant (Alleghany, Garrett, Washington)

5thSarah Cline and richard H. Gibson, Jr.

(Anne Arundel, Carroll, Howard)

6thAndrew Schwartz and Caryn G. Seigel

(Montgomery, Frederick)

7thMonise Stephenson and Lisa Hall Johnson

(Calvert, Prince George's, St. Mary's, Charles)

8thI. DeAndrei Drummond (Baltimore City)

BOG REPRESENTATIVESelizabeth Morris

erek Baron

Jason Hessler

To get in touch with any of the individuals listed above, contact MSBA

Headquarters at 410-685-7878 or 800-492-1964; or log on to the Young

Lawyers Section website at www.msba.org/sec_comm/yls.

The Advocate is published quarterly by the Section of Young Lawyers of the

Maryland State Bar Association, 520 West Fayette Street, Baltimore, Md.

21201, 410-685-7878, 800-492-1964.

The opinions exercised in this publication are those of the authors and

should not be construed to represent the opinions or policies of the Section

of Young Lawyers or Maryland State Bar Association.

2008 Maryland State Bar Association, Inc.

2 | THE ADVOCATEFall 2010

This article is being written as we are enjoying one of the hottest sum-mers in the history of Baltimore. Our country continues to be in an eco-nomic crisis and young lawyers are having difficult times finding jobs.Although times are hard, the young lawyers in our Maryland communitiescontinue to dedicate time and energy to volunteering providing not onlylegal services, but also community service.

As my year begins, I would be remiss not to thank Jason Hessler, whoseshoes I dont think I will ever be able to fully fill. Jason has been an incred-ible leader, not only in the MSBA, but also within our Maryland commu-nities. Jason, his wife Shreya, and their two daughters have readied me andmy family for the experience of serving as Section Chair. I look forward tocontinuing to work closely with Jason on the executive committee and theBoard of Governors.

We are looking forward to an amazing year in the Young LawyersSection. The Public Service Committee is already hard at work planningevents at the SPCA, blood drives, and Habitat for Humanity events.Michael Siri has reminded us that, just because its hot, it is not too earlyto plan for the Polar Bear Plunge in January. Our education and resolutioncommittees are working hard to plan events for the upcoming bar year.The membership committee, our most industrious committee of 2009-2010, has held several events over the Summer and looks forward to wel-

coming new admittees and judi-cial clerks in the Fall. Ouractivity committee is busy at

work planning the 2011Spring Fling. All of our

committees welcome newfaces, new ideas, and assis-

tance with planning. Please do not hesitateto contact us if you are interested in getting

involved.While I look forward to being the face of the Young

Lawyers Section this bar year, I know I am not the only voice. I want toensure all of our voices are heard, and I therefore look forward to hearingfrom you!

Sincerely,

Marla Zide

From the Chair

THE ADVOCATE: Vol. 26.1 | 3

When asked for his secret to success,

Wayne Gretzky replied, I skate where

the puck is going; others wait for the

puck to come to them. While some

might not expect a sports figure to be the

source of a quote at a womens confer-

ence, it aptly summed up the focus of the

American Bar Associations 2010

Women in Law Leadership Academy.

The WILL Academya two day confer-

ence in Philadelphiafocused on giving

women the tools to take charge of their

careers. Sessions addressed topics includ-

ing Attributes of a Leader,

Alternatives to Law Firm Practice,

Navigating to Partnership,

Rainmaking, and Succession Planning,

Developing Your Personal Strategic

Plan, Advice from the Bench, Best

Practices and Advice from General

Counsel, Negotiation Skills for

Attorneys, and Restructuring Law

Firms in a Down Market: Alternative

Models and Work/Life Flexibility as Part

of the Solution. The conference also

included informal and moderated net-

working opportunities.

The sessions each addressed different

situations and provided specific guidance

tailored to those situations, but some

common themes emerged: (1) know

yourself; (2) know your audience; (3)

plan ahead; and (4) work hard. This arti-

cle focuses on those themes, which are

equally applicable to male and female

lawyers working to develop their careers.

Know Yourself. Stereotypes aboundconcerning women: women are nurtur-

ers; women are managers; women are

emotional; women