What is true if a lender accepts a deed in lieu of foreclosure?

When a lender accepts a deed in lieu of foreclosure, they take title to the property directly from the borrower, bypassing the foreclosure process. This process is typically used when a borrower is unable to maintain their mortgage payments, and the property is subjected to a financial burden, such as additional liens.

The statement regarding taking title subject to any junior liens is correct because when a lender accepts a deed in lieu of foreclosure, they do not necessarily eliminate any junior liens on the property. Instead, the lender takes the property "subject to" those existing liens, meaning that any subordinate loans or claims against the property still remain attached to it, and the lender will have to deal with those obligations if they want to clear them up in the future.

Understanding this helps clarify why the other statements do not apply in this scenario. For instance, accepting a deed in lieu of foreclosure may actually have a negative impact on the borrower's credit report, contradicting the first statement. The lender's rights under mortgage insurance may also depend on terms specific to the policy and the nature of the deed in lieu agreement, affecting the third statement. Lastly, the assumability of the loan is a separate matter, as the loan's terms may not allow for assumption after a deed in lieu