One reason a deed in lieu of foreclosure is attractive to some borrowers is that it:

A deed in lieu of foreclosure is indeed attractive to some borrowers primarily because it minimizes the damage to the borrower's credit. When a borrower voluntarily transfers ownership of the property to the lender, it is usually seen more favorably by credit reporting agencies than a full foreclosure process. A foreclosure can significantly impact a borrower's credit score and can remain on their credit report for several years, making it more challenging for them to secure future loans or mortgages. In contrast, a deed in lieu may simply reflect as a settled debt, which can have a lesser impact on credit ratings. This option allows borrowers to avoid the more severe consequences and prolonged hassle associated with a foreclosure process, offering a pathway to move forward with their financial lives with less long-term damage to their credit history.