Which statement about a deed in lieu of foreclosure is TRUE?

A deed in lieu of foreclosure is a legal agreement in which a borrower voluntarily transfers ownership of the property to the lender to avoid foreclosure. This transfer is typically executed when the borrower is unable to continue making mortgage payments and wants to bypass the lengthy process of foreclosure.

The statement that it avoids public notice of the foreclosure is true because, unlike foreclosure proceedings, which are public and often involve court hearings and auctions, a deed in lieu of foreclosure is a private transaction. The homeowner can complete this process without the same level of publicity, allowing for a smoother transition.

This distinction is important for homeowners who are concerned about the public stigma of foreclosure. While other options present various procedures and consequences linked to the foreclosure process, a deed in lieu simplifies matters for both the borrower and the lender, making it a preferable alternative for those looking to minimize the negative implications of defaulting on a mortgage.