Fact sheet: What is a Mortgage Release? Helping borrowers avoid foreclosure

Borrowers who can no longer afford to stay in their home may consider a Mortgage Release™, also known as a deed-in-lieu of foreclosure, to avoid foreclosure.  This is also a good alternative for homeowners who are unable to sell their property, whether for a full payoff or a short sale

Depending on eligibility, a Mortgage Release may be an option.  In this program, the borrower may be able to deed the collateral property back to Fannie Mae in satisfaction of the mortgage debt. With Mortgage Release a borrower may be eligible for relocation assistance of up to $7,500 and/or choose from one of the three graceful exit options: 

  • Immediate move following completion of the Mortgage Release
  • A three-month transition period with no rent payments required (available to borrowers only – not tenants)
  • A twelve-month lease at market rent payment (available to borrowers or their tenants)

Benefits of a Mortgage Release
Although leaving one’s home may not be desirable, there are benefits to a Mortgage Release. Borrowers can

  • Eliminate mortgage debt
  • In some cases, receive up to $7,500 in relocation assistance
  • Start repairing their credit sooner than if they went through a foreclosure
  • May be able eligible for a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) versus experiencing a foreclosure (up to 7 years)

Helping a borrower prepare for a Mortgage Release
In order to help a borrower prepare for a Mortgage Release, follow these steps

  1. Determine if a Borrower Response Package (BRP) is required, or if the borrower is eligible for streamlined documentation.
  2. Order a Broker Price Opinion (BPO) to determine the value/condition of the property.  
  3. Submit the Mortgage Release case to Fannie Mae in Servicing Management Default Underwriter™ (SMDU™) for approval.  Receive and follow instructions in the approval letter.
  4. Work with borrower to execute the Mortgage Release and complete any required action necessary for the graceful exit option selected by the borrower.


To submit a Mortgage Release case in Servicing Management Default Underwriter™ (SMDU™) refer to the “Create Liquidation Cases” section in the SMDU user guide.

D2-3.3-02: Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure)

Borrower’s corner:
Resources are available for borrowers to learn more about and plan for a Mortgage Release.
Homeowner video series: Mortgage Release