A Deed-in-Lieu is when the bank accepts a deed to the property being foreclosed upon in place of foreclosing. The owner simply conveys title to the property to the bank by means of a deed. When the bank also pays the property owner a nominal sum of money to deed the property to the bank, the occurrence is called “Cash for Keys.”
Generally, I counsel my clients to accept a Deed-in-Lieu or Cash for Keys only when all other defenses have not worked. To me it is a last resort because my clients usually have several valid and strong defenses to foreclosure. Oftentimes, the banks have offered my clients a Deed-in-Lieu or Cash for Keys because the banks were afraid of the defenses which I raised for my clients, in my opinion.
Here is a link to a further discussion of this matter by the New York City Bar Association:
https://www.nycbar.org/get-legal-help/article/real-property-law/residential-mortgage-loan-foreclosure-in-new-york/deed-in-lieu/