What is a voluntary foreclosure?

A voluntary foreclosure is one that is initiated by a borrower who wishes to avoid the obligation of making future payments on a mortgaged property. A borrower may initiate a voluntary foreclosure due to unexpected circumstances such as the loss of a job, divorce or a catastrophic health event.

The borrower generally notifies the lender that he is unable to make future mortgage payments to initiate the foreclosure proceeding. A voluntary foreclosure generally has a negative affect on the borrower's credit rating, but it is not as detrimental as an involuntary foreclosure or default and may therefore be more beneficial to the borrower.