Deed in Lieu
You cannot force your mortgage lender to accept a deed in lieu of foreclosure; she has the right to refuse. Her decision may depend on the value of the house and on your local real-estate market: If the lender already has many deeds she can't unload, she may demand cash. If your lender agrees to accept the deed, make sure she states, in writing, that this pays off your loan. Without this guarantee, she could still sue you to collect any debt remaining after the sale.
Liens
The law ranks most liens -- claims -- on your house in the order of seniority: The mortgage lender, as the first lien, gets paid off out of a foreclosure or deed in lieu sale, then come second mortgages, contractor's liens and federal tax liens. Property tax liens are an exception: No matter when they're filed, they take precedence over all other claims. If your local government has filed a lien on your property, your lender may decide he'd rather not accept the deed.
Considerations
If your local real-estate market is healthy and your house is a good investment, your lender may be more cooperative. It's a matter of self-interest: If your lender thinks he can pay off your property taxes and still sell the house at a profit, that might be a better deal than foreclosure, which can take a year or more in some states. The only way to find out for certain what your lender will agree to is to negotiate.
Alternatives
If your lender isn't interested in paying the property taxes off, you can try scraping together enough money to pay the debt yourself, then go back and offer the deed again. Alternatively, you could stop trying to pay the mortgage and the taxes and stay in the house until either the lender or the county takes the house for nonpayment. While foreclosure is a bad blow to your credit, Fair Isaac -- the corporation that developed the FICO credit-scoring system -- says deed in lieu of foreclosure is just as bad, so you may not be worse off.
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