Can someone in foreclosure give away their property to avoid a trustee sale?

I work for a small city. A local developer is going into foreclosure, and a number of his commercial properties are scheduled for a trustee's sale in a couple of months. One of our elected officials has started badgering the developer to donate one of the properties to the city for a park, prior to the sale. She refuses to consult the city attorney, and says the fewer people who know the better. She has even gone ahead and drafted a deed for the developer to sign.

I am concerned that it is probably illegal for the owner to just give a property away, especially since it is officially in foreclosure - isn't that defrauding the mortgage holder? Wouldn't the deed/transfer of ownership be found invalid by a court? Any advice by someone who has a legal background or direct experience with commercial foreclosure would be appreciated!

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