Deed in Lieu of Foreclosure

Under certain conditions, lenders will accept the property back from the borrower as full payment of their debt to save the time and expense of the foreclosure process.

In these cases, our job is to convince the lender it’s in their best interest to accept the property as payment in full for their debt. This requires skillful research as to current and prospective property values; establishing the fact the borrower cannot afford to make any acceptable level of payments, and that there is no current or near-term market for the property. We use this data as the basis to present the financial alternatives to the lender, of a factual nature, in a manner that allows them to determine for themselves, that a deed in lieu is the best choice in the matter.

The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.

If you have been unable to make your monthly mortgage payments and have also been unsuccessful trying to sell your home at the market value, this form of foreclosure may be what is necessary to get you back on track. This procedure allows you to transfer your property voluntarily to your lender or Mortgage Company and your debt or deficiency is often forgiven. This will not save your home, but it will help you with your chances of getting another mortgage loan in the future and it will help you avoid the lengthy legal process of foreclosure. Although it is a negative strike on your credit rating, it is less harmful than a mortgage foreclosure.

Typically your Mortgage Company will require that your home has been listed with a Real Estate Agent for at least 30 days and there are no other liens on the property for them to approve you. Some Companies may also require that the property be vacant, an interior appraisal of the property and a minimum of 60 days prior to a Foreclosure sale. Let us help you with filing the necessary paperwork and negotiating with your Mortgage Company.

Note: a deed in lieu may also prevent the lender from filing an IRS form 1099 on their loss which may otherwise subject the homeowner to adverse income tax consequences. As with all tax matters, all homeowners are urged to seek advice from qualified tax counsel prior to consenting to a deed in lieu of foreclosure arrangement.

Note: Homeowners First is not licensed to give tax or legal advice. None of the statements made herein or elsewhere in this website are to be construed as the giving of tax or legal advice.