subject: Deed In Lieu Of Foreclosure [print this page] Derek and Rachel are married and both were affected by the recent recession. Derek got laid off and Rachel had her hours significantly cut back. After about one year and falling behind on their mortgage payments they decided the house had just become too much of a burden. It seemed like there was no way to avoid foreclosure. But they really wanted to limit any further damage to their credit. They heard about an option called a deed in lieu of foreclosure. This is the subject of this brief article. The information will present a basic overview of deed in lieu of foreclosure and how it works
A deed in lieu of foreclosure, which is sometimes called just a deed in lieu, could be a possible option for distressed homeowners behind on their payments and no longer able to maintain the home, to prevent a court foreclosure.
In the deed in lieu of foreclosure process, the homeowner gives the deed to house to the bank, or lender, or mortgage company, or whoever currently holds the mortgage. They in return agree not to pursue legal court ordered home foreclosure proceeding.
The parties actually complete a written agreement that details the terms and conditions. Once agreed, the deed is turned over to the lender. The home must be moved out of. This means that a deed in lieu is never an option for those who are looking for ways to save their home.
The deed in lieu offers a few benefits to the delinquent homeowner. The main one, of course, is that there is an immediate release from the debt, the mortgage obligation, and the monthly payments. The delinquent homeowner also avoids a very public court ordered foreclosure proceeding. And while a deed in lieu will definitely have a negative affect on your credit, it is less of a hit than having a home foreclosure on your credit report. Also there is a psychological benefit from being able to say I did not experience a home foreclosure. The deed in lieu of foreclosure can put a quick end to a very stressful situation. It can make it easier to start over once your financial circumstances improve.
For the mortgage holder, or lender, a deed in lieu of foreclosure has the benefit of being much less expensive and time consuming that a home foreclosure. Also if losing the home is inevitable for the homeowner, then a deed in lieu is much less of an adversarial process. This greatly reduces the risk of the homeowner seeking revenge by intentionally vandalizing, or damaging the property, as frequently happens prior to a forced foreclosure eviction. The lender can more easily take over control of the asset and resell it. The homeowner gives up any future claims to the home. This means it is much more likely that the property will not be included if the homeowner eventually files bankruptcy as a result of their financial hardship.
Some key things to know about deeds in lieu: They are not automatically approved by the lender. Deeds in lieu are only considered on a case by case basis. All lenders have their own policies. Nearly all of them will only consider it when the homeowner is in some kind of financial hardship like a loss of job, serious illness, etc. In addition the monthly payments must be significantly delinquent. And a foreclosure is inevitable if things continue as they are.
The homeowner has to initiate discussions about the deed in lieu option and they must provide evidence of their hardship circumstances.
A deed in lieu of foreclosure is viewed as an absolute last resort to avoid foreclosure. All mortgage holders will want to see that a serious effort was made to try and sell the house first.
Because intentional vandalizing of homes has become an increasing problem, many lenders have cash incentives to help vacate the home. Also known as Cash for Keys. These cash incentives can help pay for the expenses involved with moving out of the home and relocation. This deal is contingent upon no damage being done to the property
Because of these and other considerations, it is important for homeowners to educate themselves BEFORE attempting to contact the Mortgage Company. It will greatly increase the possibility that the mortgage holder will agree to a deed in lieu of foreclosure.
