Deed in
Lieu: A Way Out of Foreclosure
"Can't we negotiate?
There must be a way to work this out so we can stay in our home!"
This is one of the most common questions homeowners facing foreclosure
ask themselves. We will give you some answers in this article.
Some Options are Better
Than Others
Some like going
through the entire foreclosure process will leave a black
mark on your credit report for probably 10 years. Others
like simply walking away from the property arent necessarily
wise ways of dealing with the situation either.
Sometimes youre
out of options. Short of filing for bankruptcy (which only delays
the inevitable, and does not STOP foreclosure in its tracks), sometimes
your lender just isnt willing to negotiate a loan workout
or accept a short sale (agreeing to take less money on the sale
of your property than the balance due on their underlying mortgage).
Then again, the lender
MIGHT be willing to accept a deed-in-lieu of foreclosure.
Depending on how severe your financial hardship is, and other factors,
the deed-in-lieu would allow you to sign over legal ownership to
your home for the lenders agreement not to foreclose.
You are in effect giving
up all claims and rights to the property in exchange for the ability
to walk away from it without having to make another mortgage payment
and, possibly, without a mark on your credit report.
At the very most, maybe
a light gray mark instead of a black mark, if any mark at all depending
on whether the lender reports your mortgage as paid in full or not.
Plus, once agreeing to the deed-in-lieu, the lender will likely
have to waive its rights to any deficiency judgment, which saves
you from having to pay off any deficiency amount awarded the lender
by a court of law. However, should you find yourself in this situation
where there may be a deficiency judgment involved, the best thing
to do is to consult with a real estate attorney about possible options.
You should contact a real estate attorney anyway if you are considering
a deed-in-lieu because it involves you giving up some legal rights.
For further details about
a deed-in-lieu, the U.S. Department of Housing and Urban Development
(HUD) has both a detailed fact sheet about the deed-in-lieu option
and frequently asked questions about disposing of a property this
way.
Bottom Line About
Deed in Lieu
A deed-in-lieu is a potential
way out of foreclosure for distressed homeowners who are hard pressed
to find their way back to financial solvency. It may not always
be the best way, but it can be much better than going all the way
through the foreclosure process or filing for bankruptcy.
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