There is so much misinformation out there that homeowners are often confused on what the best choice is for them when facing foreclosure.
What is deed in lieu of foreclosure?
Deed in lieu of foreclosure is essentially a homeowner giving the house back to the lender instead of the lender proceeding with the home foreclosure. This is a voluntary action by the defaulting homeowner to stop or prevent the foreclosure process.
When is it possible to use this technique to avoid foreclosure?
To stop the foreclosure some lenders accept the reconveyance of the deed to the house instead of having to go through the costly foreclosure process. To be eligible for deed in lieu, a borrower generally must have only one mortgage on the house, and not have any other liens against the house. So if you only have a first mortgage, this may be possible.
What is the downside of a deed in lieu?
The biggest myth of this name is what the latin word “in-lieu” signifies – it means instead of foreclosure. Unfortunately this is not true. It is still reported as a foreclosure on your credit report. The big advantage to the lender is that it is less costly than hiring an attorney to proceed with the foreclosure.
Do all banks accept the deed in lieu of foreclosure?
Unfortunately not. Different lenders have different requirements. The first step is to contact the bank to see if it is possible. The will then request a written offer from the borrower that states you are doing this voluntarily. This letter essentially protects the lender from possible future claim against them, or that the lender acted in poor faith or pressured the homeowner to give back the house. Once that is received and a verbal is given from the lender both sides may proceed with the settlement negotiations. In California a deed in lieu of foreclosure grant deed will need to be prepared by yourself or a local title company. You will need to notarize this and send it to the lender. Once accepted you will send in your keys and be required to move out.
What are the advantages of a deed in lieu?
If a Notice of Default has not been issued then it prevents the public from knowing your particular situation.
What is better a short sale or a deed in lieu of foreclosure?
By far a short sale is superior to a deed in lieu. A deed in lieu is reported as a foreclosure on your record. A short sale has less negative ramifications both to your credit score and is seen in a more favorable light to other creditors. The process of selling your house via a short sale can be lengthy, but enables the borrower to stay in the house for a reasonable amount of time while this takes place. This allows the borrower to save up for moving and other expenses that they will need once the house is sold.
Julie Fontaine is the author of “Homeowner’s Guide to Avoiding Foreclosure – Strategies & Solutions”, and is a business partner in a successful short sale & loan mod company in San Diego, California Troubled Property Solutions
[tags]deed in lieu, deed in lieu of foreclosure, short sale, avoid foreclosure, prevent foreclosure[/tags]
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