Real Estate Explained | Deed In Lieu of foreclosure

Deed in lieu of Foreclosure is defined by Wikipedia as:  “A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

The deed in lieu of foreclosure lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy.”

Read Also: Avoid Foreclosure with a Deed in Lieu

Deed in Lieu of Foreclosure offers several advantages to both the borrower and the lender.

• The principal advantage to the borrower is that it immediately releases him/her 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/she would in a formal foreclosure.

Read Also: What are the steps in deed in lieu of foreclosure?

As you might guess, it is not that simple.

The bank has to be willing to take the home back and different banks have different guidelines.

• For example, according to HUD’s website, they won’t consider the program for an FHA loan for an investor or a home that is vacant (in most cases.)
• Other banks won’t take the house unless it is a last resort (if you have tried to sell it and can’t) or won’t take the home unless they are sure it will cover your entire debt.
• The bank won’t consider a deed-in-lieu if you have more than one mortgage on the property.

As with every other option during such a confusing time, it is best to talk to experts in your area. Deed-in-lieu may not be right for you– but there are plenty of other options out there!

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photo credit: respres

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