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Deed In Lieu Of Foreclosure

When it comes to simply giving back the house it cannot be done without a deed in lieu of foreclosure. This is something that is an option that some mortgages companies offer their customers.

Not all mortgage companies offer it though and the ones that do will not offer this option to every customer facing a foreclosure. Whether or not a borrower is approved for this option will be based on several various factors.

What Is A Deed In Lieu Of Foreclosure?

A deed foreclosure in lieu of allowing the home to go to auction is an option many people enjoy. The deed in lieu is simply where the bank agrees to take ownership of the house and allows the homeowner to walk from the responsibilities.

This is done when the bank feels as though they will be able to market the home and sell it for the money that they are owed and sometimes even more. Once the deed is officially given to the lender, the borrower is allowed to move on without owing anything more on the house.

How Does A Deed In Lieu Of Foreclosure Get Approved?

The lender will have a department, typically called the loss mitigation department, which handles all of these requests. There are a lot of companies out there that claim that they can get your lender to do this but they do not have anything special up their sleeve because a desire to take your money.

Never pay a company to negotiate a deed in lieu with your bank, as it is something that you are perfectly capable of doing on your own.

The first step is to call your lender to express your interest in this type of assistance. They will give you a breakdown of all of the information that you need to send into them. This will generally include proof of your current income, your previous income tax return and expenses along with a letter of hardship.

The letter of hardship is a letter from you stating what it was that caused you to fall behind on your mortgage payments and why you are unable to catch up the mortgage payments and keep the home.

Typical Outcomes That Can Be Expected With A Deed In Lieu Of Foreclosure

In order to make sure that the homeowner really cannot sell the house quickly, some mortgage companies will request that it be placed on the market. If the house does not sell during the designated time period, usually three months, the deed in lieu can then be approved. If the home does sale then that is great news.

Once the deed in lieu is completed, residents of the home must evacuate. The names of the borrowers will be removed from the deed and all collection and foreclosure action will stop. Also, a reporting will be made to the credit agencies in order to make note of the deed in lieu.

While that reporting will have a somewhat negative effect on the credit score, it is much better then a foreclosure as it shows that the borrowers took initiative to do something to resolve the issue.

Denied A Deed In Lieu Of Foreclosure?

Some people will find that they are denied a deed in lieu and this can be extremely upsetting. There may be another option though. If you do have a little bit of time before the foreclosure auction then you will want to list your property for sale.

Even if you believe that you will not receive offers for what you owe you still need to list it. There is an option called a short sale, which many banks would much prefer over the deed in lieu.

This is where the mortgage company will agree to take a smaller amount then what is owed as the home has lowered in value. This is great for the homeowner as it avoids foreclosure and looks better on the credit report.

When it is all said and done, you will be glad that you contacted your mortgage company and discussed all of their options. Whether you sell the home or get a deed in lieu of foreclosure, you are at least taking positive steps in order to correct the situation.