What Is A Deed In Lieu
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Rachel and Derek are married and both were hit by the recent economy. Derek lost his job and Rachel's hours were cut back. A year had passed, they were way behind on their mortgage payments, and decided the house had just become too much to afford. It seemed foreclosure was inevitable. However they really wanted to contain the damage to their credit. They had heard about something called a deed in lieu of foreclosure. This is the purpose of this brief article. It will present a basic overview of deed in lieu of foreclosure and how it works.
A deed in lieu of foreclosure, also referred to as deed in lieu, or deed in lieu of, is a possible option for homeowners who are behind on their payments, and no longer able to maintain the home, due to a hardship, avoid foreclosure.
With a deed in lieu of foreclosure, the delinquent homeowner gives the deed for the home to the lender, bank, mortgage company or whomever it is that holds the mortgage. In return that company agrees not to file a legal court ordered home foreclosure case.
The delinquent homeowner actually completes a written agreement with the lender that describes the terms and conditions. Then the deed to the home is turned over to the lender. The home must then be vacated. Which means this is not an option for those looking for ways to save their home.
The deed in lieu offers some benefits to the distressed homeowner. The top one being an immediate release from the debt, the loan obligation, and the monthly payment requirement. The homeowner stops a public court ordered foreclosure from ever occurring. The deed in lieu will definitely be a negative on your credit, but less damaging than having a home foreclosure on your credit report. Plus there is a psychological benefit with avoiding the negative stigma of a involuntary home foreclosure. Deed in lieu's can quickly end a very stressful situation in your life. And it can make it a little easier to start over when your financial situation improves.
For the lender, or mortgage holder, the advantage of a deed in lieu is that it is much less expensive and time consuming than a home foreclosure. If a home foreclosure seems certain to happen anyway then the deed in lieu is much less negative and adversarial. This significantly lowers the risk of the distressed homeowner intentionally vandalizing, as what frequently happens with forced home foreclosure evictions. The deed in lieu will allow the mortgage holder to easily take control of the property and then resell it. The distressed homeowner gives up any future claims to the property. Therefore it is more unlikely the property will be included in a bankruptcy if the homeowner eventually files Chapter 7 as a result of their financial situation.
Some key points to keep in mind: Deeds in lieu of foreclosures are not automatically approved by the lender. They are considered on a case by case basis. All mortgage companies have their own rules. Most will only consider it when the homeowner is in some kind of financial hardship like a loss of job, serious illness, etc. Also the monthly payments are significantly delinquent. And a foreclosure appears to be unavoidable 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.
Deed in lieu is looked upon as an absolute last resort to avoid foreclosure. Nearly all lenders want to see that the homeowner has made an attempt to 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.
Article Source: Articlelogy.com
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