DEED IN LIEU OF FORECLOSURE
A Deed in Lieu of Foreclosure is a situation in which a home owner voluntarily deeds his home to a mortgage lender in exchange for a release from all obligations under the mortgage. A Deed-in-Lieu of Foreclosure allows a home owner in default on their mortgage, who does not qualify for any other Loss Mitigation option, to deed the house over to the mortgage company.
FACTS ABOUT DEED IN LIEU OF FORECLOSURE
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DEED
IN
LIEU
OF FORECLOSURE
A Deed in Lieu of Foreclosure is a situation in which a home owner voluntarily deeds his home to a mortgage lender in exchange for a release from all obligations under the mortgage. A Deed-in-Lieu of Foreclosure allows a home owner in default on their mortgage, who does not qualify for any other Loss Mitigation option, to deed the house over to the mortgage company. Lieu in deed is a last resort option taken by home owners to avoid foreclosure when they can no longer afford to make mortgage payments. In a deed in lieu of foreclosure situation, the borrower must prove to the lender that they are unable to meet their mortgage obligation. In most cases, a deed in lieu of foreclosure will not be accepted from borrowers who are capable of making their monthly mortgage payments.
FACTS ABOUT DEED IN LIEU OF FORECLOSURE
• Lender can pay compensation, to the home owner not to exceed $2,000.
• The $2,000 compensation is not paid to home owner until they have vacated the property.
• The borrower's compensation must be applied to any junior lien(s) placed on the mortgage property.
• The borrower must agree to “written” agreement of property conditions.
• The mortgage lender may determine that a “current” borrower who is not delinquent is eligible for the Deed in Lieu of foreclosure option.
• Under no circumstance should the home owner be encouraged to default on their mortgage for the purpose of qualifying for the Lieu in Deed option.
• Deed in Lieu must be completed or foreclosure initiated within six (6) months of the date of default, unless the mortgagee qualified for an extension of time by first trying a different loss mitigation option or an extension of time was approved prior to the expiration of the time requirement.
• If the Deed in Lieu of Foreclosure follows a failed special forbearance agreement or a failed pre-foreclosure sale, then the Deed-in-Lieu must be completed or foreclosure initiated within 90 days of the failure.
ELIGIBILITY
• The property must be owner-occupied, no “walk-a ways” or investment properties. Exceptions: when it is verifiable that the need to vacate was related to the cause of default (job loss, transfer, divorce, death), and the subject property was not purchased as a rental investment, or used as a rental for more than 12 months.
• The mortgagor must be 31 days delinquent or more at the time of the Deed-in-Lieu Warranty Special Deed is executed.
• The mortgagor must provide documentation of a reduction in income or an increase in living expense, and documentation, which verifies the borrowers need to vacate the property.
• The mortgage lender will develop a written Deed-in-Lieu of Foreclosure Agreement, which is to be signed by both the mortgagor and mortgagee, which contain all of the conditions under which the Deed will be accepted.
COMMON QUESTIONS CONCERNING DEEDIN LIEU OF FORECLOSURE
Question 1: When a borrower has been approved for utilizing a deed in lieu of foreclosure, how much time does a mortgagee have to complete the DIL?
Answer: A deed in lieu of foreclosure must be completed within 90 days of initiation of the process.
Question 2: On an FHA mortgage, does HUD allow $2,000 to pay off second liens when determining if a mortgagor is eligible for a deed in lieu?
Answer: Effective with Mortgagee Letter 2002-13, HUD increased the borrower's deed in lieu of foreclosure consideration to not exceed $2,000. The funds may be paid to the home owner upon vacating the property or they may be used to pay off junior liens in order to clear title.
Question 3: Can a mortgage lender stop a foreclosure process to the acceptance of a deed in lieu from the home owner?
Answer: This is a business decision the mortgage lender is to decide based upon what is in their own best interest.
Question 4: Does a mortgage lender have the ability to accept a deed in lieu of foreclosure when there are other liens on the property?
Answer: The lender will complete a title search and may be required to secure release of junior liens. Most lenders will not accept title subject to most junior liens including IRS liens.
A Deed in Lieu of Foreclosure is a situation in which a home owner voluntarily deeds his home to a mortgage lender in exchange for a release from all obligations under the mortgage. A Deed-in-Lieu of Foreclosure allows a home owner in default on their mortgage, who does not qualify for any other Loss Mitigation option, to deed the house over to the mortgage company. Lieu in deed is a last resort option taken by home owners to avoid foreclosure when they can no longer afford to make mortgage payments. In a deed in lieu of foreclosure situation, the borrower must prove to the lender that they are unable to meet their mortgage obligation. In most cases, a deed in lieu of foreclosure will not be accepted from borrowers who are capable of making their monthly mortgage payments.
FACTS ABOUT DEED IN LIEU OF FORECLOSURE
• Lender can pay compensation, to the home owner not to exceed $2,000.
• The $2,000 compensation is not paid to home owner until they have vacated the property.
• The borrower's compensation must be applied to any junior lien(s) placed on the mortgage property.
• The borrower must agree to “written” agreement of property conditions.
• The mortgage lender may determine that a “current” borrower who is not delinquent is eligible for the Deed in Lieu of foreclosure option.
• Under no circumstance should the home owner be encouraged to default on their mortgage for the purpose of qualifying for the Lieu in Deed option.
• Deed in Lieu must be completed or foreclosure initiated within six (6) months of the date of default, unless the mortgagee qualified for an extension of time by first trying a different loss mitigation option or an extension of time was approved prior to the expiration of the time requirement.
• If the Deed in Lieu of Foreclosure follows a failed special forbearance agreement or a failed pre-foreclosure sale, then the Deed-in-Lieu must be completed or foreclosure initiated within 90 days of the failure.
ELIGIBILITY
• The property must be owner-occupied, no “walk-a ways” or investment properties. Exceptions: when it is verifiable that the need to vacate was related to the cause of default (job loss, transfer, divorce, death), and the subject property was not purchased as a rental investment, or used as a rental for more than 12 months.
• The mortgagor must be 31 days delinquent or more at the time of the Deed-in-Lieu Warranty Special Deed is executed.
• The mortgagor must provide documentation of a reduction in income or an increase in living expense, and documentation, which verifies the borrowers need to vacate the property.
• The mortgage lender will develop a written Deed-in-Lieu of Foreclosure Agreement, which is to be signed by both the mortgagor and mortgagee, which contain all of the conditions under which the Deed will be accepted.
COMMON QUESTIONS CONCERNING DEEDIN LIEU OF FORECLOSURE
Question 1: When a borrower has been approved for utilizing a deed in lieu of foreclosure, how much time does a mortgagee have to complete the DIL?
Answer: A deed in lieu of foreclosure must be completed within 90 days of initiation of the process.
Question 2: On an FHA mortgage, does HUD allow $2,000 to pay off second liens when determining if a mortgagor is eligible for a deed in lieu?
Answer: Effective with Mortgagee Letter 2002-13, HUD increased the borrower's deed in lieu of foreclosure consideration to not exceed $2,000. The funds may be paid to the home owner upon vacating the property or they may be used to pay off junior liens in order to clear title.
Question 3: Can a mortgage lender stop a foreclosure process to the acceptance of a deed in lieu from the home owner?
Answer: This is a business decision the mortgage lender is to decide based upon what is in their own best interest.
Question 4: Does a mortgage lender have the ability to accept a deed in lieu of foreclosure when there are other liens on the property?
Answer: The lender will complete a title search and may be required to secure release of junior liens. Most lenders will not accept title subject to most junior liens including IRS liens.
STOP Foreclosure
Avoid Foreclosure Now
First and foremost, if you can keep your mortgage current, do so.
However, if you find that you are unable to make your mortgage payments, you may qualify for a loan workout option. Check with your lender to find out which of these options may be available. If Your Problem Is Temporary - Call Your Lender
Reinstatement: Your lender is always willing to discuss accepting the total amount owed to them in a lump sum by a specific date. They will often combine this option with a forbearance.
Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time after which another option must be agreed upon to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time in the future. The money might come from a hiring bonus, investment, insurance settlement, or a tax refund.
Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up. If it appears that your situation is long-term or will permanently affect your ability to bring your account current:
Mortgage Modification: If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more terms of your original loan to make the payments more affordable.
Your loan could be permanently changed in one or more of the following ways:
- Adding the missed payments to the existing loan balance.
- Changing the interest rate, including making an adjustable rate into a fixed rate.
- Extending the number of years you have to repay.
- Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be delayed for several years.
If Keeping Your Home Is Not An Option -- Call Your Lender
Sale: If you can no longer afford your home, your lender will usually agree to give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to obtain the services of a real estate professional who can aggressively market the property.
Pre-Foreclosure Sale or Short Payoff: If the property's sales value is not enough to pay the loan in full, your lender may be able to accept less than the full amount owed. This option can also include a period of time to allow your real estate agent to market the property and find a qualified buyer. Monetary help may also be available to pay other lien holders and/or help toward paying a few moving costs.
Assumption: A qualified buyer may be allowed to assume your mortgage, even if your original loan documents state that it is non-assumable.
Deed in lieu: Your lender may agree to allow you to voluntarily "give back" your property and forgive the debt. Although this option sounds like the easiest way out for you, generally, you must attempt to sell the home for its fair market value for at least 90 days before the lender will consider this option. Also, this option may not be available if you have other liens such as judgments of other creditors, second mortgages, and IRS or State Tax liens.
If you need to sell your home, there will be many questions you have to answer. You will need to find how much your house is actually worth, and you will have to find a real estate agent you are comfortable with.
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Peartree Properties LLC * Mt Holly, NJ 08060 * 888.270.9497
If you are behind on your bills, you may require the services of a debt counselor or credit counseling agency.
Click Here For Debt Settlement Assistance
Click Here if You Are Behind on Your Mortgage
Click Here if You are Trying to Sell Your Home to Avoid Foreclosure