Many hardworking homeowners have undergone unfortunate circumstances, which have affected their finances and make it difficult to make their monthly mortgage payments. This may include the loss of income, medical issues, or divorce. Often, people under financial stress and in danger of losing their home mistakenly believed that foreclosure provides the only solution to solving their problem. In many cases, they are not aware of the benefits of a deed in lieu of foreclosure.
To obtain financial relief, many homeowners may allow a foreclosure to take place because they are not aware of other options like the deed in lieu. In many cases, a the deed in lieu of foreclosure may provide a borrower an effective alternative and a fresh start.
How the Deed in Lieu Works
The deed in lieu process consists of a completely voluntary act agreed upon by the homeowner and bank. The homeowner simply hands the deed over to the mortgage lender and avoids the pressures of a foreclosure.
A homeowner in danger of losing his home can realize several benefits from working out a deed in-lieu instead of going through a foreclosure:
- Homeowner sidesteps the public embarrassment of a foreclosure.
- Lender releases the homeowner from the all mortgage payments.
- Bank wipes out the balance of the loan.
- Borrower's credit does not suffer as much of a hit compared to having a foreclosure appear on the credit report.
Many lenders prefer a deed in lieu instead of dealing with the cost and time involve with the foreclosure process and maintaining the property afterwards. If the bank forecloses on the home, the borrower may still face financial liability for liens or other mortgages on the property.
In some cases, a homeowner who has a second mortgage or other liens on the home may not qualify for a deed in lieu. In addition, depending on the amount of the debt forgiven, a borrower who agrees to this type of transaction could face negative tax consequences.
If you are a homeowner facing possible foreclosure, it is important to consult with an experienced lawyer to better understand the deed in lieu transaction and other possible options. Our lawyers have the comprehensive knowledge necessary to deal with all aspect of real estate law, including deed in lieu, foreclosure defense, short sales, loan modifications, contract reviews, and bankruptcies. Call now for a free consultation.