An outline on deed in lieu of foreclosure
A deed in lieu of foreclosure is the last way to get rid of a home loan that you have taken out. If you, the borrower, are unable to make mortgage payments, you can think of opting for a deed in lieu of foreclosure transaction. Instead of resorting to the last option, i.e. filing for bankruptcy, here you the borrower, hand over the keys to the lender.
There are several advantages of deed in lieu of foreclosure from both the borrowers’ and the debtors’ perspective. The main advantage of this deed is that it immediately releases you from the personal indebtedness associated with the defaulted loan. Importantly, through this deed, you may avoid the public notoriety of the foreclosure proceedings and you may receive a more generous term than you would get in case of a formal foreclosure. Apart from these, opting for a deed in lieu of foreclosure is less damaging to the credit score than opting for formal foreclosure. From the lenders’ perspective, this deed is a better option than opting for a formal foreclosure. This is a much more fast and easy process than going through the foreclosure process. In the formal foreclosure process, you, the borrower can live in the house without paying anything during the entire foreclosure process. In case of a deed in lieu of foreclosure, the lender can take control of your home immediately.
This is an excellent disposition arrangement wherein a homeowner voluntarily deeds the mortgage property to the lender in exchange for a release from all obligations under the mortgage. If you are under serious financial trouble, you may decide to come to an agreement with your lender to deed out your home in exchange for complete relinquishing of your mortgage obligations. However, the lenders are not obliged to accept the deed in lieu. But in case the value of the said property is more than the over due mortgage value, it makes sense for the lenders to avoid going for bankruptcy.
A deed in lieu of foreclosure is not at all related to the original loan documents. In other words, this is to say that a lender can not agree in advance that it will accept a deed in lieu of foreclosure. In the same way, borrowers can not create a contractual obligation that would allow them to force a lender to accept the property instead of going through the foreclosure process.
Again, as per the law, lenders can not force borrowers to surrender a deed in lieu of a foreclosure as this would imply infringement of the rights of the borrowers. A deed in lieu of foreclosure must be arranged after negotiations between the lender and the borrower.
Anyways, a deed in lieu of foreclosure may lead to substantial benefits to a borrower. Instead of going into a bankruptcy, through opting for this deed, you can minimize the injury to your credit score. On the other hand, this is beneficial to the lenders as they can avoid the costs of foreclosures. In case of a right situation, a deed in lieu of foreclosure can be a win-win situation from the point of view of both borrowers and the lenders.
Processing your request, Please wait....
