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DEED IN LIEU OF FORECLOSURE

A Deed in Lieu of foreclosure is one option to surrender real estate. When a homeowner elects deed in lieu of foreclosure, they voluntarily deed their property back to the lender in exchange for a release from all obligations under the mortgage.

There is no legal requirement for a bank to allow a homeowner to surrender their real estate through this process. Homeowners interested in executing a deed in lieu of foreclosure are required to apply for this remedy directly with the bank and present hardship circumstances. A deed in lieu of foreclosure request might not be accepted by the bank, especially for a homeowner who can financially afford to make their mortgage payments. Often, the assistance of a good attorney can be the difference in the bank accepting this proposal or not.

The following are Frequently Asked Questions about Deed in lieu of foreclosure.

When a homeowner has been approved by a lender deed in lieu of foreclosure, how much time does the homeowner have to complete the process?
A deed in lieu of foreclosure must be completed within 90 days of initiation of the process.

How does a deed in lieu of foreclosure affect my credit?
A deed in lieu of foreclosure will appear as a foreclosure on credit.

If I am in foreclosure, will the bank accept a deed in lieu of foreclosure instead?
Maybe. It is the bank’s discretion whether they will accept deed in lieu of foreclosure instead of traditional foreclosure.

Does HUD allow $2,000 to pay off second liens when determining if a homeowner is eligible for a deed in lieu of foreclosure?
Yes, effective with Bank Letter 2002-13, HUD increased the deed in lieu of foreclosure consideration to not to exceed $2,000. Therefore, with the homeowner’s consent, this consideration may be utilized to pay off junior liens to clear the title as stated in Bank Letter 2000-05.


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