Deed in Lieu?the quick solution

The Law Offices of Paul Lucas offers services for the homeowners having problems with their monthly mortgage payments. There is the Loan Modification, the Short Sale and the Deed in Lieu. Many borrowers like the deed in lieu because this approach frees them quickly from debt.

What is a Deed in Lieu?

Deed in lieu is short for “deed in lieu of foreclosure”. It is a process in which the borrower hands over the property to the lender because of inability to pay the mortgage. This is supposed to settle the loan and therefore avoid foreclosure proceedings. The lender then puts the property on sale in order to get remaining balance of the loan. Borrowers like this process because it offers a quick solution to their problem while incurring less damage on their credit scores.

When opting for a deed in lieu to avoid foreclosure, legal documents like the Agreement in Lieu of Foreclosure and a Warranty Deed, Quit claim Deed or Grant Deed need to be signed. The first document contains the terms and conditions of the deed in lieu, while the second document transfers legal ownership of the property to the lender.
The lender puts the mark “paid” on the borrower’s notes and provides the borrower with two forms: one stating the cancellation of the debt and the other a waiver of the right to deficiency judgment.

What Can the Lucas Law Center Do For You?

The Lucas Law Center offers the deed in lieu for the borrower whose property’s worth is not less than what he owes. The lender might agree if the property’s value is about the same as the borrower’s loan. It spells savings in the cost of foreclosing procedures and eviction. After a deed in lieu, the lender still has to pay for maintenance and commission to a real estate broker who will sell the property. During mortgage meltdowns, lenders may not agree to a deed in lieu because many homes do not have enough equity to make the agreement lucrative.

A deed in lieu’s damage to the credit scores is approximately the same as that from a short sale.Visit http://lucaslawcenter.com for more info.

Deed in Lieu to Avoid Foreclosure

1. In come cases, the borrower must attempt to sell the home for its fair market value for at least 90 days before the lender will consider this option.

2. This option may be unavailable if there are other liens on the borrowers home, such as judgments from other creditors, second mortgages, or tax liens.

Advantages of a Deed in Lieu:

o Possible tax considerations, talk to your tax accountant about the 1099 ordinary income for the gift of forgiven loans, as well as the insolvency exceptions.

o Problematic option if you have a 2nd or 3rd loan, line of credit secured by the property. Although the 1st lien holder of the property may agree to a deed-in-lieu of foreclosure the subsequent lien holder have not. The subsequent lien holder loans can become unsecured debt that is attached to and stay with the borrower to pay off.

Example of a Deed in Lieu:

Sam lost his job, and after 2 months of attempting to find employment, decided he would move to another state. Sam called the lender to advise them of his situation. Sam decided to sign over a deed in lieu. In exchange, although months later the property sold for ,000 less than the mortgage owed, the lender did not submit a 1099 tax statement for the difference. This saved Sam thousands in additional income, which would have been added in to his taxes.

K. Patrice Williams has a BA in Economics as well as a law degree. She has successfully managed both residential and commercial multi-million dollar income producing assets and budgets for more than 10 years. As a 1st year law student, Patrice established a real estate development and consulting business and acquired over 30 rental properties. As the housing market values decreased- like millions of other Americans-her properties were negatively impacted by shifting ARM’s, combined by a sluggish economy. Patrice has researched and personally implemented almost all of the pre-foreclosure techniques detailed in the book: “6 Simple Steps to Avoid Foreclosure”. http://www.avoidforeclosuremanual.com

Avoid Bank Repo Homes With A Deed In Lieu

If you are nearing the end of the foreclosure process and you fear that you are going to have a foreclosure on your credit report there is an option that you can opt for with the lender. This is called a deed in lieu. Lenders will accept this with bank repo homes.

A deed in lieu of foreclosure is an option for many borrowers when they are too far behind on their mortgage payments and they are clear there is no way they can save their home financially. In this case, the lender will allow you to sign the title of the home back over to them and walk away from the mortgage. This does sit differently on a credit report than it does as a foreclosure does.

One thing to keep in mind is that you cannot just call the lender and tell them that you want to do a deed in lieu if you haven’t exercised all of your resources first. The lender wants to know that you have done everything you can first before they allow you to do this. The primary goal for the lender is to get the money but they don’t want to see homeowners have foreclosures also.

The first thing that you need to do prior to asking for a deed in lieu is try to sell your home. You will have approximately 8 months to try to sell. The first 2-3 months of trying to sell will be at a market value price. If you are unable to sell the home at market value then you need to ask the lender if they are willing to accept a short sale. This is when you sell the home for approximately 20% less than what the market value is. Lenders are willing to take less money for a home than what you owe because they don’t want the house.

If you have tried your best to sell the house at market value and as a short sale then the next option is to talk to the lender about a deed in lieu. They will allow you to give the house bank so it isn’t on their list with the bank repo homes. Although it may seem as a foreclosure it will not look the same on your credit report as one.

Can a “Deed in Lieu of” Really Stop a Foreclosure?

Recently lenders have been taking homeowners’ deeds in lieu of the foreclosure process to get title to their homes. The lender simply accepts a deed in exchange for forgiving the homeowner of his mortgage or deed of trust loan, however, this does not mean the homeowner is no longer responsible for a loan deficit.

Let’s look more closely and see the ramifications of this legal transaction. It usually starts after the homeowner has fallen behind on his loan payments and is considering foreclosure, or he has already been served with a “default notice”. Time is working against the homeowner because the lender will, or already has, started foreclosure proceedings.

The homeowner is being bombarded by outside information sources because his foreclosure has become a part of the public record or he is getting information from well-meaning but uninformed people.

As soon as the homeowner notifies the lender of his impending problem or his loan is delinquent, the lender orders an appraisal or BPO (Broker’s Price Opinion) to determine its market value.

The lender now knows if he can make money on the property if he takes it back at a foreclosure auction or by having the homeowner give the deed back to the lender. The lender’s decision will be strictly financially motivated from this point forward.

The risk of taking the property by foreclosure includes the higher legal costs, an extended loss of interest on the loan, real estate market risk, realtors’ commissions, carrying and closing costs, and increased reserve requirements for the Federal Reserve.

However, the most important issue for the lender is any other open liens on the property that would normally be extinguished at the auction, but will remain in place if the deed is transferred.

The lender now factors in the minimal cost and shorter time required to get the home by taking a deed from the homeowner, in lieu of continuing the foreclosure, and whether there are additional mortgages, deeds of trust or liens on the property, and the property’s market value. Sometimes these liens can be larger than the first mortgage and the lender will not accept the property with these liens still attached to it.

If the appraisal or Broker’s Price Opinion (BPO) comes back with a value of 80% or less of the loan balance due, the lender would be irresponsible to take the deed and not continue the foreclosure.

If the lender agrees to accept a deed in lieu of foreclosure, it is not completely over for the homeowner. The lender will submit an Acceptance Agreement that the homeowner must sign as well as a new deed. The terms of this agreement may stipulate that if the lender sells or transfers the property for less than what is owed on the loan (including all penalties, interest, and attorneys’ fees), the guarantor of the loan will owe the lender this difference.

This deficiency amount can then be granted by the courts as a deficiency judgment against the loan guarantor. Usually this deficiency amount will be passed to the homeowner in the form of an IRS Form 1099 and become “Phantom Income” on his next tax return. Federal legislation enacted in December 2007 allows the homeowner to avoid taxes on this amount under certain circumstances.

So is the “Deed in Lieu of” an ideal solution for a homeowner in foreclosure? Not unless the terms of the Acceptance Agreement release the guarantor from future liability (deficiency judgment). The issue is that if this isn’t a better solution for the lender, the lender has no motivation to take back the deed. So the option of a “deed in lieu of foreclosure” is only workable if the lender can see that they will do better than foreclosing.

If there are other liens on the property these liens will have to be “extinguished” or canceled before a deed is accepted by the lender.

Deed in Lieu Or a Short Sale, Which is Better?

A deed in lieu of foreclosure and a short sale are similar but there are some big differences. I’ll break those down here.

During a deed in lieu of foreclosure, the property owner deeds over the property to the bank voluntarily and in exchange the lender cancels the loan. The lender agrees to stop foreclosure proceedings or not start one if they haven’t already. The lender could also agree to forgive any loss from when they sell the property.

The big part of a deed in lieu of foreclosure is if the bank is willing to forgive any deficiency balance. Read the agreement carefully to see how the deficiency balance issue is handled. If you’re not clear on the agreement, seek legal counsel before signing anything.

This is the typical list of deed in lieu and short sale requirements:

· the property must already be on the market

· the property must be reasonably priced

· no liens on the property,

· the seller must have a hardship

The property owner and lender may agree to do a short sale on the home. With a short sale the lender agrees to accept less than what is owed on the mortgage balance.

Some lenders choose short sales because they do not want to own the property. They would much rather see the owner sell the property than be forced to take the house through foreclosure.

The lender picks a deed in lieu of foreclosure or a short sale depends on how the lender how it wants the distressed properties to appear on their books.

What if the lender rejects a short sale or a deed in lieu of foreclosure?

If the lender will not accept a short sale or a deed in lieu of foreclosure, foreclosure is the last option. These can be a long and painful process.

I always recommend to the investor working with the seller and the bank, to remember this one thing, your job is to be a solution provider, both to the homeowner and the banks. When you have this mindset, you are opening the door to fixing the problem. You will come across banks that just don’t want to co-operate, that’s gonna happen.

Then just close the folder and move on to the next one.

Tony Severino

Using a “deed in Lieu Of” to Stop a Foreclosure

Recently lenders have been taking deeds in lieu of foreclosure from homeowners to resolve foreclosures. The lender simply accepts a deed in exchange for forgiving the homeowner of his mortgage or deed of trust loan.

Let’s look more closely and see the ramifications of this legal transaction. It usually starts after the homeowner has fallen behind on his loan payments and is considering foreclosure, or he has already been served with a “default notice”. Time is against the homeowner because the lender will or already has started foreclosure proceedings. The homeowner is being bombarded by outside information sources because his foreclosure has become a part of the public record or he is getting information from well-meaning but uninformed people.

As soon as the homeowner notifies the lender of his impending problem or

his loan is delinquent, the lender orders an appraisal or BPO (Broker’s Price Opinion) to determine its market value. The lender now knows if he can make money on the property if he takes it back at a foreclosure auction. The lender’s decision will be strictly financially motivated from this point forward. The risk of taking the property by foreclosure includes the higher legal costs, an extended loss of interest on the loan, real estate market risk, realtors®’ commissions, and any other open liens on the property that can’t be extinguished at the auction. The lender now factors in the minimal cost and shorter time required to get the home by taking a deed from the homeowner but in lieu of continuing the foreclosure. If the appraisal comes back with a value of 80% or less of the loan balance due, the lender would be irresponsible to take the deed and would continue the foreclosure. The other determining factor is whether there are other liens against the property such as a second mortgage or mechanics liens. Sometimes these liens can be larger than the first mortgage and the lender will not accept the property with these liens still attached to it.

If the lender agrees to accept a deed in lieu of foreclosure, it is not completely over for the homeowner. The lender will submit an Acceptance Agreement that the homeowner must sign as well as a new deed. The terms of this agreement may stipulate that if the lender sells or transfers the property for less than what is owed on the loan (including all penalties, interest, and attorneys’ fees), the guarantor of the loan will owe the lender this difference. This deficiency amount can then be granted by the courts as a deficiency judgment against the loan guarantor.

So is the “Deed in Lieu of” an ideal solution for a homeowner in foreclosure? Not unless the terms of the Acceptance Agreement release the guarantor from future liability (deficiency judgment). Another option is to sell the property at a break-even point and repay the loan then his credit report won’t be negatively impacted by the lender’s reporting a loan write-off as with the deed exchange.

What is Deed in Lieu Real Estate Contract?

A deed in lieu real estate contract is sometimes offered to borrowers facing foreclosure. Instead of commencing with legal action, banks allow borrowers to return the keys to their home and walk away from the property. Borrowers cannot receive funds from the sale of the home and lose all invested money.

Not all banks offer deed in lieu contracts. However, more lenders are engaging in this strategy to reduce costs associated with the foreclosure process. According to Freddie Mac, the cost of foreclosure can range between ,000 and ,000 per property, while the cost of deed in lieu ranges between 00 and 00. Deed in lieu costs are often absorbed by borrowers to cover the cost of required documentary stamp tax.

Entering into deed in lieu of foreclosure is a cost-effective alternative for both lenders and borrowers. Deed in lieu helps borrowers avoid the embarrassment of foreclosure and can minimize the stress associated with having property repossessed. It is never easy to lose a home, but deed in lieu can make it less traumatic.

Deed in lieu of foreclosure is not without consequences. The primary disadvantage is deed in lieu can wreak havoc on credit scores and take up to ten years to fully recover from the financial fallout. In the credit world, deed in lieu is perceived the same as foreclosure. Debtors can expect a fico score reduction of 100 points or more and may be subjected to deficiency judgments.

It is crucial for borrowers to determine if their lender will hold them responsible for any deficiency between the sale price and loan balance. Many mortgage lenders obtain court-ordered deficiency judgments which often amount to several thousand dollars and can take a lifetime to repay. In addition to being expensive, deficiency judgments remain on credit reports for up to seven years after they are fully repaid.

Some mortgage lenders accept the returned real estate as payment in full and allow displaced property owners to walk away with only credit damage. This type of deed in lieu is known as ‘Payment in Full without Pursuit of Deficiency Judgment’ and is the preferred option. When banks issue deficiency judgments it is recommended to obtain legal counsel prior to signing the real estate contract.

Borrowers must meet deed in lieu eligibility requirements which require the property to be the borrower’s primary residence. Debtors are prohibited from vacating the premises or leaving the home empty during the property transfer process. Borrowers must be a minimum of 31 days delinquent on home mortgage installments.

Lenders usually reserve deed in lieu as a last resort. In most cases, banks offer borrowers the opportunity to obtain a loan modification, refinance mortgages, or enter into a real estate forbearance agreement. After all, banks are in business to make money, not sell foreclosure real estate.

While deed in lieu may sound tempting, it is crucial to weigh the pros and cons of this foreclosure solution. Always consult with a mortgage specialist or real estate lawyer to determine if deed in lieu is the best option. Borrowers who fail to research available options could end up owing thousands of dollars on a property they no longer own. Get the facts before making this crucial financial decision.

Deed In Lieu Of Foreclosure Option

Deed In Lieu Of Foreclosure

Deed-in-lieu of Foreclosure(DIL) is a when a lender or a mortgage company takes back a property from a borrower with consent. It is similar to a permission based repossession, except it is a lot easier on a borrower’s credit report. This is often done for homeowners who are simply unable to afford to keep up with their mortgage payments, and they have had no luck with trying to sell their home to a third party. A deed-in-lieu is done to avoid a foreclosure sale. A foreclosure sale is costly to a mortgage company and they try to avoid it as much as possible, but there are times when they have no choice but to foreclose on a home for non payment.  Deed in lieu can sometimes take the place of a foreclosure occurring, which is a good thing. 

A realistic order of a borrower progressing to a DILof foreclosure start with some unusual or unfortunate event such as: unemployment, death, divorce, curtailment of income, among other things. We all know most homeowners do not buy a home to end up going past due on their mortgage. Once a homeowners starts to go past due on their mortgage payments they are likely to try to get some kind of mortgage assistance. They often start off by requesting for a loan modification, and if that does not work out for them, they might go on to request a short sale followed by a DIL. A mortgage company has to agree to take back a property from a borrower, by doing so this saves the homeowner from going into foreclosure sale situation. 
The mortgage company will make arrangement with the homeowner to vacate the property in a timely manner. The borrower then walks away and is no longer obligated or responsible to make payments of the mortgage anymore. A DIL is view as a settlement a homeowner’s credit report, unlike a foreclosure. A foreclosure is extremely damaging to anyone’s credit. Homeowners that have been granted a DIL are consider to be rather fortunate, because most borrower would not be granted this option; this is a good option if loosing the property is not a big deal to go through for the person loosing the property.

Deed-In-Lieu of Foreclosure Agreements Save Credit Rating

Borrowers in despair over their mortgages facing foreclosure may still save their credit reports from foreclosure and its processes and fees through Deed-In-Lieu agreements. Law firms offering credit assistance such as the Lucas Law center expertly help their clients avoid property foreclosure, guiding their clients through the steps of processing Deed-In-Lieu of Foreclosure agreements.

A Deed-In-Lieu of Foreclosure agreement is an option of last resort wherein a borrower freely deeds collateral property in exchange for absolution from mortgage obligations. It offers advantages to both the borrower and the lender. Deed-in-Lieu agreements hurt borrowers’ credit reports less than a foreclosure does, while lenders get a substantial reduction in the time and cost of a repossession.  Deed-In-Lieu agreements may only be accepted if a mortgagor is able to substantiate their incapacity to finance their mortgage payments. This requires completion of a financial package and the provision of a copy of the borrower’s recent active listing agreement. Law firms the likes of the law offices of Paul J. Lucas meticulously guide clients through these information in order to process a Deed-In-Lieu of Foreclosure agreement.

Upon incurring long term financial hardship with the property being on the market at fair market value for at least 90 days, borrowers are eligible for a deed-in-lieu of foreclosure agreement. Additional claims or liens other than the mortgage against the property would also disqualify a mortgagor for a deed-in-lieu agreement. Once a borrower is approved of a deed-in-lieu, the borrower would be giving up all rights to the property and the property is consigned to the investor. In turn, the mortgagee may relinquish all deficiency judgment rights.

Law groups assisting in mortgage agreements strive to reach a verdict wherein both parties are satisfied. Contacting the right people within the lenders’ offices, expert law groups such as Lucas Law resolve borrower issues with their lenders efficiently, making the most logical decisions advantageous for both parties.

With the hassles of having a tarnished credit report, it is integral that foreclosure is avoided at all cost. Assistance by expert law groups such as the law offices of Paul J. Lucas is crucial in dealing with agreements working against property foreclosure such as a Deed-In-Lieu.Visit http://lucaslawcenter.com for more info.

How Does The Process Of A Deed In Lieu Of Foreclosure Work ?

Something has happened to you and your spouse and family that you have no control over. You or your spouse lost your job or both of you lost your jobs, someone in your family got so sick that you had to take time off work to take care of them, or one of the breadwinners dies.

Clearly you have a hardship that is going to take priority in your lives. You are going to have to deal with life on life’s terms and you may get behind on your mortgage.

Hector Milla Editor of the “Best Mortgage Loan Modification” website — http://www.BestMortgageLoanModification.net — pointed out;

“…If you decide that you want to keep your home there are so many options available right now in our society. The Congress and President have the loss of homes for people uppermost in their minds at present and there is a lot of help out there…”

You could go to your lender and request a loan modification in order to lower your payments. You can request that they add your missed payments onto the end of your loan. You may have a “Right of Redemption” for up to a year to straighten out your situation with your lender.

But considering your situation you decide that you want to give the property back to the lender because you cannot handle what is going on. Grief at the loss of a long time job, or a family death can make things appear really hopeless and keeping the house becomes low on your list of priorities.

Because you have had a life altering hardship you can request that your lender take your house back. You would give your lender a “Deed in Lieu of Foreclosure”, where you give it back to the lender and let them deal with getting it sold again.

Clearly lenders do not want to take houses back so they will want you to try to sell the house for at least 90 days. They will want to know that the property is on the market at least 90 days or whatever their requirement is. If you get a buyer for the property your Realtor can then negotiate a “short sale” with your lender so your lender accepts less than you owe. This is not an easy thing to do and you should get a Realtor who has experience in doing short sales. Your Realtor will keep all the necessary records for you so that you are in compliance with the lender.

Once the 90 days has passed and the house is not sold, then the lender will decide whether they will allow you to give it back to them. At that time you would give them a “Deed in Lieu of Foreclosure” so that you can be out from under the mortgage and get your life on the road to where you need to be.

“…The lender will require a truckload of documentation on your situation so they can make their decision. You will be required to provide information about every aspect of your financial lives. This is all part of the process so be prepared. It is always preferable for you to do everything you can to avoid or stop foreclosure. Dealing with your situation in this way may pave the way for your future home financing: this will not affect your credit as negatively as a foreclosure…” H. Milla added.

Further information about how to get professional assistance with a mortgage loan modification by visiting; http://www.BestMortgageLoanModification.net