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Deed in Lieu of Foreclosure |
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Deed in Lieu of Foreclosure |
Deed in lieu of foreclosure often seems like an option many people in default would like to take to cure a pending foreclosure, but it really is one of the least preferred options from a lender viewpoint. A deed-in-lieu seems like such a simple concept, the borrowers doesn't want the home and the lender will probably end up owning the home after foreclosure. Why not just get it over with now, mail the lender the keys and the deed and it will all be over.
It's not that simple from the lender's viewpoint.
If there are any other loans other than the foreclosing loan against the property, the
lender accepting the deed in lieu will need to pay those off to obtain clear title.
The same applies for any possible judgments that may have been recorded. Then there
is the question of who is on the property title. Are all the owners interested in
providing a deed-in -lieu? Do all those owners really understand exactly what they
are giving up? Are they going to come back a year later and say they didn't
understand?
There are 4 main conditions for a lender to consider a deed-in-lieu.
1. Foreclosure is imminent and unavoidable
2. The borrower is unable to sell the property.
3. There should be no other liens, or attachments to the property.
4. The property needs to be left in broom clean condition.
If those conditions have been, or can be met, some lenders will consider a deed in lieu of foreclosure, although most lenders will prefer the use of a compromise, or short sale. This is one of the least preferred alternatives to foreclosure and should be the last option explored.
