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Posted by Todd on May 05, 2008 at 18:56:31:
In Reply to: FORECLOSURE VS DIL posted by MARILYN on May 04, 2008 at 13:07:39:
A deed in lieu is less damaging to your credit and will typically save the lender the addtional cost of going to foreclosure. However, if you have a second mortgage on your home, a deed in lieu is generally not an option unless the same lender holds both mortgages. Typically, lenders also require that the property be in good, resaleable condition and not have any additional liens filed against it.
Lenders also usually require you to try to sell it for at least 90 days before they will agree to take it back because DIL is the last resort for them before they foreclose.
On the positive side, this gives you several months that you can live in the house without making a payment before you have to be worried about being foreclosed upon.
The first thing to do is contact your lender and fill out their hardship paperwork to see if they can offer any relief. If they can't come up with a workable solution to keep you in the house, they will then tell you to put it on the market. If you can get an offer on it (even if it's significantly below what you owe on the loan), you can present it to the lender and they may accept it as a short sale (which is better than a DIL). If that doesn't work out, and you meet your lender's qualifications, you can then apply to give it back to the back through a DIL. If that's not an option, they will take you to foreclosure.
From the bank's perspective, it's all about trying to lose as little money as possible and this systematic approach does that.
The big things for you right now...
1. Stay in contact with your lender.
2. Save every penny you can to help with a potential workout or moving costs once they foreclose.
3. Stay in the home until they tell you to leave. You have many more legal rights when you're living in the home than you do after you leave.
One final note. Don't talk to the lender's collection department. Talk to their "loss mitigation," or "foreclosure prevention" department. Or go to their website...most lenders either have the paperwork you need or the correct contact information there.
