A deed in lieu foreclosure is a method that can help you stop foreclosure when you are in default. Maybe you are afraid of losing both your house and the investment you made with so much effort.

In addition, you probably dislike the impact that a foreclosure process can have on your credit rating and you financial future. If you are a homeowner in such a situation, a deed in lieu foreclosure is worth considering as a way to prevent foreclosure.

How does a deed in lieu foreclosure work

In order for you, the homeowner, to obtain a deed in lieu foreclosure, you and the lender have to agree on the transfer of the title of the deed to the financial lending institution.

In short, your lending company becomes the lawful owner of the home in hand.

By applying this solution, homeowners in default are free from any more liabilities related to the house in question. Moreover, thanks to this deed in lieu foreclosure agreement with their lending companies, the credit rating of house owners is not affected as in the case of a full foreclosure.

A deed in lieu foreclosure is an agreement between the homeowner in default and the lender without court involvement. House owners that would rather agree on a deed in lieu foreclosure with their lenders to stop foreclosure should not forget that it has to be made at the beginning of the foreclosure process.

Will your lender accept a deed in lieu foreclosure?

|Not all deeds in lieu foreclosure proposals are accepted by the lending organizations. They tend to accept them more when they know that it has become impossible for the homeowner to pay off the mortgage.

It does not make sense for the lenders to pursue a deficiency judgment, which is a court order to partially recuperate the amount still owed related to the foreclosure. Lenders usually go through with the foreclosure proceedings when the debt is lower than the property’s value.

For the lender, the main interest is financial. Indeed, by settling the matter out of court with a deed in lieu foreclosure agreement, the lending company saves many costs in attorney and court fees.

Who is responsible for any liens on the property?Who is accountable for possible liens on the house?

Prior to signing the deed in lieu foreclosure agreement, the lending society ensures that this contract does not mean accepting responsibility for mortgage liens on the property. Otherwise stated, holding the title means hat the lender is a separate entity from any existing liens on the house. An example could be a payment claim from a contractor.

The goal of the lender is to put the property for sale as soon as possible and recoup the unpaid mortgage balance. If there are any liens on the house, the new owners will be responsible for them.

To recap, the main benefit for the original homeowner is that by signing a deed in lieu foreclosure he or she has avoided a full foreclosure process and the damaging record of a foreclosure on his or her credit report.