Deed In Lieu of Foreclosure
A Deed In Lieu of Foreclosure process requires the borrower to transfer all their interests in a property to the lender. This is done in order to avoid the foreclosure process, if they happen to default on their mortgage payments. The lender on their part, needs to cancel the loan.
A Deed In Lieu of Foreclosure process requires that both the lender and borrower agree to this process voluntarily. So, lenders may require a declaration to that effect from the borrower before proceeding with this method.
The Deed of Lieu of Foreclosure method would be approved by the lender only if the borrower has already defaulted on the loan and are able to prove with documentary evidence that they are not able to make the mortgage payments.
In some cases, the lender may require that there are no liens on the property and the foreclosure process should not already be underway, to approve the Deed In Lieu of Foreclosure process. Its important to remember that both the borrower or the lender can reject this process.
A Deed In Lieu of Foreclosure process is normally expected to get completed within ninety days of initiation of the proceedings. In many cases, the lender agrees to fore-go any deficiency payments when they sell the property. In some cases, they don’t. Its better to check the terms offered by the lender in this regard.
The lender would get an independent appraisal of the property value and would approve the Deed In Lieu of Foreclosure process if they believe that the value is higher than the amount owed by the borrower.
The advantages to the lender include faster processes, avoiding costs related to foreclosure proceedings and avoiding any potential damage to the property.
The advantages to the borrower include avoiding the foreclosure process and the negative exposure it brings due to ads in the newspapers, notices, etc. In many cases borrowers get better terms from the lender than they would, when they follow the foreclosure process.
The number of credit points the borrowers lose due to the Deed In Lieu of Foreclosure is lesser than what they would lose due to a foreclosure process. So, they stand a better chance to get future loans.