To qualify for a deed in lieu, a borrower must be currently facing foreclosure. They will not be able to keep their home or property if they decide to do a deed in lieu of foreclosure.
How does a Deed in Lieu of Foreclosure work?
With a deed-in-lieu, the process involves a transaction between the borrower or homeowner with the company that owns the rights to enforce the terms of the mortgage.
The company enforcing those terms is typically going to be the bank, lender or servicer.
The borrower or homeowner is the person(s) who agreed to the terms of of the mortgage in order to purchase or refinance the property.
When the deed-in-lieu of foreclosure transaction takes place, the borrower agrees to surrender the home or property voluntarily to the servicing company in exchange for a dismissal of the pending foreclosure lawsuit against them.
What is required in order to qualify for a deed-in-lieu of foreclosure?
1. There must be a financial hardship. Examples include:
- Loss of Job (now has new job)
- Reduced of Income
- Job Relocation
- Death of Spouse or co-Borrower
- Divorce (spouse has been refinanced off note)
- Military Duty
- Long Term or Permanent Disability
- Damage to Property (natural disaster or unnatural)For more information on hardships and the supporting documentation that is used to verify them, we discuss hardship reasons in greater detail on our Conditions that qualify as a Hardship for Loan Modifications page.
2. Lenders typically prefer the property to have been listed for at least 180 days.
Although exceptions are made on rare occasions, most lenders will not consider a deed in lieu of foreclosure unless the property has been listed at fair market value (typically as a short sale) for at least 180 days with no interest or success.
3. All other foreclosure defense options must be exhausted.
As we mentioned earlier, a deed in lieu of foreclosure is typically used as a last resort option. If no foreclosure defense solutions will work for a given situation, the second step is usually to attempt a loan modification. And when those aren’t an option, a short sale would be considered next. If that fails to produce results, a deed in lieu would be the next line of defense. These are all common types of foreclosure defense strategies, and bankruptcy can also be included in that list.
4. There can be no secondary liens against the property:
Loan servicers will only agree to a deed in lieu of foreclosure on a first mortgage. This means there can be no additional liens against the property. Examples include:
- Second mortgages– exceptions are made when the same lender holds the second and first mortgage.
- Mechanics liens
- Tax liens
- Judgments from creditors
Can a borrower pay off secondary liens in order to qualify for a deed in lieu of foreclosure?
Yes! A borrower can qualify for a deed in lieu of foreclosure if all secondary liens are paid off.
In some cases, the borrower may even be able to get assistance through HUD for coverage of up to $2,000 in order to pay off second liens. The Department of Housing and Urban Development would need to be the insurer of the loan in order to get their financial assistance.
How can Fernandez Law Group help me with a deed in lieu of foreclosure?
When faced with any serious legal matter, an attorney should always be consulted with in order to protect any rights or available options. A deed in lieu of foreclosure is no different. Our attorneys have been helping Florida homeowners defend against foreclosure proceedings for years. We can help anyone understand their choices when faced with foreclosure and what defense options are best suited for their individual situation and needs.
With a deed in lieu, we can help borrowers work out any issues with secondary liens and also help them avoid any future claims that could potentially arise. A claim could occur for any shortfalls or differences between the mortgaged amount and the selling price.
Some homeowners may find that other options such as a loan modification or short sale are more in their favor. Or they might need aggressive representation to help them defend against their foreclosure. In either situation, a foreclosure defense attorney will greatly improve the outcome.
When faced with a foreclosure lawsuit, time can be a serious factor against those who wait too long to act. A trusted attorney should be contacted immediately in order to preserve all available options.
Call us today at 813-489-3222 for a FREE consultation.
Content authored by Gaston Fernandez
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