Foreclosure:

Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is one of the loss mitigation options that can avoid home foreclosure. If you have been unable to make your monthly mortgage payments and have not been able to sell your home at fair market value, a Deed in Lieu of Foreclosure may be the best option for you. This process requires the borrower to turn over the property to the lender, thereby releasing any obligations the borrower may have under the mortgage. The process usually begins when the borrower sends a letter to the lender requesting that they enter into negotiations. It is important to note that both the lender and the borrower must enter in this process voluntarily.

A Deed in Lieu of Foreclosure can offer several advantages to both the homeowner and the lender. Upon completion of this process, the homeowner is immediately free of the debt connected to the defaulted loan. Borrowers are able to avoid the foreclosure, and are often given more generous terms then they would receive in a formal foreclosure proceeding. The Deed in Lieu of Foreclosure also eliminates the public notoriety of a foreclosure proceeding. A Deed in Lieu of Foreclosure can be advantageous to the lender because it saves the time and cost associated with repossessing property. This process will not save your home, but it can protect your future. A Deed in Lieu of Foreclosure is damaging to your credit, but it is less harmful than an actual foreclosure.

While a Deed in Lieu of Foreclosure may be a good option for some homeowners, there are risks involed. If the outstanding amount of the loan exceeds the current market value of the property, the lender may not be willing to proceed with a Deed in Lieu of Foreclosure. In addition, junior creditors may hold liens on the property which could complicate the process. It is advisable for homeowners to contact an experienced professional or real estate attorney before proceeding with a Deed in Lieu of Foreclosure.

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