A Deed-In-Lieu of foreclosure happens when a homeowner gives up all legal rights to their home in exchange for being absolved of all obligations associated with it. The legal transaction of the deed-in-lieu starts after the homeowner has fallen behind on his loan payments and is in foreclosure. Sometimes the lender requires that homeowners be at least 90 days in judicial foreclosure states and 30 days in non-judicial states, before they can accept a deed-in-lieu.
When the homeowner notifies the lender regarding the deed-in-lieu, it is byway of an application with supporting documents that show the homeowner meets all the qualifications. The lender then orders a Broker’s Price Opinion to determine if he wants to take the home at the foreclosure auction, accept a dee in lieu of or work out a loan modification to stop the pending foreclosure.
In some cases the lender may take the deed from a homeowner, continue with the foreclosure process and request that the homeowner sign a personal note leaving them liable for any deficit incurred, leaving no advantage to the homeowner at all. Meaning, if the lender sells or transfers the property for less than what is owed on the loan, the homeowner will owe the deficiency.
Many people assume that this process requires an attorney, exorbitant legal fees and a long drawn out process. However, if you may not need an attorney if you have a good understanding of the deed in lieu process, your rights and the applications and forms you are signing. There is no requirement that you must have an attorney to help you with the transaction.
If you don’t truly understand the process you may consider consulting with a FAIR Counselor who can help explain it all in depth with you and provide alternatives should you decide a deed in lieu is not in your best interest.
Would you like help considering whether a Deed-In-Lieu of Foreclosure is right for you? Contact a FAIR Counselor for free assistance.