What do you need to know before considering a deed-in-lieu of foreclosure?

Most lenders, including Freddie Mac, a government sponsored enterprise and one of the leading mortgage companies, will require the homeowner to market the property for a minimum of 90-days before considering a deed-in-lieu (DIL). Homeowners interested in a deed-in-lieu (DIL), may also be required to provide evidence of a financial hardship and that they can no longer financially afford their mortgage payments.

Additional requirements include clear title (i.e. NO additional liens), including second mortgages, home equity lines of credit (HELOC), property tax liens, homeowner’s association liens and/or city/county liens, unless the holder agrees to a release the debt. The lender may also require that the property is currently a “no risk of property” being clear of any potential “risk”; which may include mold, lead based paint, etc.

Although the lender is spared the cost associated with foreclosing, there is minimum advantage to the owner of the home. The expense is then assumed by the homeowner as they will be forced to vacant the property immediately. In the case of a short sale you may continue to occupy the property until the close of escrow. The borrower may be ineligible to qualify to purchase a home for up to 7 years (Fannie Mae credit guidelines). Be aware that it can be reported to the credit bureaus indicating it as such.

It is advisable that you consult with an attorney or seek help from a counselors from HUD approved agencies for a more in depth review of the consequences associated with a deed-in-lieu (DIL) and any other foreclosure prevention alternatives.  Our free no obligation initial evaluation will help you determine if you qualify for this program.

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