JDFN Financial Network

Deed in Lieu of Foreclosure - Might Be An Answer

So many people today are in foreclosure around the country; the banks and the courts are really getting backed up.  If you are in this situation, you might want to approach your mortgage company and see if you qualify for a Deed in Lieu (DIL) of Foreclosure to avoid the foreclosure process.

Basically, a DIL allows the homeowner to voluntarily transfer the ownership of their property to the mortgage holder in exchange for a release from the mortgage loan and payments.  This is becoming a popular tactic by the banks because there are just so many foreclosures across the nation.  Plus, if the mortgage holder can avoid foreclosure hearings, they save tons of money in the legal process.  So, the DIL has become an alternative to foreclosure and seems to be a win-win situation for all parties. 

Homeowners who might be interested in this process versus foreclosure, must qualify prior to approval.  You can qualify if you:

Are ineligible  to refinance or modify your current mortgage,
Are currently behind in your mortgage payments,
Owe more than the home is actually worth,
Haven’t been able to sell your home,
Are going through a hardship (like the loss of job, divorce, or medical emergency)
Can no longer afford to live in your home and are prepared to leave, since the process must be completed within 90 days of initiation).

This is, by no means, the comprehensive listing of qualifying factors for a DIL, so you’ll need to talk to your mortgage holder to see if you qualify.  A DIL is less harsh than a foreclosure on your credit report too.  It all depends on your mortgage holder.  There have been times where a mortgage holder has reported a borrower’s mortgage paid in full following the DIL process.  That’s a question you would need to ask your mortgage holder prior to processing the DIL.  Regardless, the DIL is less harmful, in many ways, than a foreclosure and you can expect, at least, a “grey” mark on your credit report versus the “black” mark a foreclosure is sure to cause.

And here’s something I bet you would have never thought of; a DIL, in some cases, qualifies you to receive a relocation allowance from the mortgage holder after the process is competed.  It just happened to someone I know.  There are some mortgage companies that are assisting homeowners after a DIL by providing them with $3,000 for relocation expenses.  The homeowner can use this money to pay for moving expenses, make a deposit on a home or apartment rental, or just put it in the bank for that proverbial rainy day.  All you have to do to find out if your mortgage company offers such a benefit is to ask them. 

This is a program that is definitely an attractive alternative to foreclosure and troubled homeowners should immediately approach their mortgage holders to see if they qualify for this program.  The one thing that hurts the homeowner is waiting too long.  If you are days away from an auction where it would be easier for the bank to dispose of the liability in that manner, you’re probably out of luck.  So before you get to that point, be proactive and approach your mortgage holder to find out whether or not you qualify for a deed in lieu of foreclosure.  It just might be a better option for you.

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