How is my credit affected by a DIL and foreclosure?

jaoja · Joined: 04 Sep 2008 Posts: 2 1.88 Dollars($)

I am a widow and due to high funeral costs for my mother and providing over 50% of her care the last year of her life, I have no funds and live on a fixed income. I have no equity in the house and don't see how I can ever have any equity.

adonis · Posted: Thu Sep 04, 2008 10:41 pm Post subject:

Welcome Jaoja,

It seems you're not sure whether you'd go for a deed in lieu or a foreclosure. Have you negotiated with the lender in this regard? if you consider the credit effects, a deed in lieu would be better than foreclosure. Also, you don't need paying any deficiency (if you're in a deficiency judgment state) in case the lender can't retrieve what he owes by selling off property after deed in lieu.

Both deed in lieu and foreclosure reduces your credit score by 250-300 points. Creditwise their effects are almost similar.

jaoja · Joined: 04 Sep 2008 Posts: 2 1.88 Dollars($)

'if you consider the credit effects, a deed in lieu would be better than foreclosure'. 'Creditwise their effects are almost similar.'
This seems like a contradition so, apparently, I must not be understanding correctly.

Samantha · Posted: Mon Sep 08, 2008 5:46 am Post subject:

Hi jaoja,

I do agree with you here. What Adonis perhaps wanted to say is that, a deed in lieu brings down your score by 250 points whereas a foreclosures lowers it by more than 250 points.

Guest

I mean that I have a pension and Social Security benefits.

Guest

Foreclosure is the worst of them all...give the house back if you can not do a Short Sale or renegotiate the mortgage.

Jessica · Posted: Tue Sep 09, 2008 3:37 am Post subject: RE: deed in lieu may be an option

Hi Jaoja,

Welcome to our community forums.

Lady T must be asking you to negotiate for a deed in lieu. That's how you give back property to the lender. Foreclosure does have the worst effect on your credit.

If you don't have equity, I find no chances of your getting a mortgage in order to refinance the existing loan. But even if you rent out, you need to pay off the mortgage asap. So, considering your situation, i do feel deed in lieu may be an option. But this depends more on the lender's policies regarding accepting deed in lieu.

In case you'd like yo get a fair idea of what's deed in lieu all about, just check out the information available on this topic.

Regards,

Jessica.

vegas_storms · Joined: 12 Sep 2008 Posts: 67 3.54 Dollars($)

Try to negotiate a Ded-in-lieu with paid as agreed & paid in full reported by the lender to avoid ruining your credit. It's tough to do and depends on the lender but can be done occasionally

Guest

I to, like many other people I'm sure never thought they would be contemplating these decisions but; here I am. I lost my job 4 months ago, moved out of state and left my home to be sold. That never happened and I am four months behind in my mortgage and second mortgage which both are with countrywide. Not only that I am also up to my ears with unsecured debts. I am not for sure which way to turn. At first I was sure that a dil for the first and second mortgage would be the answer and to settle with the rest of by creditors would be the best answer morally and credit wise. But; after reading this forum I am quickly learning that a dil can be just as harmful. Not only that there is a chance it may not be approved and if it is you may still be liable for unpayed balance. I feel like one half does the other. What I am trying to say is maybe my trying to salvage my credit thru dil and settlement is no more worse for my credit than filing bankruptcy. Sorry for the long drawn out explanation.

Guest

i thought that by reaching out to the soldier sailor patriot act i was going to be excempt from personal liability when i gave up my house to Country Wide.... now was hit with a 1099 tax form that says that i had earned income totaling $639,000.00.....What do I do???? where do I turn to?????

jameshogg · Posted: Sun Feb 22, 2009 11:46 pm Post subject:

Hi liz,

In a deed in lieu, the lender forgives the deficient amount resulting from the sale of the property but the borrowers need to pay taxes on that forgiven amount. As you have received the 1099-c form, you will have to pay the taxes. I don't think you can avoid the taxes.

Thanks

Guest

I cannot afford my mortgages anymore, I had a modification 6 mos ago but the payment is still too high. The lender placed me on a forebearance for 2 months and on the 3 month I am suppose to catch up the past due. This is so stupid! I decided to let the property go. I thought I would do a DIL, but I have the 1st and 2nd, and I don't want to pay anything else in the future. Then I thought about sitting there and let the lender forclose. I understand that an agent would come by and offer cash for keys. My question is which option is better to do?

adonis · Posted: Thu Apr 09, 2009 10:21 pm Post subject:

Hi Darlene,

Both deed in lieu and foreclosure will have a bad effect on your credit report. However, if the first lender goes for a deed in lieu, you won't have to pay the deficient amount resulting from the sale of the property to him. But you'll have to pay off the dues of the second lender. If you don't pay, he may charge off the loan.

If you let the first lender foreclose the property, then he can sue you for the deficient amount resulting from the sale of the property. Apart from this, you'll have to pay off the dues of the second lender. Thus, in my opinion, deed in lieu is a better option for you.

mtgfixit · Joined: 13 Apr 2009 Posts: 73 28.05 Dollars($)

Hi Darlene,

There are more options available now. Have you looked into the Home Affordable Program? Lenders are trying to avoid foreclosure and work out a plan to keep you at 31% debt to income ratio based on your PITI and any association dues. They are lowering the rates as low as 2%, adding upto 10 years to repay your mortgage and possibly reduce your principal balance to keep you at the 31% debt to income ratio - I hope this helps you. There are different programs for Freddie Mac and Fannie Mae Loans for more information visit:

"loanlookup.fanniemae.com/loanlookup/"

http://www.makinghomeaffordable.gov/

https://ww3.freddiemac.com/corporate/

If this is not an option for you, a deed in lieu of foreclosure is the way to go

[Link deactivated as per forum rules. Thanks.]

Guest

We have a first and second on our rental property. We were keeping the rent payments up to date until our back taxes were added to our mortage payment which made our payment more than double. We are going into the fourth month of not paying this mortage lender. We have paid the second lender on time each month to date. I am wondering what effect foreclosure will have on the second lender, my husband's trucking business (has a loan from a different lender for his truck and trailer), and will we need to pay lots of taxes? Back taxes owed to the IRS got us into the situation in the first place.

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