How does deed in lieu affect credit compared to bankruptcy?

king4609 · Joined: 31 Mar 2006 Posts: 1 0.39 Dollars($)

How does a deed in lieu look on a credit report,and compared to a bankruptcy

blue · Posted: Fri Mar 31, 2006 4:38 pm Post subject:

A deed-in-lieu will have negative impact to your credit score too but the effect will be less compared to bankruptcy.

Samantha · Posted: Fri Mar 31, 2006 4:56 pm Post subject:

Hi King,

Welcome to MortgageFit Forums.

Deed-in-lieu is an alternative to foreclosure used by the debtor under acceptance of the lender.

It can be used under limited circumstances and only if the lender agrees. There are some conditions under which the lender may accept a deed-in-lieu.

First if the debtor has exhausted all efforts to sell the home at a fair market value. Second there should not be any other mortgage in default. Third the debtor doesn't have the ability to make the monthly payments.

Generally the lender accepts a deed-in-lieu if the above conditions are met and there is no other option left than a foreclosure. You should think for a deed-in-lieu only if you have a place to stay.

Bankruptcy will give an option to have automatic stay. If you are in bankruptcy, legal action can not be taken against your house at least. But it may ruin your credit history more. Depending on your situation you have to take a decision.

God bless you.

For MortgageFit,
Samantha

Bill · Posted: Fri Mar 31, 2006 5:33 pm Post subject:

A Deed in Lieu of foreclosure (DIL) is an option in which a homeowner voluntarily deeds the home to the mortgage servicing company in exchange for a release from all obligations under the mortgage.

The question as to how the DIL will affect you depends upon how this situation is actually reported onto your credit. If you are not delinquent on your mortgage payments but some event allows you to know that future mortgage payments will not be possible, it is possible that the mortgage company may accept a Deed in Lieu to future mortgage obligations. But this process of acceptance may take as much time as it would to sell the property outright.

If mortgage payments are delinquent, most mortgage servicers have strict policies regarding a timeline of filing foreclosure proceedings. Even if the servicer has been advised in writing that the homeowner is interested in deeding the property over the foreclosure is usually started on the lender's standard timeline as a form of legal protection against loss. If foreclosure is initiated, a foreclosure will be reported on your credit and this will affect your credit worse than a bankruptcy from a mortgage lenders point of view.

As Samantha mentioned, bankruptcy may even be considered an option worth considering if you need to avoid foreclosure. Whether you are considering a Deed in Lieu and/or facing foreclosure, consultation with a reputable real estate attorney is highly advisable to ensure you are making the best decision given your specific circumstances.

The key to any situation with regards to your credit is to work closely with the mortgage servicer and/or attorney to ensure no foreclosure is initiated and that the end result is your former mortgage simply reports on your credit as 'Paid/Satisfied'.

Hope this helps- Best of Luck!

Guest

how can i qualify for a short sale?

Guest

If you want to go for short sale you will have to convience your lender for that.

Zeal_Deal

jerry · Posted: Thu Apr 06, 2006 9:01 pm Post subject: RE:

Hi,

As Zeal_Deal said this entirely depends on the lender.

Negotiating a short sale with your lender can be a daunting task. Because finding an officer who has the authority to accept discounts can be a difficult process.

You will have to locate the loss mitigation department of your lenders company.

Thanks,
Jerry

Bill · Posted: Fri Apr 07, 2006 6:10 am Post subject:

Curious,

Why do you want to "qualify" for a short sale?!

Guest

Because most of us are upside down in our place, and we want the F* out of our place, and start over.

jerry · Posted: Tue Dec 16, 2008 4:00 am Post subject:

Hi Eric,

If you are unable to pay your mortgage debts and want to go for a short sale, contact the lender immediately. You will have to write a hardship letter to the lender while applying for it. But you should also remember that it is the lender's discretion whether he will accept it or not. However, you should note that a short sale will definitely affect your credit score. To know about how short sale affects your credit, check out the following page:
http://www.mortgagefit.com/discuss/shortsale-crediteffect.html

Thanks,

Jerry

Guest

hi, i'm facing a situation where I've never been 30 days late on my payment, but my employment and local market conditions are such that the lender is willing to do a deed-in-lieu on the property, even though I've never been late. how will my credit score be affected if i choose to move forward? how is a deed-in-lieu reported on a credit report and what is the negative impact if teh payments were never late? thanks in advance

Niicss · Posted: Fri Feb 13, 2009 2:46 am Post subject:

Hi thomas,

A deed in lieu will badly affect your credit score and will lower it by 250 points. It will also remain on your credit report for 4 years from completion date. If borrowers are not late on payments, then the lenders generally do not offer a deed in lieu. It's very surprising to me as to why the lender is offering a deed in lieu.

Thanks.

Guest

It's strange, I called my bank and asked about options for financing the shortfall on a sale. I've never been late on my payments, and have calculated that short financing would cost 25% of the mortgage. Yet, they have instead suggested a Deed in Lieu. It's baffling that with our credit scores over 700, secure incomes, and a desire to do the responsible thing the banks would rather take on a vacant property and destroy our credit rating.

Guest

I have a large loan on a piece of property in Florida. The bank is refusing to lower my repayments and I am finding it very hard to make the payments. I am not behind with the repayments but would like to walk away leaving them with the property. I do have another property in another state but cannot get a loan on it. Can I walk away,, would this negatively effect my job?
Thank you very much for your answer

jameshogg · Posted: Sun Feb 22, 2009 10:30 pm Post subject:

Hi pat,

As you are not behind on your payments, so the lender is not ready to lower your payments. If you walkaway from the property, the property will be foreclosed and the lender will demand the deficient amount resulting from the foreclosure. As far as your job is concerned, I don't think it will be negatively affected.

Thanks

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