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LShoaf · Joined: 27 Jul 2008 Posts: 1 1.42 Dollars($)

What is the best way to ask your lender to allow a Deed in Lieu of foreclosure?

shane · Posted: Sun Jul 27, 2008 5:56 pm Post subject:

I'd call them up on the phone first to see if it's something they are even entertaining at this time. If they are then the next step would be to mail them a request so it's documented in writing that you asked for it.

cliff3 · Posted: Mon Jul 28, 2008 4:22 am Post subject:

Hello LShoaf,

Convincing your lender to accept a Deed in Lieu (DIL) of foreclosure, should only be used as your very last, extreme resort to avoid a foreclosure. Even though a Deed in Lieu (DIL) is less time consuming, and less expensive than a foreclosure for the lender, as well as for you, most lenders will still prefer to negotiate a workout plan, or accept a short sale.

Have you contacted your lender yet to see what workout plan you may qualify for to you to keep your home? Please do this right away!!

There are certain eligibility requirements that you must meet, before your lender will even entertain the option to accept a Deed in Lieu from you:
• Are you imminently facing foreclosure? Are you at least 31 days delinquent?
• Have you exhausted all means to avoid foreclosure?
• You, the borrower, must voluntarily submit a written offer of the Deed in Lieu and it must specifically state that the offer to enter these negotiations is being made voluntarily. You must list all the conditions for which the DIL will be accepted. Including the agreed upon transfer date of the property. On that date, the property must be vacant and clear of all your personal property.
• Usually the lender requires that you have listed your home with a Realtor for at least 30 days. They need to see that you have attempted to sell the property, but that you have been unable to sell the property. They prefer for there to be no other liens against the property at all.
• The property should still be occupied, unless you provide documentation that can verify your need to vacate the property, i.e. loss of income, increased living expenses.
• The property is not a rental investment, nor used as a rental for more than 12 months.

And keep in mind that the lender is not required to accept the Deed in Lieu.

Good luck.

Guest

if your property ie a rental you cannot apply for deed in lieu so you have to go with a short sale ?

smithsussane · Posted: Mon Dec 29, 2008 12:49 am Post subject:

Hi benny!

You can apply for a deed in lieu foreclosure. It will be the discretion of the lender whether he will allow a deed in lieu or not. Lenders generally agree on a deed in lieu if you have defaulted on your mortgage payments for at least a month. So if you have defaulted on payments, you will be able to apply for a deed in lieu. If the lender does not agree, then you can check out the option of a short sale.

Feel free to ask if you have further queries.

Sussane

Guest

I am not late with any paymnets but the writting is on the wall. Can i just do a deed in lieu of and fed ex the keys to the lender. I would be out of the house and be renting. I am 0ver 100k upside down so no realtor will list the house. Once I send the keys back am i free of the morgage/

sara · Posted: Mon Feb 02, 2009 2:49 am Post subject:

Hi,

If you just hand over the keys, you are not free of the mortgage payments. If you're at all unable to pay, or anticipate that you may be in problems, request the lender to provide you with an alternative payment plan.

Since you're not yet in default, the lender won't consider any workout option other than an alternative repayment plan.

Take care

Guest

If you do a DIL aren't you still responsible for the part that they didn't write off? And do you have to pay Tax on it as well?

jenkin7 · Posted: Thu Mar 18, 2010 11:47 pm Post subject:

Hi Sherrie,

If you do a deed in lieu (DIL) of foreclosure, the mortgage company forgives the deficiency. This is what they generally do. However, in some cases, I've come across queries in the forum where the lender has gone after the borrower for the deficiency from the deed in lieu. Thus, it is always better to get it in writing from the lender that he will not sue you for the deficiency from the DIL.

In case the lender does forgive the deficiency, it will be considered as your taxable income. But if you have used the property as your primary residence, you can claim exemption from paying taxes on this forgiven debt amount.

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