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How Deed in lieu of foreclosure affects credit score

My wife and I along w/another couple bought a 2 family with an agreement that one resident would buy the property in one year, he defaulted and left us with a ton of damage and bills. Long story short we ended up doing a deed in lieu on the property. Our wives were the primary lendees on the mortgage as a result we are seeing a major hit on her credit score taking it down to a 660 or so. Lenders can't use her on a loan if we want to [url=http://www.mortgagefit.com/refinance.html]refinance[/url] or anything because they say the hit disqualifies her. We did not enter this deal to go into the hole, we worked real hard for many years to keep our credit very very good and this one property seems to have wrecked us, we don't have a ton of money, we work hard and have a small home of our own that we would like to refinance, I am getting no's from lenders. I really need some help and I feel hopeless at this point. I just don't want to see all that my wife and I are working for shot because of one bad deal that we only entered into because one tenant wanted to buy the place and take care of it and then we got stuck with it. It took thousands out of our pockets before the deed in lieu. As I said other than that we have had excellent credit, mine is over 740-750. Please offer any advice, it is truly truly appeciated. I feel that we are good hard working people and we just don't want to feel hopeless.thank you so much, Matt Long

jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Matt,

I can understand your problem. Did you try to refinance it in your name solely? That might work for you.

A little more shopping around will probably enable you to find a lender who agrees to refinance.

James

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matthewalong's picture
matthewalong | Joined: May 10, 2006 01:22 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Yes I've tried that but I don't have enough income. I was wondering if there is anyone out there who knows who I could talk to or lenders that would have experience dealing with these types of issues. thanks for the feedback

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Matthew,

Welcome to MortgageFit Forums.

I feel sad about your misery caused by some other whom you believed. Sometimes this sort of problems comes under the situation you went through.

I would suggest you to look for some more lenders or brokers to help you with this situation. Never get worried if you are rejected by one or a few of them, there will some who will agree to refinance under this condition.

At least a deed-in-lieu is far better than a foreclosure but you will have to explain clearly the reason behind the default.

Another option is to refinance it in your name if possible. Your credit score is a good one to qualify. We need to look at your income as you are saying it not enough to qualify.
Our Community can also help you in this matter. There is a wide network of lenders under this community and your requirement may be put forward to them. Don't get worried, refinance under these circumstances is not impossible if not easy. :)

Feel free to ask if you want to clear up some more things.

God bless you.

For MortgageFit,
Samantha

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matthewalong's picture
matthewalong | Joined: May 10, 2006 01:22 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Thank you, do you know of any names or numbers in particular I could call that may have people to help...I truly appreciate the help. !!!!!!!!!!

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Matthew,

Welcome again.

You can sign up here for your request. Kindly sign up with a different e-mail address this time.

This will directly forward your request to our loan department who will contact you within a very short period and discuss your requirement with you.

If you find any difficulty you can post it here.

God bless you.

Thanks,
Samantha

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

How soon can you get a new mortgage after you apply for a [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url]?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

When applying for a new mortgage you will be asked if your property was foreclosed on or if had given title in lieu thereof in the last 7 years. So, this information will stay on your credit report for 7 years.
Luke

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

It is possible for you to get a new mortgage in as little as three years.

But the major obstacle in getting approved for a new mortgage is your credit rating. You should concentrate on rebuilding your credit in order to get approval for a new mortgage.

And for that you should try to make all of your payments to your remaining creditors in a timely manner.

James

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I'm not understanding something! I thought if you did a deed in lieu of foreclosure that it didn't show up on your credit report. Most mortgages companys go straight for the credit report for a new mortgage.so what am I missing? Just call it dumb blonde syndrome! LOL

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

A Deed-in-Lieu does get recorded in your credit report and acts as an evidence of the fact that the borrower has conveyed all his share in the property on being unable to pay off his mortgage. But a recording of this process doesn't have as negative an impact as a foreclosure.

Know more on Deed in Lieu from the information available on this topic.

Thanks,

Caron.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

So really the only one who benefits from a deed in lieu is the mortgage co. because it doesn't cost them like it would for a foreclosure! Because in a foreclosure you still have to wait for three years to get a loan again.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Roberta,

Yes, in one way you gain by avoiding a foreclosure as that can have more severe effects on your credit. But deed-in-lieu does appear on your credit report and next time you approach a lender he is going to take that into consideration.

The lender agrees to a deed-in-lieu only if he finds that you don't have any other options to repay or you are compelled to change the house as a result of a job transfer.

Also he may agree to avoid the time and money associated with a foreclosure.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Okay, now I've got it! Thanks so much for your help!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I'm retired military and have relocated to a location that offered me and my wife employment. We bought a home in an area that at the time had no housing at all so we bought a manufactured home and placed it on a lot. I was transfred to this location in 1997 by the Army. Iwas transfered out after 4 years. The home was then rented and occupied until june of 2006. At this time we put the home up for sale. We had a buyer that signed a contract, to buy, but rented it until she could get financing. This person the was fired and backed out of the contract and move out of the united states. We place the home back on the market, but the town of 1200 people has had a drastic ecnomic decline and we can not find renters of anyone that can get financing for the home due to the fact that it is not on a perminate foundation. I am living in a home and the payment are always on time, I am looking at doing a deed in lieu of before the lender starts foreclosure proceedures. My wife and I have had a great payment history on the manufactured home but with little or no prospects to rent or sell we feel that we should give up the property. What kind of paperwork history should we compile to assist us in the event of possibly buying a new home in the future?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

If the lender allows, deed in lieu will be much better option than a foreclosure. But it will also affect your credit score, though not as much as a foreclosure.

Tim

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Tim,

If you wish to buy a home with a mortgage in future, then you need to compile proofs of your income, assets, debts that you have paid off and you will be currently paying for.

Refer to http://www.mortgagefit.com/preapproval.html for more details on the paperwork that can help you to buy the home of your choice.

Hope that helps

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am speaking to an attorney in regards to a bankruptcy to surrender 2 condos that turned bad investment in the FL market. I am in the mortgage business and seen people recover from a bankruptcy far more quicker than a foreclosure. Granted both do stay on the report for 7 years and both are looked upon for 24 months from filing date, but lenders can't come after you for the defiency balance. My question is though in reading about the [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url] does it affect your credit if you have never been late on the mortgage before since the mortgage is immediately setteled with the mortgage company? I'm a liitle confused, but this might be a better option for me to look into. I'm certainly not trying to get out of all my debts, but the condos I have are killing me financially!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[size=9:3c86041f52][color=Red:3c86041f52][System detected it as duplicate content. Converted it into an image][/color:3c86041f52][/size:3c86041f52]

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Sammy,

A deed in lieu has negative effects on your credit but it is less than that of a foreclosure.

In order to be eligible for deed in lieu, you need to have some late payments. Your lender might also ask you to go for short sale if you haven't tried to sell your property before filing deed in lieu.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

How many points does your credit score drop if you have a deed in lieu?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Deed in lieu may lower your credit score by about 50-100 points.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

I have to make a quick decision in regards to either proceed with a Deed of Lieu or a Short Sale. But I'm not sure what is my best option. I've already contacted a real estate agent to proceed with a short sale but was declined as my mortgage company went out of business and was purchased by another company. My current mortgage company has confirmed that they are willing to hear any offer's that we may have. But I am unsure which has a more negative effect on my credit score a Deed of Lieu or a Short Sale. I heard that with a short sale the effect can stay on your credit for only 7 months. Is this true? If so, how long does a Deed of Lieu last on your credit>

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Melissa,

Welcome to this forum.

Short Sale is far better than Deed in lieu of foreclosure and has lesser negative effects on your credit report. DIL and Short Sale both stays on your credit report for almost 7 years but DIL will drop your credit more than 100 points whereas Short Sale will drop your credit score only around 50 points and you can be approve for another loan after 18 months.

Thanks,
Larry

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Melissa,

There is another factor that should be considered. In case of a deed in lieu of foreclosure, the lender cannot seek a deficiency judgment but he might do that if you are going for a short sale, unless your state has anti-deficiency laws.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i am a senior and on a low income i have a disabled son who lives with me. my husband passed away five years ago and the home we bought twenty years ago is in need of major foundation repairs i have excellent credit but cannot afford the repairs needed on the property. i have contacted the mortgage company and they suggested a deed in lieu but this was two months ago. what will this do to my credit if i do the deed in lieu.

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Renna,

Welcome to the forum.

Is it a mortgaged property? Why do you want to do deed in lieu? Are you late on your mortgage payments?

As you have said "the home we bought twenty years ago" I think there is good enough equity in your property. So why don't you consider Reverse mortgage? If you want you can get a lump some money at a single time for the repair works and to meet you other needs or you can take the money on a monthly basis.

If you want to know more about reverse mortgage, you can check this article out on reverse mortgage - http://www.mortgagefit.com/reverse.html

Hope this will help you :)

Feel free to ask if you have any further questions.

Best of luck,
Larry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My company recently went through some restructuring and In turn this cost me a great amount of financial problems. We had relocated to a new area and within a year my pay was dropped 10,000.00. Needless to say this was the end of last year and also the time when the housing market was starting to plummett. We did get renters that were interested in renting our house however, they were always late and we eventually had to evict them. Now we are in a situation where because of the market dropping on housing my house no longer appraises for what it was worth 17months ago and I can't find anyone to [url=http://www.mortgagefit.com/refinance.html]refinance[/url] our house because of what I owe and where the appraisal comes in at. We are in a bad situation and are considering giving our house back. Also I took another position along the same line of work and have transfered out of the area. What would be the best thing for us to do as we have always had good credit and this would be the first time anything like this would come against our credit. We are currently working with a realtor trying to do a short sell on our house but are finding quite a bit of resistance when trying to get info from our mortgage company. Any advice?

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Ken,

Welcome to the forum.

It is good that you are at least trying to pay off the mortgage company through the process of short sell. I think you should contact with you mortgage company directly and consult with them about you problem and check out what are the options you can afford.

I think you can try out something like forbearance or loan modification to [url=http://www.mortgagefit.com/foreclosure/17ways-avoid.html]avoid foreclosure[/url]. Check out this article to know more options at http://www.mortgagefit.com/foreclosure/17ways-avoid.html

Hope that helps you.

Feel free to ask if you have any further questions.

Best of luck,
Larry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Try calling Sterling Asset and Equity Corp., Joe 561-330-0400

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cliff3's picture
cliff3 | Joined: May 5, 2008 02:15 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Ken,

Doing a short sale is a good option if you know longer want to keep the house. However, you may want to ask your realtor how many short sales she has done. VERY FEW REALTORS KNOW HOW TO "REALLY" APPROACH A SHORT SALE. If your realtor has not done at least 20 short sales I would find one who has.

If you want to keep the house then contacting your lenders "[url=http://www.mortgagefit.com/loss-mitigation.html]loss mitigation[/url]" department would be the smart thing to do. Just make sure that you talk to the "loss mitigation" department.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

As an invester I entered into a trust deed sale & leaseback agreement whereby I purchased 2 condos putting $50k down on each. I used 1031 exchange money. The company I entered into the agreement with is suspending making payments which leaves me with 2 payments of $1000 each which I cannot make to the lender. The properties originally purchased for $188 k each are now worth about $125-$140 K . Any thoughts as to what I should do ??

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi jmianecki

You have mentioned that the company suspending payments have entered into an agreement with you. First and foremost if they are breaking the agreement, you can sue them.

As you are unable to make the payments, you should immediately contact the lender and check if he can offer you any help. In case you keep on defaulting on the payments, the lender will have the right to foreclose the property.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What if you were never late on the property, but the bank agreed to the deed in lieu. Does it still affect your credit score?

Thanks Dave

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

How long will it remain on the credit report-----

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi!

Welcome to forums!

To Dave,

Yes, though you were never late on the payments but still the bank has accepted a deed in lieu, you credit score will still be affected.

To Lloyd,

As far as I know, a deed in lieu foreclosure will remain on your credit report for 4 years.

Feel free to ask if you have further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

we are using a company to assist us with this process and so far they have proven trustworthy and helpful. i will update as we go through this, it should be about 6 months..

just google, walkawayplan

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

After a foreclosure how long can you wait to buy another house?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi rose,

A foreclosure remains on your credit report for at least 5 years from completion date. Within these 5 years, lenders will not be ready to give you loan. Additionally between 5 and 7 years, you can only purchase a personal residence but will have to pay at least 10% down. After 7 years you will get normal rates and terms.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My husband and i are in the construction business and as we know thats not doing so great. We decided to put the house on the market. My realtor thinks we should list it for $224,000 but there is a house 2 doors down that sold for $203,000 4 months ago and also another house with the same floorplan that is listed for $209,000, We have no equity into the house since we got intrest only loan @ 8.7%. we purchased this house 2 yrs. ago for @213,000 we owe the same amount now! we can't [url=http://www.mortgagefit.com/refinance.html]refinance[/url] since my husband and i are selfemployed and show little income. my question is should i put it on the marketfor that amount ($224,000) or maybe try to do a short sale or ask for a deed of lieu or just walk away. If we do foreclose what are some of the consequences besides credit problems. can the lender come after us and garnish or wages? does the irs get involved? how we that affect our small business?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

my deed in lieu was reported to experian 3 months ago and it is showing up on my credit report. the mortage went about 60 dys past due before the deed in lieu was recorded. This mortgage has two loans, one showed up as 'charge off' and the other showed up as 'deed in lieu'. yet, my experian score only dropped 40 points when all the info i got on these net forums tells me it will be 100-250points. should i expect my score to drop lower in the coming weeks and months? when can i be certain that the deed in lieu has fully impacted my score?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

To ac,

You can list the property at $224,000 and try selling it. If you do not get buyers, then you can lower the rates and re-list the property. If the property sells off at a lower rate, then you will be liable to pay off the deficient amount to the lender.

In case of a deed in lieu, the lender will sell off the property and the deficient amount resulting from the sale of the property will be forgiven. However, a deed in lieu will lower your credit by 250 points and you will also have to pay taxes on the deficient amount. As far as foreclosure is concerned, it will ruin your credit and if you are unable to pay the deficient amount resulting from the sale of the property, then the lender may garnish your wages.

Hi anonymous,

It is surprising to me that your score has dropped by only 40 points. But as one of your loans has been charged off, I think your credit will drop further in the coming days.

Thanks

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m.snover92571's picture
m.snover92571 | Joined: February 10, 2009 09:53 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

You can try to refi just in your name.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We have a mortgage on the home we live in but have not been able to sell the home we moved out of for the past two years. Our savings is gone and we need to get rid of the house asap. Will our credit rating get better faster because we already have another mortgage or should we try harder to short sale before deed in lieu?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi JZ,

You should contact the lender and try for a short sale or a deed in lieu. But remember that both short sale and deed in lieu will affect your credit score and lower it. As far as another mortgage is concerned, I don't think it will help much in improving your credit score.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have a 90% mortgage on my property and a 10% home equity line of credit, neither of which I have paid down on very much, it appears I may be moving to a new city soon and may have to do a [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url]. Will the bank do away with the home equity line of credit also or just the 1st mortgage?

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi btvs,

If you go for a deed in lieu of foreclosure, the bank will do away with the first mortgage only. The first mortgage holder will sell the house and try and recover the loan amount. If the sale proceeds exceeds the first loan amount (which is rare), the second lender will get the exess amount to recover the second loan amount. But if the sale proceeds are not enough to pay off the [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url], the second lender can get a deficiency judgment against you and garnish your wages.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What if you want to proceed with deed in lieu after a divorce and you have a second mortgage on property.Does this have an effect on her credit if she is cosigned on note?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If you have a $25,000 judgement from a default [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url], how much can they garnish?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi scrub,

If you and your spouse had signed on the mortgage note and if you default, her credit score will also get affected, besides yours. As far as I know the federal govt. allows only 1/4 i.e. 25% of your wages to be garnished. So , the rest 75% is likely to be protected from garnishment.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Mortgage now $100,000 above fair market value of condo. When mortgage was initiated, loan amount was less than 80% of appraised value in 2007. Medical conditions require early retirement and I cannot afford to keep condo. Have not been able to sell. How badly will a DIL affect my now excellent credit rating?

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