Deed-in-Lieu Is Not For You

Hi Paul -

Just having read briefly some of your posts, I am hoping you may have a few words of advice for me.  I recently received a huge paycut (27%) and now am unable to afford my mortgage payments.  As an act of good faith, I contacted my mortgage co (not a bank, the original lender of my 80/20 loan) on June 29 — a few days before the first of the month (July) in which I would not be able to pay, and explained my situation… after a lengthy phone conversation, the Home Retention team member suggested that a deed-in-lieu would probably be the best option for me, especially since I have no issues about giving up my home at this point (I tried in the summer of 2007 to sell, without receiving any offers, and then my mortgage co helped by giving me a LM in September of that year (reducing my interest percentages)).

Now it seems that even though the mortgage co (AHMSI holds both loans — and I specifically asked on June 29th if this would hinder a DIL application, and was told no it would not) lists DIL on their own website as a means of assistance, they are insisting I try to remain in the home and try again for some kind of modification.  My income is now so severely reduced (about $850/mo, and I was only living check-to-check as it was!) that I don’t see how they can modify without losing as much as they would if they just accepted my DIL.  Furthermore, they are beginning to try to pressure me into paying (which I cannot do anyway!) by threatening foreclosure.  I understand they have every right to come after me, especially when I haven’t paid them (though I am only one month behind at this point).  HOWEVER, the reason I went to them first, BEFORE ever missing a payment, was to avoid a “full” or regular foreclosure in the hopes that they too would see the benefit of taking this easier way out (if there is such a thing here).  Either way, they will end up with a very underwater property — why would they rather hire lawyers and come after me the hard way, when I’ve been trying to offer my deed over to them on a silver platter for more 5 weeks now?!!

Any advice you can give would be most appreciated.  Thank you in advance.

-Karen

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Hi Karen,

The first and second may be serviced by the same lender but are probably owned by different lenders.  If the first mortgage accepted a deed-in-lieu then they would be stuck paying off the second mortgage.  This is why the first mortgage would foreclose rather than accepting a deed-in-lieu.

If they want to do a loan modification then I say great.  How about a principal reduction to go along with that? 

Thanks for the questions and hope this helps.

Paul