Deed in Lieu

I am behind two months on my rental property.If I am turned down for loss lidigation and volunteer surrender of the property,how would my credit be effected?

Melissa 

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Hi Melissa,

From a credit standpoint, a ‘deed in lieu’ is generally viewed the same as foreclosure; but, it’s important to note, the mortgage lender doesn’t want to own your property.  They want you to (1) keep your home, and if there is no way for your loan terms to be modified or worked out, then the lender wants you to (2) sell your home.

Hud.gov defines Deed-in-lieu:

“Your lender may agree to allow you to voluntarily “give back” your property and forgive the debt. Although this option sounds like the easiest way out for you, generally, you must attempt to sell the home for its fair market value for at least 90 days before the lender will consider this option. Also, this option may not be available if you have other liens such as judgments of other creditors, second mortgages, and IRS or State Tax liens.”

It is true that a ’deed in lieu of foreclosure’ may become a mortgage lender’s counter to a short sale negotiation that’s going nowhere, although the homeowner should first try to market the property for sale at a price that the market will bear – even if that price is less than the present mortgage balance. 

I’ll liken the ‘deed in lieu’ to a homeowner waiving the white flag to his lender saying: “I give up!  Do with me as you will, Mr. Bankster.  Please accept my estoppel affidavit and this ‘deed in lieu’ Mr. Bankster!” 

“Walk the plank!” says the Bankster as he closes out another 122,000 HELOCs. 

The ‘deed in lieu’, the ‘deed in lieu’, what else shall I say about you?  Ah, I got it.  The deed in lieu of foreclosure, it’s just one step above, well, um, foreclosure.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

(source=hud.gov/offices/hsg/sfh/econ/econ.cfm)