A Deed In Lieu Foreclosure Saves Your Credit Rating
A deed in lieu foreclosure is a method that can help you stop foreclosure when you are in default. It could well happen that you are not able to meet your mortgage payments when due anymore and your house and the large investment you placed on it are in jeopardy.
Not only that, you also feel uneasy about the influence a full foreclosure could have on your credit report. It is thus worthwhile that you research a deed in lieu foreclosure as an alternative to having your house foreclosed.
What does a deed in lieu foreclosure entail?
The first step towards a deed in lieu foreclosure is to come to an agreement with your lending society to sign away your rights on the title of the deed and pass them over to the lender.
In short, your lending company becomes the lawful owner of the home in hand.
One of the main advantages of a deed in lieu foreclosure agreed with the lending society is that it will not have the impact on the original homowner’s credit rating as having the property foreclosed on would have.
A deed in lieu foreclosure is a non-judicial settlement. Anyway, one thing to remember is that a homeowner that chooses a deed in lieu foreclosure as a way to avoid foreclosure has to sign it at the beginning of the foreclosure proceedings.
Does your lending company want a deed in lieu foreclosure?
When a bank or other lender concludes that the homeowner is completely unable to pay the mortgage back, they are more willing to accept a deed in lieu foreclosure.
It does not make sense for the lenders to pursue a deficiency judgment, which is a court order to partially recuperate the amount still owed related to the foreclosure. Lenders usually go through with the foreclosure proceedings when the debt is lower than the property’s value.
For the lender, the main interest is financial. Indeed, by settling the matter out of court with a deed in lieu foreclosure agreement, the lending company saves many costs in attorney and court fees.
Where does the responsibility for the liens lie?
Before they proceed to take over the title, lenders make sure that this does not make them responsible for any possible mortgage liens on the real estate. In other words, although the lender now holds the title, it will be a different entity from any liens on the house like a contractor claiming a payment, etc.
The next logical step for the lenders is to sell the real estate and recuperate the money they lost. If there are any liens on the house, the new owners will be responsible for them.
Briefly, many homeowners that choose a deed in lieu foreclosure to stop foreclosure do so mainly to prevent unwelcome foreclosure proceedings and a very negative foreclosure entry on their credit report.
Tags: avoid foreclosure, deed in lieu foreclosure, deeds in lieu foreclosure, foreclosure, stop foreclosure