What are the steps in deed in lieu of foreclosure?

my husband and i sold a rental home last august and carried the note ourselves. subsequently, the borrower lost her job and can no longer pay the mortgage. due to the lack of funds on her part, we have offered to assist her in selling the house, taking our pay-off and incurred expenses when the house sells. if the house doesn't sell within a reasonable time, would a deed in lieu of foreclosure be our best option. we could then rent the property and probably come out a lot better on taxes.

Hi Jan,

Welcome to Mortgagefit discussion board.

Foreclosing on the house would mean added expenses as well as involvement in terms of time with all the proceedings. A deed in lieu of foreclosure would be a suitable option to select if the borrower is not able to continue the mortgage and the house does not get sold.

You could then rent it out if you like.

Do let me know if you have any other questions.

Thanks
Blue

WE are currently not late on our mortgage but we have been trying to sell a house for three years. It is listed for 45% lower than the bank originally appraised and 40% lower than the tax assessment. We are current but are working with the bank for a DIL. Is this the right way to go? What should we look out for if we do decide to do a DIL? How will this effect our credit?

Hope,

I have answered your query at http://www.mortgagefit.com/deedinlieu/credit-effect.html . Please have a look and then if you have further queries, do let me know.

I purchased a home on may 08 and can not make the payments because my husband lost his job and can not afford childcare and spent money making home repairs. i have accepted a job in another city and will relocate, what other options do I have, please help. Will our credit be ruined. should I purchase car before making above request.

Hi Jr,

It's great to hear that you've got a job. But you should not think of purchasing the car in this stage of distress. Now as you've got a job, you should start to make the payments of the loan.

As you've already defaulted on the loan, it will affect your credit score and will be shown on your credit report for a certain period.

MY HUSBAND IS 64 AND HAD TO RETIRE FROM HIS JOB WE ARE NOT BEHIND ON OUR MORTAGE BUT CANNOT AFFORD THE PAYMENT SINCE HIS RETIREMENT OUR INCOME IS HALF OF WHAT IT WAS OUR HOME VALUE IS MORE THAN OUR MORTAGE IN TODAY'S MARKET IF THE HOME SELLS FOR LESS THAN THE MORTAGE ARE WE RESPONSIBLE FOR THE DIFFERENCE IN VALUE AND SELLING PRICE,WE ARE TO THE POINT OF PAYING OUR MORTAGE OR EATING,PLEASE HELP.

Hi Rose,

The process of selling your home for less than the loan balance is called a short sale. When you go for short sale, the lender may require you to pay for the difference between the outstanding balance on the loan and the short sale price and may pass a deficiency judgment against you in the court. And if the lender report of this deficiency judgment to the IRS, you may have to pay the required applicable tax.

I bought an investment property last year January. Since then, the market has taken a dive for the worst. The builder is selling the same unit $100k less than I paid for it. I had to add more than $500 a month to pay the mortgage. The mortgage has adjusted, and I don't have a tenant in there, and I cannot afford the mortgage any longer. Should I DLF the property?

Hi Olowomade,

I have already given you a suggestion at http://www.mortgagefit.com/deedinlieu/investment-property.html . Please have a look.

Hi, I went through bankrupty this year. I didnt add my house and now i am looking at 4yrs more of a home equtiy loan that needs to be paid of 70,000. No way will i be able to pay it off.I retire this year also and have less income where i am not able to afford house repairs.Would i be able to do deed in leiu of fore closeure?

Hi Liz,

Welcome to the forum.

I can feel what you're going through - it's been a tough situation for you. But have patience and let's hope things work out your way.

As for the deed-in-lieu, just have a talk to your lender and find out what he's saying.

Since you have been thorugh bankruptcy, I can interpret that you've been in some kind of financial hardship and if you can prove this to the lender, perhaps he will agree to the deed-in-lieu. But I do have a question - which chapter did you file? If it's chpater 7, then you need not pay for your debts anymore. But is it chapter 13 then?

Hope this helps...

God bless you.

Samantha

I am a 61year old women who was hospitalized last year and was told I had to cut down my workload and of course.this lowered my Income almost in half. My house is on the marketand I have about 20,000,or more in equity in it. It was appraised in oct for 305,000. I have rented a house in another city in fear of losing the house and not having a place for me and my animals.Would a DIL be the right step for me?

I forgot to mention that my loan balance is 259,500.00 on the message I sent regarding a house that was appraised in october for 305,00.00 that I have up for sale and can no longer pay for. I am making half the money I used to make due to my doctor telling me I had to slow down. I am 61years old and will not be buying another home.

Hello Liz,

How long has your house been on the market? No offers?

A deed in lieu could be an option for you and for that you should talk to your lender first and see if he is willing to accept it. In case of a deed in lieu, the lender cannot seek any deficiency judgement.

But I would suggest another option. Since you are already 61, you shall qualify for a reverse mortgage next year. This will save your home as well as your credit. Do you know about this reverse mortgage program?

If you can put up your house on rent for one year and can manage the monthly mortgage payments from that, then the next year you can go for this reverse mortgage.