Do It Yourself Guide Deed-In-Lieu of Foreclosure
In these tough economic times of high unemployment, local businesses moving to places where there is cheaper labor and looser labor laws, the housing market bubble bursting, among other unfortunate events occurring no wonder foreclosure is still on the rise. If you are unemployed, of course you will be struggling to make ends meet, including paying your mortgage payments on time and offering basic living expenses. Mortgage lenders are offering many different types of work out options to help homeowners keep their homes and keep paying. However, a mortgage company’s program may or may not work out for you, but it certainly would not hurt to try whatever it is that they may be offering. One of the most attractive options being offer when nothing else can be completed would be a deed-in-lieu of foreclosure(DIL), which is highly desirable if you can no longer make mortgage payments.
Deed-in-lieu of foreclosure is the process of a mortgage company or lender taking back a borrower’s home and relieving that person of their financial obligation. In a sense the borrower is given a clean slate. This will have a minor negative consequences on a borrower’s credit history, unlike a foreclosure. A deed-in-lieu is almost always one of the last option a homeowner has to take advantage of. Typically, a borrower will apply for one or more possible workouts such as: a mortgage loan modification, repayment plan, short sale, settlement or a deed-in-lieu of foreclosure. A DIL is usually requested when a borrower has exhausted most other options available, and now they are asking for a DIL to try to stop the foreclosure sale of their home. Lenders want to try to avoid a foreclosure sale at all cost so they will look into a DIL option. Regardless, most mortgage companies will require a borrower to list their home for sale with a local professional such as a realtor or real estate agents first, and apply for a short sale with them once the property is listed; once the property is listed for at least 60 days, and if the property is not sold in that timeframe, the borrower can then apply for a DIL.
When you are applying for a DIL ask your lender for a DIL packet to be mailed out to you. If they do not have a standard packet to send out to you ask them which documents you will need to send into them for a DIL review. Generally, you will need the document from your realtor or real estate agent showing that your property has been listed for sale for at least 60 days, your written financials on a sheet of paper or on a financial template showing your monthly income and expenses, and a hardship letter explaining why you are behind with your mortgage payments. If your lender requires anything additional such as your income tax returns, pay stubs, utility bills, etc. then send those in with the rest of your documents as requested to start the review process. Deed-in-Lieu review processes can vary from about 10 days to a few months, and in some cases your lender might extend your property‘s sale date or put it on hold to give you an answer on whether your were approved or denied; this will be mailed out to you but you may also call to find out the answer. If your sale date is not extended or put on hold, you might consider paying on your mortgage if you are able to, or getting on a repayment plan while the review is still not completed.
It is wise to get a fax number to your lender. Fax in a copy of all the required documents, mail in a hard copy by certified mail, and request for a return receipt at the post office to show that someone at your mortgage company received it. Your lender will review your request to take back your property and relieve you of the financial obligation. If you are approved, this would be considered a good outcome for you because you will be given a move out date shortly after, and you may also be offered up to $3000 to move out at a quicker date; as long as your property is in broom swept condition meaning really clean. Good Luck!
