What Is A Deed In Lieu Of Foreclosure?
Foreclosure is the legal process by which the lender who owns your mortgage takes the property back. In other words, they kick you off the premises. This generally happens when you fall behind on your mortgage payments. A deed in lieu of foreclosure agreement can help you avoid the repercussions of foreclosure. In this article, the Columbus, OH foreclosure defense attorneys at Kohl & Cook Law Firm, LLC will discuss deed in lieu of foreclosure agreements, what they are, how they work, and the benefits of such agreements.
What is a deed in lieu of foreclosure?
A deed in lieu of foreclosure agreement is an arrangement between the borrower and the lender that gives the mortgage lender the deed to your home. Homeowners can agree to a deed in lieu agreement to avoid foreclosure. Foreclosures show up on your credit report which can make it virtually impossible to buy another home for several years.
With a deed in lieu of foreclosure agreement, you hand over the deed to the lender, the lender removes the property lien and takes over ownership of your home. The lender also relieves what you still owe on the mortgage. This allows the lender to recover some of their losses without forcing the borrower into foreclosure. Many borrowers seek deed in lieu agreements when their mortgage ends up underwater (they owe more on the home than it’s worth).
A deed in lieu of foreclosure will show up on your credit report and negatively impact your credit score. However, it won’t be as bad as it would be if you have a foreclosure on your credit report. It could impact your ability to obtain another mortgage, but it won’t necessarily. A foreclosure almost certainly would.
Will the lender accept a deed in lieu of foreclosure?
Reasons a lender may reject a deed in lieu of foreclosure include:
- Depreciated home value – If the home’s fair market value has depreciated, you might owe more on the home than it’s worth. In that case, a lender may agree to accept the deed in lieu but only if you pay the difference between the appraised value and what you owe.
- Liens or tax judgments on your property – If you have a judgment or a secondary lien, the process can become more complicated. Some lenders might work with you to clear the lien, but others may refuse until the lien is cleared.
- Poor home condition – The lender may reject a deed in lieu agreement if your home is in poor condition.
A lender may accept a deed in lieu agreement because:
- It gives them faster control over your property – It can take months to foreclose on a property and lenders must pay attorneys to file the necessary paperwork with the court. A deed in lieu can save the lender time and money.
- Better condition of property – Properties in good condition sell faster and spend less time on the market. A lender will often stipulate that you must keep the home in good condition with a deed in lieu of foreclosure.
Talk to a Dayton, OH Foreclosure Defense Attorney Today
Kohl & Cook Law Firm, LLC offers foreclosure defense services to Columbus and Dayton, OH residents. Call our Columbus consumer attorneys today to schedule an appointment, and we can begin discussing your best moves right away.
