The Deed in Lieu of Foreclosure transfers all right and title to a property from the buyer/ borrower to the lender.
This fast process effectively ends the contract and any obligations between the parties. Also saving time, attorney fees, and emotional upheaval.
If you are a borrower about to be foreclosed upon, this is the instrument that could salvage some of your credit and allow you to move on in life. If you are in this position, you already know that your credit is in bad shape, but a foreclosure on your report could prevent you from having a place to live. Not only will banks be unwilling to lend you money for a home, landlords now look unfavorably on individuals with foreclosures on their credit report. And most savvy landlords do check credit reports, along with references and rental history.
A foreclosure will remain on your credit report for ten years, so if you can avoid it, you should.
If you are a lender faced with having to reclaim your property, this process can save you months of hassle and thousands of dollars in attorney fees. The foreclosure process has several steps all of which need the attention of a lawyer. And you know they don’t work for free. Plus, while you are working on the paperwork you are unable to take possession of the property even if the defaulting borrower has moved out. The property is not legally yours until everything is complete.
No one buys real estate with the intention of losing it. Whatever circumstances caused the need for foreclosure, they were unpleasant for the borrower as well as a financial problem for the lender. If both parties can remain amicable and can agree to execute a DEED IN LIEU OF FORECLOSURE, both will be ahead both financially and emotionally.
The transfer back will be finished, and both parties can move ahead. Neither will have the right to make claims for damages against the other.
It should be noted that this deed will only work if there are no additional encumbrances on the property. It could in some instances be used to remove a second lien on a property, but only if the lender is willing to assume the lien.
This document must be recorded to place the world on notice regarding ownership of the property. It must be executed in front of a notary and then taken to your County recorder’s office to be filed.
Depending on your situation, you may qualify through some different programs. These include the federal government’s Home Affordable Foreclosure Alternatives program, Fannie Mae’s Mortgage Release program, and others. However, the entire process is easy enough for anyone with average intelligence to complete themselves.
The first thing to do is call your lender and ask them if they are willing to co-operate with this procedure. If they say yes, they will usually provide instructions on how they wish to handle things. If you are processing the whole thing then fill out the form, have it notarized and mail it or take it in person to your lender. You are not done yet. You must be sure that the document gets to your county recorder and filed.