
Deed in Lieu of Foreclosure
A deed in lieu of foreclosure can be an effective
alternative to foreclosure. This is a process in which homeowners or other real property owners voluntarily
transfer their real property over to their mortgage lender after defaulting
on their mortgage loans in order to avoid an involuntary foreclosure sale
of their home or other real property. When other options fail or are simply
not possible, a deed in lieu may be the only way a homeowner or other
real property owner can avoid having a foreclosure sale placed on their
credit report. Such a blemish will likely have a significantly greater
negative impact on debtors’ prospective ability to rebuild their
credit scores on file with the 3 national credit reporting agencies (Trans
Union, Equifax and Experian) than the filing of a
Chapter 7 and, to an even greater extent, the filing of a
Chapter 13 bankruptcy petition.
What Happens After a Deed in Lieu of Foreclosure?
After the debtor/borrower surrenders ownership of the secured property
by way of a deed in lieu of foreclosure, the mortgage lender will attempt
to sell the debtor's property as quickly as possible in order to recover
all or, as much as possible, of the entire amount owed.
A deed in lieu of foreclosure is simply name of the document used to transfer
ownership of the real property from the property owner/borrower to the
mortgage lender. It is important for borrowers/property owners to be aware
that mortgage lenders are typically unable to recover the full amount
owed to them under the terms of the defaulted mortgage loan through this
transfer and the subsequent "distressed sale" of the mortgaged
property to 1/3 party. The mortgage and related loan documents executed
by borrowers no doubt gives the mortgage lender the right to sue borrowers
for what is called a deficiency judgment, this sum of money represents
the balance due the mortgage lender on the defaulted mortgage loan after
the property is eventually sold to a third party. Mortgage borrowers should
assure that their mortgage lender cancels all/any remaining debt due on
the underlying mortgage loan in return for the borrower voluntarily transferring
title to the property pursuant to the "Deed in Lieu". The mortgage
lender should have no problem doing this since it will likely be spared
from the significant expense, delay and hassle of having to pay their
attorneys to foreclose on the subject property. If the lender does not
agree to waive any unpaid balance due on the mortgage, then borrowers
may have to deal with a deficiency lawsuit filed against them by their
lender after the transfer of title to the property is completed.
Looking for a lawyer for a deed in lieu of foreclosure case in Hackensack?
An attorney experienced in personal bankruptcy should have much more leverage
in negotiating a waiver of any potential deficiency lawsuit by the lender
than would a borrower communicating directly with the lender.
If a deed in lieu of foreclosure is an option that you would like to explorer
further, please call or
contact our firm today for a free consultation.