What are the Steps for a Deed in Lieu of Foreclosure?

If your home is going into foreclosure and you want to take steps to avoid foreclosure, a deed in lieu of foreclosure is one option that you may consider. While a deed in lieu of foreclosure will not allow you to stay in your house or condo, it can allow you to avoid having a foreclosure on your credit report. With a deed in lieu of foreclosure, you will voluntarily transfer your house over to the bank, as the CFPB explains, and the bank will agree that it will stop taking steps toward foreclosure. In effect, you will walk away from the house, but you will not have to contend with the credit hit of a foreclosure. If you are considering a deed in lieu of foreclosure, you should understand how the process works. Our Oak Park foreclosure defense lawyers can tell you about the steps involved in this process.

Contact the Lender’s Loss Mitigation Department

The process for a deed in lieu of foreclosure typically begins when a homeowner who is at risk of foreclosure contacts the loss mitigation department for the lender and asks for information about a deed in lieu of foreclosure, and an application for this loss mitigation option.

Fill Out the Application

Next, the homeowner will fill out the application, and will typically need to submit a variety of documents to the lender that provide details about the homeowner’s finances, including evidence of the homeowner’s income, tax returns, bank statements, detailed information about income and expenses, and a hardship affidavit. With a hardship affidavit, which is sometimes known as a hardship letter, the homeowner will clarify that they cannot continue to make mortgage payments on the house, and thus that the homeowner is seeking a deed in lieu of foreclosure.

You should know that, in some circumstances, a lender will want to see if it is possible to sell the house before moving forward with a deed in lieu of foreclosure, so you may be required to put the home on the market.

Lender Will Do a Title Search

If your home cannot sell for fair market value, the lender will then do a title search on the property in order to determine whether it can accept a deed in lieu of foreclosure. If you have a second mortgage on the property, a deed in lieu of foreclosure may not be possible unless the same bank is the lender for both your first and your second mortgage. Similarly, if there are any liens on the property, the homeowner will often need to resolve those liens before a deed in lieu of foreclosure can be completed.

Negotiate the Agreement With the Lender

Before you sign over the property, it is important to work with an Oak Park foreclosure defense attorney to negotiate any terms with the bank that can benefit you. Most importantly, you will want to address the issue of a deficiency judgment and whether the bank can file a claim against you to seek the difference between the current market value of the property and the amount of mortgage debt you owe. You will want to make sure the bank cannot pursue a deficiency judgment and that your mortgage debt will be satisfied when you sign over the property.

Sign Over the Property

Finally, you will sign the deed in lieu of foreclosure and transfer the property to the lender.

Contact a Foreclosure Defense Lawyer in Oak Park

If you have questions about avoiding foreclosure, our Oak Park foreclosure defense attorneys can help. Contact the Emerson Law Firm today.


See Related Blog Posts:

Pros and Cons of a Deed in Lieu of Foreclosure

How Do I Complete a Short Sale?

Pros and Cons of a Deed in Lieu of Foreclosure

Are you struggling to make your mortgage payments and at risk of foreclosure? For many Illinois residents, avoiding foreclosure is the most important thing, even if it means you need to move into a new residence until you can get caught up financially. If you are in this situation, you may be assessing different options that are available to you, including allowing your home to go into foreclosure, considering a short sale, or arranging for a deed in lieu of foreclosure. A deed in lieu of foreclosure has both pros and cons as a recent Forbes article discusses, and our Oak Park foreclosure defense attorneys want to discuss them with you here.

Pros of the Deed in Lieu of Foreclosure

There are many pros or advantages to a deed in lieu of foreclosure, particularly as an alternative to foreclosure itself. The following are some of the central benefits to a deed in lieu of foreclosure:

• Quicker way to avoid foreclosure and to move forward: When the bank agrees to a deed in lieu of foreclosure, you should expect the process to take anywhere from approximately 90 to 120 business days, which is significantly faster than a foreclosure and can allow you to move forward much more quickly with your life.
• Prevent additional financial harm: Once you decide on a deed in lieu of foreclosure, you will not risk missing additional mortgage payments, falling farther behind on your loan, or harming your credit any further. Although your credit will be affected by the mortgage payments you have missed, the impact to your credit will be significantly less than a foreclosure.
• Relocation assistance may be available: Depending upon the details of your case, you could be eligible to seek relocation assistance from your mortgage servicer if you go through with the deed in lieu of foreclosure and move out of your home. In some cases, you could be eligible to obtain up to $3,000 in relocation assistance for a conventional mortgage and up to $2,000 for an FHA loan.
• Remain in your property temporarily: Once the bank agrees to a deed in lieu of foreclosure, you can be eligible in some cases to remain in your home for one or more months, which can give you time to find another place to live while still avoiding foreclosure.
• Qualify sooner for a mortgage: If you choose a deed in lieu of foreclosure instead of your property going into foreclosure, you can qualify sooner for a mortgage and can buy another property once you get back on track with your finances.

Cons of a Deed in Lieu of Foreclosure

What are some of the issues with a deed in lieu of foreclosure that may be disadvantages? Consider the following:

• Your credit report will be harmed (although not as much as it would be with a foreclosure);
• Deed in lieu of foreclosure can stay on your credit report for up to 7 years;
• You could owe money to the bank if the mortgage servicer gets a deficiency judgment against you, so it is important to ensure that the bank agrees to forgive any remaining debt you owe;
• You will owe income taxes on the debt that the bank has forgiven; and
• You will not be able to keep any equity in your home.

Contact Our Foreclosure Defense Lawyers in Oak Park

Do you have questions about a deed in lieu of foreclosure? An Oak Park foreclosure defense attorney is here to help. Contact the Emerson Law Firm today for more information.


See Related Blog Posts:

How Do I Complete a Short Sale?

Benefits of a Short Sale Instead of Foreclosure

My Home is Going Into Foreclosure: Should I Consider a Short Sale or Deed in Lieu of Foreclosure?

When you are significantly behind on your mortgage payments, you may receive notice from the bank that your home is going into foreclosure. For many consumers who are struggling with mortgage debt, it is more important to avoid having the lender foreclose on the property than to remain in the property. Accordingly, in these situations, a homeowner might be considering two options for avoiding foreclosure — a short sale or a deed in lieu of foreclosure. You might have read about these options, but you may not be certain if either one is the right choice for you. While it is critical to work with a foreclosure defense attorney in Oak Park on any action you plan to take to avoid foreclosure, you can learn more about these options in the meantime.

Short Sales or Deeds in Lieu of Foreclosure Can Allow You to Avoid Foreclosure

Both short sales and deeds in lieu of foreclosure, the latter of which is often described simply as a “deed in lieu,” are options for avoiding foreclosure. As such, if your goal is to avoid foreclosure, either of these are possibilities that could be in your best interest. However, it is important to know that these options are distinct from one another and involve different processes.

If you are considering a short sale or a deed in lieu to avoid a foreclosure under Illinois law, you should know that short sales and deeds in lieu will still affect your credit. While neither short sales or deeds in lieu will impact your credit as significantly as a foreclosure, you will still see a noticeable dip in your credit score. So, should you choose a short sale or a deed in lieu? Our Oak Park foreclosure defense attorneys can provide you with details about each of these processes.

What is a Short Sale?

A short sale is a sale of your home in which you sell it to a third-party buyer (e.g., another consumer, someone who wants to use the property for rental income, or somebody who plans to do something else with the property), but you sell the home for less than the total amount you owe on your mortgage. For example, if you still owe $200,000 on your mortgage, you might sell the house for $150,000 in order to avoid foreclosure. However, the bank must agree to the short sale before you can complete the transaction. After the bank agrees to the short sale, you will typically need to submit an application for loss mitigation.

It is important to work with a lawyer who can ensure that the bank has agreed to the short sale and has also agreed to forgive the remaining debt not covered by the short sale proceeds. However, you should be aware that any forgiven debt will likely count as taxable income, and you will be responsible for paying taxes on that amount the same way you would any other income.

What is a Deed in Lieu?

With a deed in lieu, rather than selling your house to repay some of the amount you still owe, you agree to transfer the title of your home to the bank. Like a short sale, you will need to get the bank’s approval for a deed in lieu before it can happen. However, you can still be responsible for the difference between the amount owed on your mortgage and the fair market value of your home.

Contact Our Foreclosure Defense Lawyers in Oak Park

If you have questions about avoiding foreclosure through a short sale or deed in lieu, our Oak Park foreclosure defense attorneys can help. Contact the Emerson Law Firm today.



See Related Blog Posts:

Is a Mortgage Modification My Only Option to Avoid Foreclosure?

How Long Can Foreclosure Suspensions Last?