A deed in lieu of foreclosure is a method sometimes used by a lienholder on property to avoid a lengthy and expensive foreclosure process, with a deed in lieu of foreclosure a foreclosing lienholder agrees to have the ownership interest transferred to the bank/lienholder as payment in full. The debtor basically deeds the property to the bank instead of them paying for foreclosure proceedings. Therefore, if a debtor fails to make mortgage payments and the bank is about to foreclose on the property, the deed in lieu of foreclosure is an option that chooses to give the bank ownership of the property rather than having the bank use the legal process of foreclosure.
West Virginia Offer by Borrower of Deed in Lieu of Foreclosure
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How to fill out Offer By Borrower Of Deed In Lieu Of Foreclosure?
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FAQ
A "deed in lieu of foreclosure" is when a lender agrees to accept a deed to the property instead of foreclosing. With a deed in lieu of foreclosure, the deficiency amount is the difference between the borrower's total debt and the home's fair market value.
There's less negative impact on your credit score. As with any negative event impacting your credit, the higher your score is before the negative impact, the bigger the drop will be. With a deed in lieu of foreclosure, the drop might be anywhere from 50 to 125 points or higher.
A Deed in Lieu of Foreclosure is a contractual agreement between a borrower and a lender. In this arrangement, the borrower willingly transfers the property to the lender, who, in turn, forgives the borrower's mortgage debt, thereby avoiding a lengthy foreclosure process.
A Deed in Lieu does not clear second (or even third) mortgages, and therefore will not allow the lender to take clear title to the property. (These are sometimes referred to as junior liens.) And if the Deed in Lieu is accepted, the secondary lender may come after you for the deficiency.
Drawbacks Of A Deed In Lieu No guarantee of acceptance: Your lender isn't obligated to accept your deed in lieu of foreclosure. Your credit will still take a hit: While a deed in lieu arrangement won't harm your credit as drastically as a foreclosure, you can still expect your score to drop.
Similar to a short sale, a deed in lieu of foreclosure likely will not damage your credit as severely as a foreclosure or a bankruptcy. As noted above, the burden of selling your home shifts to someone else, so it may be more appealing than a short sale.
By accepting a deed in lieu of foreclosure, lenders may take possession of the property sooner and keep it in better condition. The lender may be more likely to approve a request for a deed in lieu on a home in good condition so they can sell the property quickly and at a fair market rate.