Deed In Lieu Of Payment

People facing foreclosure normally have several options depending on their situation. For people who are not concerned with keeping their house, conveying their house to their mortgage lender may be an option. This process is commonly referred to as "deed in lieu of payment", "deed in lieu of foreclosure", and/or "deed-in-lieu".

The first term, "deed in lieu of payment", recognizes that the only way to stop foreclosure or avoid foreclosure is to pay your mortgage lender. You "deed" or convey your house to your mortgage lender "in lieu of" or instead of "payment" or paying off your mortgage debt with money.

It sounds pretty good. Give your mortgage lender your house and your mortgage lender cancels and satisfies your mortgage loan.

However, as the old saying goes: "the devil is in the details".

First, your home must be free and clear of all liens except for your current mortgage. In other words, you cannot have any other mortgages on your home, you cannot have any tax liens against you, and you cannot have any judgments against you. If there are any of these liens against you, they will probably have priority over a deed to your mortgage lender and your mortgage lender would not receive a clear title to your home. Your mortgage lender will have to go through a foreclosure action to receive a clear title to you house.

Next, is your home worth more than the amount you owe on your mortgage? While a lender may agree to a deed in lieu of payment when your home is worth less than the amount owed on your mortgage, a lender is much more likely to agree to a deed in lieu of foreclosure when your house is worth as much or more than the amount owed on the mortgage.

Another factor is whether or not you are involved in any legal action which could affect the ownership of the house. If there is any action that can affect the ownership, it may also affect your mortgage lender receiving a clear title to your house.

Finally, will your mortgage lender agree to accept a deed-in-lieu? A lender does not have to accept a deed to your house. Your lender can simply refuse a deed and proceed with a foreclosure action.

If you do reach an agreement with your mortgage lender for a deed in lieu of payment, be sure that you understand all of the terms and conditions of the agreement and have a lawyer handle the transaction.

This is general information only and not legal advice. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

Stop! Don't blindly chase any option to stop foreclosure. See stop foreclosure options to learn what options you have in your situation. Remember, what works in one person's situation, may or may not work in your situation to stop, avoid, and prevent foreclosure.

For more general information, see Stop Foreclosure - Five Options You Need To Know. For more detailed information see deed in lieu of foreclosure.

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