Deeds In Lieu Of Foreclosure

Many people facing foreclosure want to know what are deeds in lieu of foreclosure?

Simply stated, deeds in lieu of foreclosure are a process whereby borrowers give their houses to their mortgage lender without the lender having to go through the complete foreclosure process. The borrowers convey or deed their houses to their lender.

A deed in lieu of foreclosure is not for everyone who wants to avoid foreclosure.

First, if a borrower wants to keep his house, but avoid foreclosure, he cannot do that with a deed in lieu, because he is giving away his house to avoid foreclosure.

Second, the borrower must qualify. He must be legally competent and know what he is doing. He must not be in bankruptcy. If he is in bankruptcy, then he must get bankruptcy court approval before conveying his house by signing a deed in lieu of foreclosure. Also, the borrower cannot be involved in any legal action that may result in the loss of the house or a lien against the house.

Third, the borrower's house must qualify. There cannot be any other mortgages against the house other than the mortgage that the borrower is trying to satisfy. Also, there cannot be any liens against the borrower such as judgments or unpaid taxes. In most states, these liens, judgments, and unpaid taxes are actually liens against the borrower's house and other property. Usually, these liens are junior to or behind the borrower's mortgage. When the mortgage is satisfied, these liens can move into first position and must be paid.

Fourth, the borrower's mortgage lender must agree and accept the deed in lieu of foreclosure. If both the borrower and the borrower's house qualify, the mortgage lender may accept a deed in lieu of foreclosure because it can save the lender the costs of a full foreclosure action. However, if either the borrower or the borrower's property does not qualify, the mortgage lender will need to go through the foreclosure process because the foreclosure action will give the lender a clear title to the property, free of claims against the property.

Borrowers must realize that mortgage lenders are not required to accept deeds in lieu of foreclosure. A borrower cannot legally make a lender take a property such as a house if the lender doesn't want to take it. And this is true even if both the borrower and his house qualify. A lender can have a good reason such as the borrower owing more money than the house is worth or the lender may not have any reason at all for not taking the house.

If you want to avoid foreclosure and are not concerned about keeping you house, you may want to consider deeds in lieu of foreclosure.

This is general information. 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.

You may republish this article as long as the wording is not changed and all links remain active.