In some cases, a lender will release a borrower from liability in exchange for a borrow relinquishing his or her right to a property. This process called a deed in lieu of foreclosure is often the result of a settlement. If you can make a case why it’s in the banks favor to accept a deed in lieu of foreclosure they will sometime accept them.
A lender will most often pursue a deed in lieu of foreclosure when they feel going through the entire foreclosure process will be expensive and they have no hope of recovering the cost to complete the foreclosure. If the property in question is worth more than the amount owed on it, the lender would be better off to simply liquidate the property rather than pursuing a deed in lieu of foreclosure.
Both the lender and borrower may decide to execute a deed in lieu of foreclosure as soon as the lender has decided to begin foreclosure proceedings. The entire process of securing a deed in lieu of foreclosure takes place outside the judicial system and is reached by a settlement out of court.
By agreeing to a deed in lieu of foreclosure, the lender will be able to assume title to the property immediately instead of having to wait for months for the foreclosure process to complete. The lender will save considerably on court costs and lawyers’ fees as well, so the best and most economic course of action is often to seek a deed in lieu of foreclosure.
Before deciding to enter a deed in lieu of foreclosure, the lender will determine if the property is unencumbered and that the deed will eliminate the possibility of the mortgagee’s lien and the mortgagor’s fee simple title will remain separate.
A deed in lieu of foreclosure will benefit the lender by saving costs of a formal foreclosure proceeding and allowing them to resell the property and get a paying occupant so they can get back some of their original loans. Borrowers will benefit from a deed in lieu of foreclosure because it will free them from the possibility of having a foreclosure marring their credit histories.
Not everyone will qualify for a deed in lieu of foreclosure which is why it’s important to consult with qualified loss mitigation professionals. Remember, banks are going to do what’s in their best interest, not yours! Naples attorney, Marc L. Shapiro, P.A. can help put a package together that helps banks understand why it’s in their best interest to accept a deed in lieu of foreclosure. Please don’t hesitate to contact us to discuss your property situation.