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What is a deed in lieu of foreclosure?

On Behalf of | Mar 31, 2017 | Mortgages

When a Fort Lauderdale resident has been refused a short sale or denied a loan modification and is underwater on his or her mortgage, they may consider a deed in lieu of foreclosure. This is a document that transfers title from the homeowners to the bank that holds the mortgage. The homeowner has to sign the document and it has to be notarized by a notary public.

The property does not have to be in foreclosure at this time. The lender could have started judicial proceedings to foreclose or sent a notice, but this is not necessary. In fact the aim of such an action is to prevent foreclosure. The lender could still be amenable to discussing a deed in lieu, even though they are often reluctant to accept it even when the homeowner is up to date with his payments. The obvious reason may be because the deed is not profitable, but there could be other reasons the bank does not agree to deed in lieu of foreclosure.

Whether a property qualifies for deed in lieu of foreclosure is another matter. It depends on the transaction itself and the lender’s policies. If there is a second mortgage against the house, the property will probably not be eligible and there would also be no point of a deed in lieu of foreclosure, as it would not release the person from their liabilities with the second lender. Secondly, if there is any judgment or liens against the property, it would also not be eligible.

When pursuing a deed in lieu of foreclosure, it is also important to ensure that the deed specifically releases one from their liability to repay the loan.

There are many aspects of mortgages and foreclosures that could overwhelm people already going through a difficult time and trying to hold onto their property. An experienced attorney may be able to discuss various options with Florida residents.