deed in lieu

[habber]

Deed In Lieu As opposed to allowing a mortgage to go to foreclosure - would it be more beneficial for a person to give a deed in lieu of foreclosure. How does this effect your credit score in comparison? Associated costs. etc.?
Thanks

[mattpattberg]

I'm not sure exactly what that means, but I know if you can do anything rather than getting foreclosed it's a good thing. Short sale, quit claim and have someone else pay the mortgage, etc... All better than getting foreclosed on. If a dead in lieu is deeding it to someone with the current mortgage still in place, the new person woul still have to either pay off the loan, or bring the mortgage current. That's my understanding anyway...

[ResaleBroker]

A "Deed in Lieu" is when the property is deeded back to the lender, with lender approval, prior to foreclosure.

As far as I know a "Deed in Lieu" will still have a negative impact on the borrowers credit.

[mattpattberg]

Okay... that makes sense. Yeah I'm sure it reflects negatively, but I highly doubt more than a foreclosure... I would check with the credit bureas to see...

[CafeMonkey]

It is just "slightly" more favorable than a foreclosure.

The credit report will still show that a large secured loan went into arrears, it will count the number of months that they are late, then it will show that the creditor closed the account. This is basically what you get with a foreclosure... The only difference is that you do it sooner, so you might save a month or two.

Generally, I tell my sellers that they should do that as a last option... Often, it only works when the seller has a place to go. If they don't have a home to move to, then a deed-in-lieu isn't very attractive.

More often than not, it's better for the sellers to:

1. Sell to someone like me... Fix up that credit!
2. Claim bankruptcy to stop the sale until they can get on their feet. (Warning - This has serious negative side affects... Never "recommend" this action, only recommend that they speak with a Bankruptcy attorney.)
3. Live in the house, and KEEP the money that they would otherwise be spending on the house. Once you're too far in the hole, you're better off saving a few grand for the next house. Often they can stay longer than the foreclosure date, because the new owner will need to evict them.
4. Deed in leiu.

In that order. This is a general statement... Use common sense and evaluate your situation accordingly.

[Remaxman]

Your best bet would be to try to short sale it if you have time....you can normally negotiate with the lender a reduced payoff or even a waiver of all the foreclosure late fees interest etc (other than attorney, they normally wont budge) and get an investor to buy it or even a well qualified owner occupied.

Believe it or not the banks really dont want to foreclose on a property. As far as credit damage you wont be getting a black AMEX with a deed in leiu, think about it, all the late payments that lead up to the DIL or the foreclosure will still be there, thats not going away, the DIL vs Foreclosure will not be much of a differance on affecting your score.

[Jnazareno]

DLI would show up on youir Credit report..if you have significant equity sell.
if not DLI might be the best option for ya

[timert]

what if the loan is for an investment property and you get a DIL? Can the bank take other assets including your living residence? I'm in Florida if it matters...

[CafeMonkey]

If you signed personally for the loan... The bank can get a judgement for the loan and attach the deficiency to your personal home. They can not "take it" from you, but you will need to pay it off before you can refinance or sell your home.

They usually don't go this far, as most people just claim bankruptcy and the debt is wiped.

In Florida you have a 100% homestead exemption, so if you claim bankruptcy, they can't get anything out of your house.

[cece]

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