When a person is in financial distress and has to get out, is it better to go foreclosure or deed in lieu? Are there costs involved in either and does one impact credit more than the other?

I spoke with the credit reporting companies the gave me no information on how badly this will affect your scores if it is a deed in lieu

Habber: If you have a client who is in such utter financial distress that the home may go into foreclosure you need to work closely with the lender. Some lender's will agree to a deed in lieu of foreclosure and some will simply not. Check with the lender to see if they are willing to cooperate in the first place.

As far as which one will be most damaging to one's credit -- That's a question that really needs to be addressed by a credit expert! It depends on the particular circumstances.

Good luck with this!

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I used to manage a mortgage bank so you can trust me on this one...

"Deed in Lieu of Foreclosure" is better than flat out Foreclosure if there are no other alternatives. It will save the bank money in court fees and in turn save the person foreclosed upon some equity. The banks are allowed to recoup all expenses as a result of a foreclosure so it is beneficial to keep all costs to the bank as low as possible.

From a credit standpoint your score might be a little higher with a Deed in Lieu rather than the foreclosure. THIS DOESN'T MATTER TO THE BANKS!!! They still view it as a foreclosure no matter how it went down. With the Fed. cracking down on lending laws it is highly unlikely you will be able to get a loan for quite some time. Whenever your mortgage is more than 91 days late (which it has to be to get foreclosed upon) banks don't even want to talk to you for 2 years. I would try getting out of the foreclosure some other way (sale / leaseback maybe) before choosing either of these options.

Hi
You have done a good question, it’s really interesting. If you get any good reply, so please let me know. So I’ll also get some good idea.
Thanks for your future help.

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