Are you facing foreclosure and wondering about you options? The Downers Grove Deed in Lieu lawyers at Cover and Covert, LLP, can help you understand all of your options, including the deed in lieu of foreclosure. A deed in lieu of foreclosure is a deed instrument where the debtor/borrower/mortgagor conveys all interest in a piece of real property to the mortgage holder/mortgagee/lender, in order to satisfy a loan that is in default and avoid foreclosure.
When facing mortgage default, a borrower who is unable to get current on a mortgage and either is not interested in or does not qualify for other remedies, such as a repayment plan, forbearance, or loan modification, is still left with some options to avoid foreclosure: short sale, and deeds in lieu of foreclosure. Because these are similar transactions, many people confuse them, but the two processes are substantively different.
In a short sale, a homeowner debtor sells his home to a third party for less than the total debt remaining on the mortgage. The lender (mortgage holder) agrees to allow this transaction and accept the proceeds from the sale in exchange for releasing the lien on the property. The borrower gets to avoid a foreclosure, but loses any money that they put into the house. Because the short sale will not be sufficient to satisfy the debt, the lender must approve of the short sale. To qualify for a short sale, a borrower will have to establish hardship that shows that he is unable to meet the current mortgage responsibilities and that the short sale is necessary to avoid foreclosure. In addition, borrowers generally have to show that there is an offer on the home or that they are part of the Home Affordable Foreclosure Alternatives Program (HAFA) before the lender will approve a short sale. However, unless barred by law, a lender may still seek a deficiency judgment against the buyer, for the difference of the owed amount and the amount received for the home.
In a deed in lieu of foreclosure, the homeowner voluntarily transfers title to the lender. In return, the lender releases the borrower from a mortgage obligation. As with a short sale, the borrower will have to establish hardship in order to qualify for a deed in lieu of foreclosure, and may have to prove that he has attempted to sell the home. Generally, a deed in lieu of foreclosure will prevent the lender from filing for a deficiency judgment, but you should make sure that is part of your individual agreement because lenders are not generally barred from seeking such judgments. The main difference between a short sale and a deed in lieu of foreclosure is that, with a short sale, the house is conveyed to a third party, and, with a deed in lieu of foreclosure, the house is conveyed to the lender.
If you need help with a deed in lieu of foreclosure or any other foreclosure-related issues, the Downers Grove real property attorneys at Covert and Covert can help you.
