Deed-In-Lieu of Foreclosure
A Deed-in-Lieu of Foreclosure (DIL) is where you, the homeowner, voluntarily transfer the ownership of your property (the title and all property associated with it) to the owner of your mortgage in exchange for a release from your mortgage loan and payments.
A DIL is an alternative to foreclosure and should be considered if:
- You are ineligible to refinance or modify your mortgage
- You are facing a long-term hardship
- You are behind on your mortgage payments
- You owe more on your home than it’s worth
- You don’t want to sell your home or haven’t been able to sell your home
- You can no longer afford your home and you are ready to leave
What are the benefits of a Deed-in-Lieu?
- Eliminate or reduce your remaining mortgage debt
- Avoid the negative impact of a foreclosure
- May be eligible for relocation assistance in some cases
- Start repairing your credit sooner than if you went through a foreclosure
- May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (at least 7 years)
What is the process for a Deed-in-Lieu?
To qualify for a DIL, you will work with your mortgage company to complete the eligibility process, such as determining the value of the property and how much you still owe as well as reviewing your current hardship. If approved, you will need to vacate the property (unless we agree to lease the property back to you), and you may be required to sign standard pre-closing documents as well as attend the closing.
Additionally, you will need to leave the home—inside and outside—in good condition, free of interior and exterior trash, debris or damage, and all personal belongings must be removed. In some cases, you may be eligible to receive relocation assistance to use toward your moving expenses and to make the transition to new housing easier.
A DIL usually takes around 90 days to complete, but this could be shorter or longer or depending upon your specific situation.
There is today, no true benefit to YOU in a DIL. Today a short sale is much more attractive to your lender and also to you down the road. The act of walking away from a debt or obligation without effort to pay can negatively affect your ability to obtain a new loan sooner than one may be otherwise available to you.