There are many questions surrounding the deed-in-lieu of foreclosure, so here are some answers.
A deed-in-lieu of means that the borrower conveys all interest to the lender in order to satisfy the loan that’s in default and avoid foreclosure.
This process is advantageous to the borrower because it releases the borrower from the indebtedness associated with the loan, and it hurts the borrowers credit score less than a foreclosure.
In order for this process to take place, both sides must enter into it voluntarily, acting in good faith.
The property must not have any liens against it and it must be on the market at fair value for at least three months. If it does not sell in that time period, then the process may begin.
Most lenders have a loss mitigation department which handles the process and they will ask for recent financial statements and paystubs, among other things. Once it is approved by the bank, the owner needs to vacate the property.
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