An alternative to foreclosure: Deed in lieu

Might you be facing financial distress? Has your house become a burden? You could always work with an investor like ReliefWire, which can help remove the threat of foreclosure. But there are other methods your lender might provide, like a deed in lieu process.

Before we dive into this alternative method, it’s important to keep in mind Hs 4:6. Along with providing solutions, information is key to preventing issues (if possible) in the future. God wants you to be a good steward of your finances. Honor God. Stubbornness may be the number one reason houses foreclose, though there are so many options in place to avoid it. Don’t be that kind of owner. Now I’ll get on with explaining the pros/cons of deed in lieu and how ReliefWire fits into the equation of your choices.

Ever heard of an escape clause? Essentially it’s a part of a contract that allows a party to back out of a deal, given certain stipulations. In a very simplistic way, that’s what a deed in lieu is modeling.

Now for detail.

A deed in lieu of foreclosure is a transaction in which a homeowner voluntarily yields the property’s title over to the primary lender, in order to be released from a mortgage debt. It’s similar to those programs that vehicle manufacturer’s have for being released from a car note due to financial difficulty.

For obvious reasons, this is a powerful tool. An owner still has to vacate the property, however hundreds of thousands of dollars won’t show as being delinquent on a credit report. Whew, right?

You’ll have to check with your lender for this program to see if it’s an option. So what are some of its other benefits?

Benefits to using a deed in lieu of foreclosure

  • Avoid foreclosure – That’s the main premise of using this option. The mark of a foreclosure on a credit report is just nasty, even lowering a score on average 250 points.
  • Cancel existing mortgage and payments – What if you avoid foreclosure, but still have to finish paying what’s left? Yeah, I wouldn’t appreciate that either. Your lender will most likely follow HAFA guidelines if a participant.
  • May receive a relocation package – What happens next should be a main focus of the situation anyway. Your lender may provide funds to help families move on from the house and a negative situation.
  • Delayed vacate options – This process and its results shouldn’t smack owners in the face. Just the process itself takes about 90 days, providing time to get things in order and plan for things like moving, rental trucks and more.

Negatives of using a deed in lieu of foreclosure

  • Credit still affected – Deed in lieu still appears on your credit report for seven years and still lower your score; in most cases just not as harshly as a foreclosure.
  • Your next house purchase may take time – You may still have to wait at least a year or more (traditionally 3-7 years) to purchase another house; this heavily depends on which program is used for the process.
  • The roughly 90 process – Above it’s an advantage, if you’re out in front of the situation. But if you aren’t, 90 days may take too long to bring you out of the legal process. At that point, it’s definitely something to bring up with the law offices and/or lender to help delay a judgment.
  • You may still owe the difference between what’s owed and the property’s value – On it’s own, the deed in lieu of foreclosure process doesn’t remove this deficiency of value. So request that it be waived or make sure it’s included.
  • It’s not mandatory of the lender – Remember that voluntary part from before? You must request it (usually in writing). Otherwise the option won’t come up.
  • Multiple mortgages or liens may prevent it – If there’s another lien or 2nd mortgage, the process may run into difficulty as each lender then is responsible for whether or not to choose the option AND they must all be involved.
  • The situation has to show up for others to see – What I mean is that your account has to be 31 days behind or past due for it to become an option. So even if you can project that the situation is occurring, it must be a reality for which a credit report will show it.

ReliefWire’s alternative to foreclosure

As we have seen, a deed in lieu of foreclosure has as its main objective the removal of immediate debt, but still reminds other lenders of the situation and may still delay your family from moving into another house. Why not choose an option that removes the debt, puts some cash in your pocket and maybe even build your credit up from where it has dropped?

ReliefWire has that option and has successfully employed it for several deals, by the grace of God! It’s called seller-financing.

What we help our clients achieve in this specific situation, is relief from the stress and burden of impending foreclosure. With seller-financing, we offer the opportunity of getting a real estate investor into the equation; someone willing to get the mortgage up to date and even get cash into your hands, in exchange to own the property. It’s contractually supported, avoids foreclosure, avoids the mark against your credit and can even be used over time to help establish payments which again strengthen your credit.

So the situation gets turned around AND there’s no annual delays in purchasing the next house—time to get the finances in order in a quicker amount of time. It’s been working in Charlotte and beyond; it can work for you.

It’s a solution that we know works to breathe hope into a difficult situation and doesn’t carry as many roadblocks as a deed in lieu may. It certainly would have helped my parents and our family had this option been presented those many years ago. But I know now and want this information to be a blessing for you.

Deed in lieu is just one option of many, but a strong one. Keep it in perspective: it removes the threat of immediate payment and suffered credit, but still punishes you for the situation by keeping it recorded for seven years on a report.

We’ve been blessed by God to help situations even several days before the courts rule any possibilities too late. So let ReliefWire work for you and always trust Jesus to see you through any difficulty.

ReliefWire Financial Solutions nor its authors are providing specific legal or financial advice to any reader in this post. The information herein is generic and is meant to be educational. If necessary, seek legal counsel regarding your specific situation. And always, pray and trust God in your decision-making.