How Does A Deed Foreclosure In Lieu Help Lenders?
Lenders need security during tough economic toughs as well as borrowers,
and deed foreclosure in lieu is one way lenders ensure that they will
receive mortgage payments in a timely manner. Deed foreclosure in lieu
also helps both lender and borrower avoid costly legal proceedings.
Foreclosure is a legal procedure in which the lender can file a case
of default against the borrower in the court of law. The borrower generally
borrows a loan from the lender by placing the house on mortgage. In case
the lender defaults on the repayment of the loan, then the lender can
take legal action by acquiring the property. The borrower is generally
given a 90 day time period after the due date to repay his money to the
lender. A Deed Foreclosure in Lieu may help the lender a great deal in
The lender can file a case anytime after the due date. There are two
laws which favor the lender: judicial foreclosure and foreclosure by
power of sale. The judicial foreclosure calls for an auction which is
presided over by the court. The power of sale sanctions the lender with
all rights to the property.
Timely mortgage payments can help in avoiding foreclosure. But certain
unexpected circumstances like job loss, illness, medical emergency, death,
divorce, etc can lead to foreclosure.
The best way to avoid a foreclosure is of course by making sure that a Notice of Default is not filed by
the lender. In general, lenders would not want to foreclose, but end
up doing it to safeguard their interests. So the best way to stop foreclosure
is by speaking with the lender and convincing them against filing for
Time May be on your Side
Depending on the situation the lender might increase the time limit or
forgive a payment, especially if you offer a Deed Foreclosure in Lieu.
In this case the time constraint is temporarily waived off and another
method of repayment plan can be worked out.
The lender can also extend the amortization period or perform a note
modification which would in turn affect the terms of the loan. At times
another loan can be taken in order to finish off the previous loan. This
is referred to as partial claim. Refinance is the method of adding back
finance back to the loan balance. These methods involve direct contact
with the lender before they file for a Default.
In case the Notice of Defaulthas been filed, then a certain time period
will be offered to pay the amount along with the cost of filing the foreclosure
and stopping the foreclosure. Foreclosure can be stopped by selling off
the home. Selling the home by means of real estate agents would fetch
more money than auctioning it out. If the amount due is lesser than the
cost of the home, then a Short Sale would be sufficient. By this the
house is temporarily sold off for the amount and then the owner needs
to pay and buy the home again.
Deed Foreclosure in Lieu
The other method would be to sign a Deed Foreclosure in Lieu. This is
a deed in which the borrower transfers the right of the property to the
lender in order to pay off a loan that is in default, to prevent the
This is in advantage to both parties. The lender does not have to haggle
with the borrower nor do they need to get mixed up too far on legal proceedings.
This also prevents the need for bankruptcy or repossession. As for the
borrower, it grants freedom from the loan and saves them from foreclosure.
The owner can offer the lender the deed of the property and the lender
can instead forgive the mortgage and cancel the foreclosure. At times
the borrower can stay in the house and make some deal until they eventually
wish to move out of the house. They no longer own the rights to the house
and effectively have a landlord or landlady, but at least they have a
roof over their heads!