A deed in lieu of foreclosure is an alternative option that involves the transfer of the title from the homeowner to the lender. This voluntary transaction relinquishes the home owner of his or her rights to the property, in exchange for a release from the mortgage. Obtaining approval for a deed in lieu of foreclosure is best accomplished with the help of a Miami foreclosure defense attorney, as many lenders are hesitant to offer this option since it means payment will not be received.
While the process for securing a deed in lieu will ultimately depend on the lender, here are three steps that all borrowers pursuing this option can expect to take.
Step 1: Determining whether the option is right
This foreclosure alternative will not be ideal for every borrower. For instance, if the homeowner would prefer to stay in the home, a loan modification may be a better fit. If this is not the case, but the home’s value is enough to satisfy the mortgage, a short sale could be a more favorable option for both the borrower and the lender. Lastly, if the home has other liens placed on it or a second mortgage has been taken out, seeking a deed in lieu of foreclosure is unlikely to be successful. A Miami foreclosure defense attorney can advise the borrower of which options are most likely to be effective in avoiding a foreclosure action.
Step 2: Submitting the application
If it has been decided that obtaining a deed in lieu of foreclosure is the right move, the borrower will need to request an application from the lender. An experienced lawyer can help the homeowner fill out the application out to ensure there are no errors which could lead to the request being denied or prolonged. The borrower will also need to supply documentation that supports the need for a deed in lieu of foreclosure, which may include an overview of monthly income versus expenses, proof of said income, recent tax returns, and two recent bank statements for all open accounts. The homeowner will also want to provide a hardship affidavit, which details a major life event that brought on the need for a foreclosure alternative, such as the loss of a job or a divorce.
Step 3: Granting deed in lieu of foreclosure
Once the application is submitted, the loan servicer will complete a title search to confirm the title has no other liens against it. If there are none uncovered, or those which exist are also held by the bank that holds the first mortgage, the bank may grant approval. Some banks require that a short sale is attempted before a deed in lieu can be accepted, but a skilled lawyer can often negotiate around this requirement. Similarly, some lenders will attempt to reserve the right to seek a deficiency judgment after accepting a deed in lieu of foreclosure in Florida, and a lawyer will be essential in avoiding this judgment. If the terms have been agreed upon by both parties, the homeowner will then need to sign a grant deed in lieu of foreclosure, officially transferring ownership, as well as an estoppel affidavit which demonstrates his or her voluntary action and the full terms of the agreement.
If you have fallen behind on mortgage payments and are interested in learning more about alternatives to foreclosure, it is time to arrange a consultation with a Miami foreclosure defense attorney. Our firm offers free consultations to struggling borrowers, and can help you determine the right course of action. Give our office a call today to schedule a meeting with a member of our team before it is too late.