Why on earth should one "qualify" for a DIL?

[NewDad]

I've been reading Chase's website regarding mods and DIL and what-not, on every single page they point out how they'll use all information they obtain in their effort to collect a debt.

Given that, what is the reasoning behind completing a long application listing every asset and liability one has and submitting it to them? I would think one could simply offer the DIL, and if it makes financial sense to them, they take it.

If they don't, and you've completed their forms, they have everything they need about you to start collections in deficiency states after a foreclosure, for zero effort on their part.

[knownick]

I think a lot of the banks are stuck in the old world where accepting a DIL is doing you a favor. They're basically offering to "relieve you" of the burden of the house and spare you (and your credit) the detrimental effect of a foreclosure.

Problem is, they're only doing you a favor if you're genuinely afraid of the alternative outcome (foreclosure). As more and more people are realizing it's within their rights and makes financial sense to just walk away, the fear and stigma of a foreclosure just doesn't matter to them. It's also becoming increasingly apparent that a foreclosure really isn't all that much worse in terms of credit damage than a short sale or DIL.

The banks haven't caught up with this yet. They haven't realized that there is a significant population out there who are going to walk no matter what, and that they could actually save a bunch of money by accepting a DIL from these people up front and saving themselves the time and cost of a foreclosure (which as we all know on this forum can be quite lengthy and expensive).

There's also the matter of the bank realizing a loss on a DIL immediately, while the threat of foreclosure is something that will happen down the road. Maybe the borrower will get cold feet, get a better job, or otherwise decide that they don't really want out of the contract and make themselves current again. I was reading an article recently that said one of the main reasons that banks aren't jumping at the opportunity to modify loans is that ~50% of all defaults cure themselves without the bank doing anything.

If I had it to do over again (and had arrived at the decision we eventually made to walk earlier), I wouldn't have given the bank a shred of documentation. I'm not too worried about it given the purchase money protections the state of CA offers, but frankly the less the bank knows about me and my finances the better. Unfortunately we were teased down the path like so many others, applying for modifications that never materialized and honoring request after request for more and more financial documentation.

If you've made the decision to let the house go and want to stick with it, I'd trust your instincts and not provide a single piece of financial data to the bank. It can only be used against you. The idea of a DIL is a pipe dream from what I can see on this forum - they just don't exist in the real world. Your choices are foreclosure or short sale.

[Enough Already]

I agree with Knownick. Although, if your loans are recourse a short sale might be the way to go. Some experts have suggested that one should only provide the info they want the bank to have. One does not have to put all of their cards on the table. It's up to you. DIL is a pipe dream for sure. Short sale or foreclosure seem like the best bets. Either way, we'll be glad to get out!

[NewDad]

Well, we're in a recourse state with a recourse loan... but unfortunately no one's biting on short sales in our area, either. No one with the patience to deal with the banks on a short sale really thinks things are turning around any time soon, they're waiting for the real bottom to hit.
So we're probably at the DIL or foreclosure point. Which probably means foreclosure. I haven't had a lot of luck finding examples of the banks actually going after folks for the deficiencies though, especially in deed of trust states where they don't have to go to court for the foreclosure, but would have to for a judgment. 1099s seem to be the norm. Although maybe that's just wishful thinking.

[Enough Already]

NewDad,
If we end up going the foreclosure route our plan is to negotiate a settlement with the bank. I don't think they're really pursuing deficiencies right now either, but the may in the future. From all of my research on this site, and talking with a few different lawyers, we expect to be able to settle for around 5% - 10%.

On your short sale attempt, try dropping the price. If you price the house right you will get an offer. The price doesn't matter, all you want to do is sell it. The bank will pay the realtor commission. You just want to make sure you're released from the debt before you sign off on the sale.

The mortgage debt relief forgiveness act should cover you on taxes. Double check that with a CPA. Our CPA confirmed it for us.