Deeds In Lieu Of Foreclosure : Make Sure Lender Is Offering The Real Thing

[Enough Already]

Hi all,

I found this info on a FL asset protection attorney's blog/website. Good info. Looks like more sharky behavior from the banks:

Deeds In Lieu Of Foreclosure : Make Sure Lender Is Offering The Real Thing

Each week I talk to several people about negotiating a deed in lieu of foreclosure with their mortgage lenders. Like so many people around the county, these clients are experiencing problems paying mortgages on their upside down real estate. I typically tell people that as long as they are current on their mortgage they are wasting time trying to convince a mortgage lender to accept a deed in lieu. Banks will not consider a deed in lieu, short sale, modification or any other work out proposal until the borrower is in default, and usually not until loan payments are at least three months past due. My clients report that it is impossible to negotiate a deed in lieu until the property is in foreclosure; one reason is that until a foreclosure lawsuit is started and both sides are represented by attorneys it is difficult for you or your attorney to reach a bank representative who has authority to negotiate a deed in lieu or modification.

So I was surprised today when a client reported that his mortgage lender readily accepted a deed in lieu on one of his upside down rental homes after he was only two months behind in mortgage payments. Was it true, and were lenders finally beginning to accept owner’s offers to voluntarily deed back properties in lieu of foreclosure? Not exactly.

A deed in lieu of foreclosure is supposed to be a final settlement between owner and mortgage lender. The lender accepts a deed to the property in consideration for releasing the borrower of any further liability under the loan or mortgage. When my clients tell me they want to offer a deed in lieu they intend for the deed to the lender will end their liability under the mortgage loan. When I looked at this client’s "deed in lieu" I found that the lender did not include a release of liability, and in fact the document referred to the borrower’s continued liability for a deficiency. This client had negotiated a deed in lieu of foreclosure by not a deed in lieu of deficiency liability. Also, by surrendering title to the property without the bank having to foreclose, the client gave up all the defenses available in a foreclosure action which he could use as leverage to negotiate a complete release.

If your mortgage lenders offers you a deed in lieu make sure it’s the real deal. You give them the property back and they release you from any further liability. Anything less may be a trap.

By Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida

[grandmapat]

Can we be foreclosed on during trial mod.? How soon after if we get denied? We live in texas

[Enough Already]

grandmapat,

I don't think they will foreclose during a trial mod, but I don't know for sure. You might try posting your question in the loan modification section of this forum.

Here's a link to the foreclosure laws in TX which may help answer some of your questions: Texas Foreclosure Law.

Good luck!

EA

[KFish]

I am not familiar with Texas, but sounds like from reading everyone's stories here on this site, lenders foreclosure all of the time on owners that are in that situation.

As for the article from Florida..my Arizona attorney told me a similar thing. Be VERY careful about paperwork from the banks...they only have their best interest in mind, ALWAYS, never YOUR best interest..never!