Deed in lieu - unsolicited

[onedaysoon]

Hi,
does anyone know if a lender is less likely to accept a DIL if it is given w/out asking if they will accept one first?

My situation: I have a construction loan (through a credit union) that expired the begining of this year and they would not refi it, due to me being self employed, etc.
I just got a letter saying I need to pay the whole $260,000 in 30 days or they'll start forclosure. I don't exactly have that money lieing around, so no chance in that.
I have so far made all the monthly payments on time otherwise. But, especially after getting the letter, I don't want to make payment for a house that they are going to take away.

Things that might hurt my chance of DIL:
1.) There is one unpaid tax payment for about $1000 (after
Dec. 10 there will be another)
2.) I have tenants in the property.

I have tenants, but they do not cover the full monthly payments. I don't want to keep paying for a house I am going to lose. It don't have that kind of money to throw away, but at the same time I don't want to hurt my credit anymore than it is going to be from whichever way I end up losing it.

This is causeing me so much stress. I just want to get it off my hands instead of it stalling.
With the things I mentioned is there a chance they will not take a DIL and can I just get it prepared and give it to them and hope that they will accept it?

I am in Calif.

Thank you greatly for any help!

[The Professor]

Construction loans in particular, because of the potential for mechanics' liens, are an interesting beast when it comes to getting lenders to accept a deed-in-lieu.

The good news is if they foreclose they will undoubtedly follow the non-judicial foreclosure route. Once they have completed that foreclosure (it takes approximately 4 months), you will no longer be liable for any shortfall. So it may make sense to take the hit to your credit score and let them foreclose.

Take care,

Daniel

[onedaysoon]

Well, that's not good news. 4 months is a long time . There are no mech. leins as of now, or reason for their to be, but, I can see their worry.

I am most worried about my credit, because I have some debt on a couple credit cards at 0%. If my credit gets ruined I will end up having to pay high interest on the balances, which I cannot at all afford.
It seems this one house will create a domino effect and ruin any financial security I may have .

This house was originally built for me to move in to, but with the economy turning the way it did, I realized it would be best for me to stay where I was and get some renters in there to help me with part of the payment, so I wouldn't loose it.

Under that new law would I still be liable for any short fall (assuming the bank took another option, besides forclosure) since it was originally suppose to be a residence for me? I do have a house of my own (so far) that I live in, but my intent WAS to sell this one and move into the other.(i'm in Ca.)

In the letter it said they will start forclosure, if not paid, and that they may have the right to seek judgment against me for any deficiency. I thought they couldn't, if they forclosed, or is this just a scare tactic?

If it were not for the no interest I have on my current debt, I wouldn't worry much about my credit score. But this one mark could end up bringing me down completely financially.

Thank you for taking the time to help!

[Ambling]

The credit ding from DIL versus foreclosure is not much different.

Regarding your credit cards... I recommend getting all the low interest credit cards you can right now while you're credit is still good. Get one from every different bank that will give you one. Tell them you want to do a balance transfer which they like.

Then when the foreclosure happens and half your credit cards blow up, you can shuffle into the cards that didn't blow up.

Not all credit card companies participate in "universal default" which is what you're describing.

[925girl]

How can they legally just change the terms of your loan if you have never been late?
What happened to "no one wants your house", it seems as though the banks are in some kind of hurry to push people out...What's up with that!

[The Professor]

925girl, that is simply the nature of a "universal default" provision with some charge accounts. They can effectively adjust your interest rate based upon the associated risk that if you default on one debt you are more likely to default on others.

Onedaysoon, what is important is your intention at the time you took out the loan. I would assume that your loan application evidenced this intention so that would be key.

I would suggest that threats that they will chase you for any deficiency after completing the foreclosure is more likely a bluff. Chances are, given the negative factors associated with following the judicial foreclosure path, they will elect to utilize a non-judicial foreclosure under California Civil Code Section 2924b, and once that is completed they cannot chase you even if you never intended to occupy the premises as your residence.

Take care,

Daniel