What are the down sides to lien in lue of foreclosure?

Question

Other than loosing equity, what is the long and short term impact to Lien in Lue of Forclosure.

Answer 1

I believe the term you mean is deed in lieu of foreclosure. It is basically a friendly foreclosure. You will suffer the same credit consequences as a full-blown foreclosure. The only difference is that you are willing turning over the keys and moving out in an orderly way. Talk to a lawyer before you decide what to do.Perhaps it is possible to salvage your loan and have the missed mortgage payments put on the back of your loan. Some lenders are willing to negotiate. Best of luck to you.

Answer 2

YOu owe back payments.  You can either pay those or you can lose the house to foreclosure because you didn't pay.  The other choice is for the bank to :

Let you stay in the house if you sign a promissory note for the back payments.  It's a lien and you have to pay it at some time.

But you may be referring to a "Deed in Lieu of Foreclosure" which means that you know you aren't going to make the back payments. What's the point of waiting for the clock to keep ticking.   Just sign a deed today and the bank can have the house today.  It's over.

Your credit is wrecked either way that the bank takes the house back.  One lender said that you might save some points on your FICO score with the Deed In Lieu.

Answer 3

a lien means that you have a debt that has to be paid or reconciled prior to having the title to your home cleared.

foreclosure; you are in the process of losing your home and this could still result in a large debt that requires payment.

Answer 4

A Deed in Lieu of Foreclosure is where the bank agrees to take Title to your property "In Lieu" (Instead) of filing Foreclosure.  This will have the same impact as if foreclosure were actually filed.  Several things to concern yourself with:

1.  Your credit report will reflect a foreclosure or deed in lieu.  This will be looked at as a foreclosure when you go to get a future mortgage.  You will be precluded from getting a mortgage for a minimum of 3 years under FHA guidelines.

2.  You will receive a 1099-C for Cancellation of Debt Income.  You may have to pay tax on this Income.  (I'm presuming that the home will sell for less than you owe.)

3.  You may be liable for the Deficiency and the bank may sue you for a Deficiency Judgment.  If so this judgment will attach to all your assets, including checking accounts and wages.  They can force your employer to garnish your wages and empty out your checking/savings accounts.

If you can get the home sold, do it.  Contact a Realtor and ask them about doing a Short Sale.

Mr. Financial Freedom

http://www.5stepstofinancialfreedom.com

Answer 5

You mean a Deed In Lieu of Foreclosure.  

1.  Lender may not accept D.I.L.

2.  You must qualify with mortgage holder for a D.I.L.

3.  Will reflect on your credit report

4.  If you have equity, why would you consider a D.I.L.?