A deed in lieu of foreclosure is a foreclosure prevention process that can be used when you are upside down on your mortgage and cannot afford to keep your home. You simply sign a deed transferring ownership of your home back to your mortgage lender in exchange for walking away owing them nothing on your mortgage balance. The deed in lieu is a mechanism used to avoid foreclosure that saves you and your lender the time and costs of having to go through a formal foreclosure process. It benefits you and your lender by saving on court and legal fees. It can also save your credit if negotiated properly.
- Call your lender’s loss mitigation department and tell them you are experiencing a financial hardship and can no longer afford to keep your home.
- Ask if they will accept a deed in lieu of foreclosure.
- Find out what other foreclosure prevention options you qualify for from your lender’s loss mitigation department and also by contacting a HUD Certified Counseling Agency or a real estate foreclosure defense attorney.Download your lender’s deed in lieu of foreclosure forms, complete them and submit them to the lender with a hardship letter and any financial information they require.
- Negotiate that the deed in lieu satisfies your mortgage balance and that the lender will not come after you later for a for the outstanding mortgage balance
- Request and negotiate with the lender that they report the transaction to the three credit bureaus as paid settlement or satisfied and ask them to remove any prior negative reporting from your credit report. Otherwise, they will report it as a foreclosure or deed in lieu of foreclosure, which stays on your credit for 7 years and lowers your credit score.
- Sign the deed in lieu of foreclosure back over to the lender. Hand them the keys to your home and walk away owing nothing.