When a homeowner falls behind on their mortgage payments, it is very likely that foreclosure proceedings will soon follow. Struggling to make payments and facing foreclosure is all incredibly stressful and emotionally draining. However, you do have legal rights, and it is in your interest to speak to a foreclosure defense attorney to learn your options.
One of these options is to simply hand your deed over to the bank or financial institution that owns your mortgage. While this is not an option that we generally recommend, it is important to us that our clients have all the information they need to make well-informed decisions.
Deed in Lieu of Foreclosure
In the face of foreclosure, one of the options to reach a settlement or avoid foreclosure entirely is a “deed in lieu of foreclosure.” This is a voluntary written agreement between a borrower in default and a lender that transfers the borrower’s entire interest in the home. So the key question is this: why would anyone do this?
There are several reasons that some people choose this as an option. For example, if a borrower cannot afford to make payments and the borrower and lenders are unable to agree to an alternative payment plan, then a borrower may choose this option to avoid foreclosure. This is because people do not want a foreclosure on their record, due to the impact it has on their credit and on their ability to purchase another home.
In addition, there may be financial incentive to agree to transfer their deed. For example, if the amount of the deficiency is greater than the market value of the home, and the lender is willing to waive the deficiency, then it may make financial sense to walk away. There are, however, caveats to this as well. First, if the deficiency is waived, there are tax implications, as the waived deficiency is treated by the tax code as taxable income. Second, not all lenders are willing to waive this deficiency, which removes any advantage of giving the deed to the lender. It is therefore important to consult with an attorney who can protect your legal rights and make sure you don’t get ripped off by your lender.
You Need an Attorney
Your house is important to you. We understand this and will advocate for your legal rights and make sure that your lender hears your voice. If you want intelligent, trustworthy, and accurate advice, contact the attorneys at Levitt & Slafkes, P.C. We work hard to provide our clients all of the relevant information they need to make fully-informed decisions about their financial futures. Contact Levitt & Slafkes, P.C., at (973) 323-2953, or reach us online to schedule a free consultation.
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