In a recent policy statement (MORTGAGEE LETTER 2002-13) HUD authorized lenders to pay FHA borrowers up to $1000.00 for a Deed in Lieu of foreclosure.on the condition that the occupant peacefully vacates a property for which the mortgage has been foreclosed and the property is left broom clean.
If you are approved for a Deed-in-Lieu, you will deed the property over to your lender in exchange for a release from the obligation to repay your mortgage. Your lender may also waive their deficiency judgment rights. If not, you could still owe your lender money after they have “fixed up” and sold your property.
There may be tax consequences of a Deed in Lieu transaction. A qualified tax professional should be consulted to determine the impact this may have in your case.
Lenders will consider accepting a Deed in Lieu transaction when other options are not possible. Generally, lenders expect the following conditions to be met in order to consider offering a homeowner a Deed in Lieu solution:
- You have experienced a long term financial hardship that has not been resolved.
- Your house has been on the market (at fair market value) for at least 90 days.
- There are no additional claims or liens (other than the first mortgage) against the property.
- The house is broom clean.
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