How Do I File a Deed in Lieu?
Filing a deed in lieu of foreclosure can prove beneficial if you've accepted that you can no longer keep up with home loan payments and if you feel that foreclosure due to default is inevitable. A deed in lieu works similar to a foreclosure. The main difference is that you voluntarily give up your property before the lender exercises its right to foreclose.
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Instructions
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Show evidence of financial hardship. Lenders vary, and some only consider a deed in lieu after you've missed a few home loan payments and foreclosure appears imminent due to situations such as loss of employment or divorce. Submit copies of unemployment papers, divorce/separation papers or any other documentation to provide evidence of hardship.
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Keep your house on the market for a minimum of 90 days. Lenders consider a deed a lieu of foreclosure only after borrowers attempt to sell the property.
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Speak to your lender to explore options to help you keep your home. Lenders can offer suggestions for avoiding a deed in lieu and foreclosure such as a mortgage short sale --- selling house for less than balance owed --- or loan modification ---reducing your mortgage payment. Discuss both options to see if you meet the criteria.
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File a request once you've exhausted possible options. If keeping your home or selling the home isn't an option, submit your request for a deed in lieu of foreclosure. Submit information pertaining to your present financial condition --- a list of monthly income and debts --- and prepare a hardship letter to include in your file. A hardship letter explains why you're behind on your mortgage loan.
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Tips & Warnings
Credit damage is typical with a deed in lieu, but damage is often less severe than a mortgage foreclosure.
References
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