How to Give Back a Deed in Lieu

Borrowers in danger of losing their home have the option of giving back their deed to the lender to avoid a foreclosure. Deed in lieu is a provision set forth by mortgage lenders. Borrowers, if approved, sign over the deed to their house and then walk away from the property. Lenders take back possession and re-sell the home to another buyer. While an effective means to avert home foreclosure, not everyone will qualify for help.

Instructions

1. Take steps to find a buyer for your property. If requesting a deed in lieu, your lender will inquire as to whether you attempted to sell the house first. If not, you will need to list the house with a real estate company or do a "for sale by owner."

2. Re-approach your mortgage company if the house doesn't sell within three months. Lenders consider requests for a deed in lieu after a home sits on the market for 90 days or three months.

3. Discuss other possible alternatives with your home loan lender. Before approving a deed in lieu, your lender will ask questions about your situation to determine other solutions for avoiding foreclosure. This can include modifying your loan term and lowering the payment or giving you permission to sell the house for less than the balanced owed.

4. Submit documents for review. If you can't qualify for a loan modification or short sale, and you feel that a deed in lieu is the only option for averting a foreclosure, begin the approval process by submitting documentations to your lender such as your most recent tax return, employment pay stubs, banking statements, list of assets, list of debt and a hardship letter.

Tips & Warnings

• A hardship letter is your plea for help and should include specific details on why you need a deed in lieu.

References

• Bank of America: Signing Your Home Over to the Lender
• Bankrate.com; 8 Dos and Don't for Fighting Foreclosure; March 2009