The voluntary surrender of a home in the manner you describe is often referred to as a "deed in lieu of foreclosure" in the mortgage industry. In this procedure, a borrower negotiates with the lender to turn over the deed to the lender in order to avoid formal foreclosure proceedings in the court system. I will explain more about voluntary surrender of a home in just a moment.
I generally recommend negotiating a deed in lieu agreement when a homeowner can no longer afford his mortgage payments, has explored all other options to save his home, and when foreclosure is imminent.
It sounds like you are able to make your monthly mortgage payments, but that you would like to rid yourself of the home so you can move. Before you consider surrendering the property to your mortgage lender, you should do everything in your power to sell the home. If you can find a buyer, you should be able to rid yourself of the home without the credit damage caused by a foreclosure or a deed in lieu. For further information about foreclosure, you should review the foreclosure information from the Avoiding Foreclosure Web page.
Unfortunately, in the current housing market, many homeowners find themselves owing more on their mortgages than their homes are worth, a situation which the mortgage industry refers to as being "upside down" on a mortgage. Even if you cannot find a buyer willing to pay enough for the home to pay off what you currently owe, you still may be able to sell the property for less than the mortgage balance, though you will need to negotiate an agreement with your lender to accept less than the balance of the note to pay off the mortgage.
Selling a home for less than the balance owed on the mortgage is often called a "short sale." Such transfers must be approved by the lender prior to the sale. Lenders that agree to short sales will frequently forgive any balance remaining on the note after the sale proceeds are applied, though they usually require borrowers to provide documentation of financial hardship, such as job loss or unexpected illness, before they will approve a short sale.
Surrendering your home to your mortgage lender through a deed in lieu of foreclosure agreement will likely have a strongly negative impact on your credit rating and your ability to obtain a new mortgage. While I understand that your credit score is already quite low, it is possible that a voluntary surrender may drive your score even lower. In addition, this derogatory mark on your credit will likely appear on your credit reports for seven years, meaning that this "foreclosure" could damage you credit rating for much longer than your dismissed bankruptcy.
Recommendation
Explore all options available to you to avoid voluntary surrender or foreclosure of your home, as losing your home will likely hurt you financially and negatively impact your credit rating for many years. These credit problems could prevent you from qualifying for a mortgage for a new home, cause you problems leasing an apartment, and force you to pay significantly higher interest rates for any credit you are able to obtain, which could cost you thousands of dollars in interest charges.
To learn more about the foreclosure process, and possible ways to prevent foreclosure, I encourage you to visit the Bills.com Foreclosure page. See also Deed In Lieu Of Foreclosure vs. Short Sale and Home Affordable Foreclosure Alternatives Program.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Grand Terrace, CA | February 13, 2013
February 15, 2013
If you have no liability for the mortgage, then you have the option to walk away — allow a strategic default.
You mentioned a short sale. Because you have no liability for the mortgage, I do not see a legal or financial reason to consider this option.
You mentioned taxes. I do not see any unusual tax situation here, again assuming your personal liability for the mortgage was discharged in the chapter 7.
Charlotte, NC | May 08, 2013
I typed-up my own QCD to transfer the property out of my name into the bank's name, and recorded it with the county Deed and Recording Dept. If you do the same, you will no longer own the property. Be sure to send the HOA a copy of the stamped, recorded QCD so they can pursue the bank to pay the fees.
Springfield, OR | January 01, 2013
January 02, 2013
October 10, 2012
Chester, VA | September 08, 2012
September 11, 2012
I don't know if you have other debts that you would clear out in BK, giving you greater cash-flow to afford the mortgage payment.
Mint Hill, NC | May 09, 2012
May 11, 2012
- Start discussions with your home loan servicer about a a deed-in-lieu-of-foreclosure or a short sale. Both take you to the same place — selling your property — but via different routes.
- If discussions with your servicer go nowhere, consider a strategic default. This is your nuclear option, as it were, if your discussions with the servicer fail. Before you pull the trigger and allow a strategic default, consult with a lawyer in your state who has experience litigating mortgage issues so that you have an understanding of your rights and liabilities for the deficiency balance.
- Rent the property, and cross your fingers the rental market in your area is tight enough for you to break-even or better on your monthly cash flow.
One last thought: Study your state's anti-deficiency rules to understand what, if any, liability you may have for a deficiency balance on your home loan.
Delmar, MD | May 08, 2012
May 10, 2012
- Contact the creditor and state that you should not be linked to the account, as you did not consent to be responsible.
- Consult with an attorney.
Regarding the foreclosure and your credit score, it is unfortunate, but as you were financially responsible for the loan, all the delinquencies for the loan and other accounts that you were listed on will appear on your credit report.
Annapolis, MD | March 12, 2012
March 12, 2012
However, doing so will not get you out of the woods yet. Whether you disposed of the property with a short sale, deed-in-lieu, or foreclosure, there is still the matter of the deficiency balance. The lost letter you mentioned may have a clue as to any promise made by the lender to forgive the deficiency balance. Ask your lawyer to demand copies of any and all correspondence the bank sent you regarding an offer of a deed-in-lieu or the deficiency balance.
Readers, Crystal's letter is a reminder when you go through an important event like a home purchase or foreclosure to keep all related documents in a safe place. Relying on your opponent to keep better records than you is not a safe strategy.
March 06, 2012
March 06, 2012
Upland, CA | February 05, 2012
February 06, 2012
Rolesville, NC | February 02, 2012
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