What is a Deed in Lieu?
What is a Deed in Lieu of Foreclosure?
Lawyer Seving Stuart FL, Port St. Lucie FL, and Jensen Beach FL
A deed in lieu of foreclosure is simply transferring the title of the property to the bank in lieu (instead) of the bank continuing with the foreclosure. A deed in lieu of foreclosure allows the homeowner to have the asset removed from their name and saves the lender the costs associated with foreclosure. It is a non adversarial method of resolving a potential foreclosure. In general, if a homeowner is unable to sell their home through a short sale, then they may be able to qualify for a deed in lieu. It is important to realize that although the homeowner may desire a deed in lieu of foreclosure, the lender does not have to accept this option. The lender can still continue to foreclose, if they so choose.
There are some issues of which homeowners considering a deed in lieu should be aware. First, if the house is underwater (i.e. the value of the home is worth less than the amount owed), deeding the property back to the bank can result in an unpaid balance. This balance due is called a deficiency. It is important to address waiving any potential deficiencies when negotiating the terms with the lender prior to completing the actual deed. Another issue is the realization of potential income from any debt forgiven by a lender which could then constitute taxable income. The Mortgage Debt Relief Act of 2007, which has been extended until December 31, 2013, generally allows taxpayers to exclude income from the discharge of debt on their principal residence. It is important to address this issue up front and fully understand any potential consequences before moving forward.
There are and have been programs available to qualified applicants when a deed in lieu option is considered. The “Cash for Keys” program is a possibility when requesting a deed in lieu. Under HAFA, this program can provide financial support for those homeowners that qualify. Banks have also instituted in-house programs which work along similar lines. Understand these are programs and are not guaranteed.
If you are in financial difficulty and need a lawyer familiar with foreclosure defense, loan modification/restructuring, debt relief, short sales, and deed in lieu, please give me a call. My Law Firm serves North Palm Beach, Martin and St. Lucie Counties.
Lawyer serving Stuart FL, Jupiter FL and Port St. Lucie FL. Please watch the video below for a brief discussion.