Difference between revisions of "Negotiate a Deed in Lieu of Foreclosure"
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==Steps== | ==Steps== | ||
===Gathering Required Information=== | ===Gathering Required Information=== | ||
| − | #Contact your lender’s loss mitigation department. Find the company that owns your mortgage and call them.<ref>http://www.alllaw.com/articles/nolo/foreclosure/steps-completing-deed-lieu.html</ref> Explain your situation and ask for a loss mitigation packet. | + | #Contact your lender’s loss mitigation department. Find the company that owns your mortgage and call them.<ref name="rf1">http://www.alllaw.com/articles/nolo/foreclosure/steps-completing-deed-lieu.html</ref> Explain your situation and ask for a loss mitigation packet. |
#*Speak generally. For example, you can say, “Hi. I’m Dianne Smith and I have a mortgage with you for my home. I’ve lost my job and can’t make payments anymore. I’d like to look into a deed in lieu of foreclosure.” | #*Speak generally. For example, you can say, “Hi. I’m Dianne Smith and I have a mortgage with you for my home. I’ve lost my job and can’t make payments anymore. I’d like to look into a deed in lieu of foreclosure.” | ||
| − | #Collect financial information. You’ll need to show the bank many financial documents, which you should gather as soon as possible. For example, find the following:<ref | + | #Collect financial information. You’ll need to show the bank many financial documents, which you should gather as soon as possible. For example, find the following:<ref name="rf1" /> |
#*recent tax returns | #*recent tax returns | ||
#*proof of all income, such as two recent paystubs or a profit-and-loss statement | #*proof of all income, such as two recent paystubs or a profit-and-loss statement | ||
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#*two recent statements for all bank accounts | #*two recent statements for all bank accounts | ||
#*mortgage statement | #*mortgage statement | ||
| − | #Identify your hardship. You’ll only qualify for loss mitigation if you have suffered a hardship beyond your control. For example, the following are common hardships that cause people to fall behind on their mortgage payments:<ref | + | #Identify your hardship. You’ll only qualify for loss mitigation if you have suffered a hardship beyond your control. For example, the following are common hardships that cause people to fall behind on their mortgage payments:<ref name="rf1" /> |
#*lost job | #*lost job | ||
#*reduced income | #*reduced income | ||
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#*natural disaster (such as an earthquake, landslide, tornado, etc.) | #*natural disaster (such as an earthquake, landslide, tornado, etc.) | ||
#*adjustable rate mortgage that increases | #*adjustable rate mortgage that increases | ||
| − | #Draft a hardship affidavit or letter. You’ll need to submit one of these documents to your lender as part of your application.<ref | + | #Draft a hardship affidavit or letter. You’ll need to submit one of these documents to your lender as part of your application.<ref name="rf1" /> Your lender may have a printed affidavit form that will ask you to check off certain boxes.<Ref>https://www.nationstarmtg.com/reference_documents/hardship_affidavit.pdf</ref> |
#*Alternately, you might need to draft a letter in which you summarize your hardship. If you are struggling financially, explain how this is likely a long-term hardship.<Ref>https://www.knowyouroptions.com/avoid-foreclosure/options-to-leave-your-home/mortgage-release</ref> | #*Alternately, you might need to draft a letter in which you summarize your hardship. If you are struggling financially, explain how this is likely a long-term hardship.<Ref>https://www.knowyouroptions.com/avoid-foreclosure/options-to-leave-your-home/mortgage-release</ref> | ||
#*A nice touch is to mention how drawn-out and expensive the foreclosure process can be.<Ref>http://savethecave.com/sample-foreclosure-letters/deed-in-lieu-hardship-letter/</ref> | #*A nice touch is to mention how drawn-out and expensive the foreclosure process can be.<Ref>http://savethecave.com/sample-foreclosure-letters/deed-in-lieu-hardship-letter/</ref> | ||
#Consider your other options. Although you want to go ahead with the deed in lieu of foreclosure, you should at least consider your other options. Talk to the loss mitigation department about other options such as short sales, [[Negotiate Mortgage Forbearance|forbearances]], and loan modifications. | #Consider your other options. Although you want to go ahead with the deed in lieu of foreclosure, you should at least consider your other options. Talk to the loss mitigation department about other options such as short sales, [[Negotiate Mortgage Forbearance|forbearances]], and loan modifications. | ||
#*You can also meet with a HUD counselor to discuss your options. Find a HUD-approved counselor here: https://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. Click on your state. | #*You can also meet with a HUD counselor to discuss your options. Find a HUD-approved counselor here: https://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. Click on your state. | ||
| − | #*You may be eligible for the deed-for-lease program if Fannie Mae owns your mortgage. Under this program, you can stay in the home for up to 12 months and lease it at the market rate.<ref | + | #*You may be eligible for the deed-for-lease program if Fannie Mae owns your mortgage. Under this program, you can stay in the home for up to 12 months and lease it at the market rate.<ref name="rf1" /> |
===Negotiating with the Bank=== | ===Negotiating with the Bank=== | ||
#Submit your application. Go over your paperwork and check to make sure the information is complete and accurate. Then make a copy for your records. Mail the application and copies of supporting documents to the address provided. | #Submit your application. Go over your paperwork and check to make sure the information is complete and accurate. Then make a copy for your records. Mail the application and copies of supporting documents to the address provided. | ||
| − | #Read the broker’s price opinion. After you submit an application, the bank will order a broker’s price opinion, which determines the fair market value of your property.<ref | + | #Read the broker’s price opinion. After you submit an application, the bank will order a broker’s price opinion, which determines the fair market value of your property.<ref name="rf1" /> Look at this opinion closely. It will determine whether the bank can sue you after accepting the deed. |
#*For example, you might owe $200,000 on the house. If the fair market value is only $150,000, then the bank may want to sue you for the difference--$50,000. It can seek a “deficiency judgment.” | #*For example, you might owe $200,000 on the house. If the fair market value is only $150,000, then the bank may want to sue you for the difference--$50,000. It can seek a “deficiency judgment.” | ||
#*However, if the house is worth $220,000, then there is no reason for the bank to sue you. | #*However, if the house is worth $220,000, then there is no reason for the bank to sue you. | ||
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#*Have solid reasons why the bank shouldn’t sue you. For example, you may have no money. If the bank sues you, they won’t get anything because you have no valuable property they can foreclose on. | #*Have solid reasons why the bank shouldn’t sue you. For example, you may have no money. If the bank sues you, they won’t get anything because you have no valuable property they can foreclose on. | ||
#Negotiate other important terms. Consider the following. Hammer out an agreement with your lender before agreeing to sign your deed over: | #Negotiate other important terms. Consider the following. Hammer out an agreement with your lender before agreeing to sign your deed over: | ||
| − | #*Ask the lender not to report negative information to the national credit bureaus.<ref>http://nreionline.com/distress/deed-lieu-foreclosure-valuable-tool-exercise-caution</ref> If they report a foreclosure, it can stay on your credit report for years. | + | #*Ask the lender not to report negative information to the national credit bureaus.<ref name="rf2">http://nreionline.com/distress/deed-lieu-foreclosure-valuable-tool-exercise-caution</ref> If they report a foreclosure, it can stay on your credit report for years. |
#*Choose a date when you need to leave the property. You may need to leave the home immediately after transferring the deed, or you might be able to stay for several months. | #*Choose a date when you need to leave the property. You may need to leave the home immediately after transferring the deed, or you might be able to stay for several months. | ||
#Consult with an attorney if the bank won’t agree. Realize that the bank has most of the leverage in negotiations: they don’t have to take your property from you. Accordingly, you’ll benefit from an attorney’s expert advice if the bank resists your proposals. | #Consult with an attorney if the bank won’t agree. Realize that the bank has most of the leverage in negotiations: they don’t have to take your property from you. Accordingly, you’ll benefit from an attorney’s expert advice if the bank resists your proposals. | ||
| − | #*You can find an attorney by contacting your local or state bar association and asking for a referral to a real estate attorney.<ref>https://shop.americanbar.org/ebus/abagroups/divisionforbarservices/barassociationdirectories/statelocalbarassociations.aspx</ref> | + | #*You can find an attorney by contacting your local or state bar association and asking for a referral to a real estate attorney.<ref name="rf3">https://shop.americanbar.org/ebus/abagroups/divisionforbarservices/barassociationdirectories/statelocalbarassociations.aspx</ref> |
#*Call up the attorney and schedule a consultation. Ask how much they charge. | #*Call up the attorney and schedule a consultation. Ask how much they charge. | ||
===Completing the Process=== | ===Completing the Process=== | ||
| − | #Try to [[Sell Your Own House|sell your home]]. Some lenders will require that you try to sell your home for the fair market value before they will go ahead with a deed in lieu of foreclosure.<ref | + | #Try to [[Sell Your Own House|sell your home]]. Some lenders will require that you try to sell your home for the fair market value before they will go ahead with a deed in lieu of foreclosure.<ref name="rf1" /> If this is a requirement, you should make your best efforts to sell. |
#*Get your home close to move-in condition. This means fixing obvious hazards, such as exposed wires, holes in the floor, and rickety stairs. But it also means giving your home a thorough clean and possibly a fresh coat of paint. | #*Get your home close to move-in condition. This means fixing obvious hazards, such as exposed wires, holes in the floor, and rickety stairs. But it also means giving your home a thorough clean and possibly a fresh coat of paint. | ||
#*Commit to reaching potential buyers. You can work with a real estate agent, but that costs money. Instead, think of advertising online at websites such as Craigslist. You can also put up fliers at your local grocery store and library. | #*Commit to reaching potential buyers. You can work with a real estate agent, but that costs money. Instead, think of advertising online at websites such as Craigslist. You can also put up fliers at your local grocery store and library. | ||
