Short sales have been the hot solution for financially stressed homeowners and their lenders for the past year, but here’s another potent foreclosure alternative that’s about to take center stage: Deeds-in-lieu.
Some of the largest mortgage servicers and lenders in the country are gearing up campaigns to reach out to carefully targeted borrowers with cash incentives that sometimes range into five figures, plus a simple message: Let’s bypass all the time-consuming hassles of short sales and foreclosures. Just deed us the title to your underwater home and we’ll call it a deal. We won’t come after you to collect any deficiency between what you owe us on the mortgage and what we obtain from the home sale. We might even be able to wrap up the whole transaction in as little as 30 to 45 days. How about it?
Mortgage companies say troubled borrowers increasingly are signing up. One of the largest servicers, Bank of America, has mailed out 100,000 deed-in-lieu solicitations to customers in the past 60 days, and its volume of completed transactions is breaking company records, according to officials.
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This certainly is another alternative especially if the homeowner’s credit is already going down the drain. With a deed-in-lieu it is still treated like a foreclosure and the borrower will see that their credit score will take a hit of up to 350 points. With a short sale they may not take any hit at all depending on their payment history. If they haven’t missed payments they could possibly purchase another house right away. Under HAFA they can also get $3000 in relocation money (I just had one get $5000). We counsel our clients at the beginning to see what alternative is best for them: loan modification, bankruptcy, short sale, or deed in lieu. It’s irresponsible to arbitrarily say that anything is better without taking into consideration individual circumstances.