When the foreclosure notification arrives the pressure for finding an alternative mounts. Now more than ever does it become important to review all of your options for mortgage debt relief. While loan modifications, short sales and deed in lieu transactions pass by on the radar, they are not for everyone. This is especially true of deed in lieu transactions, which can bring unwanted effects to the homeowner even long after the home has been returned to the bank.
Covering The Bases
Again, deed in lieu of foreclosure transactions are not all bad. They just simply are not for everyone, which is the point that is important to consider. First of all, anyone who desires to keep their house or cannot realistically relocate should consider another foreclosure alternative. Since a deed in lieu requires that the homeowner sign over the deed and give up the property in exchange from being released from their mortgage debts, those who need to stay in their home should not pursue a deed in lieu.
Another consideration is the after effects of a deed in lieu. Although the lender may absolve the debtor of liability over their debt, it does not erase any deficiency balance or delinquency fees. If these fees are not waived by the lender and go unpaid, further credit damage or legal action could result. Further, if the lender does agree to waive these fees the debtor could still be held liable for claiming the waiver as income on their taxes.
Homeowners should also consider the potential for credit damage resulting from a deed in lieu, which is typically worse than if a short sale was to be pursued. The reason is that lenders do not look well on those who did not repay their debts, making it difficult to secure another mortgage. loan in the future.