One of the foreclosure options available to anyone facing financial hardship is a deed in lieu of foreclosure. This allows the borrower to relinquish the property to the lender in exchange from being released from the loan debt. Although the borrower does not get to keep the home, they do get spared from a stressful foreclosure and many of the consequences that come with it. While a deed in lieu isn’t the lender’s preferred option, there have been some advancements made in the area for Freddie backed loan holders.
Earlier this month, Freddie Mac announced that it will be revising their standard deed in lieu procedures. Designed to serve as an option for those who could not secure a foreclosure alternative, such as a short sale, Freddie will begin considering deed in lieu agreements for eligible borrowers.
Effective on March 1, 2013, mortgage services will be able to approve deed in lieu agreements that meet Freddie Mac requirements that are:
- 90 or more days delinquent
- Are current or less than 90 days delinquent, but meet certain hardship criteria
- Do not have an eligible hardship, but were previously discharged from debt obligations as per a Chapter 7 bankruptcy
Freddie Mac will be offering mortgage servicers a $1,500 incentive for each deed in lieu completed with accordance to their requirements, as well as allow mortgage services to postpone foreclosure sales in order to conduct a deed in lieu qualification evaluation.