Since the collapse of the Real Estate market in 2007-2008 many people across California have turned to deed-in-lieu to satisfy their mortgage loans that were in default and ultimately avoid going through foreclosure.
How does a deed-in-lieu work? A deed-in-lieu occurs when a homeowner is facing foreclosure and their lender has denied their request for loan modification or forbearance.
With a deed-in-lieu the homeowner will effectively transfer the title or their ownership in the property to the lender in exchange for the lender releasing them from their mortgage obligation.
How Does The Deed-In-Lieu Process Work?
To get started with the deed-in-lieu process a homeowner must contact their lender and ask them for a loss mitigation package then the application will need to be completed and submitted along with the documentation regarding their income and expenses.
Besides filling out the paperwork required from their lender the homeowner (borrower) must also submit the following information:
- Financial statement.
- Proof of income.
- Tax returns from the last 2 years.
- Bank statements.
- Hardship letter.
If The Deed-In-Lieu Is Approved
Let’s say that a homeowner’s deed-in-lieu is approved by their mortgage lender, the next things they will need to do include: 1. Fill out a deed that will transfer ownership of their property to the lender and 2. Fill out an estoppel affidavit or document that will set the terms of the deed-in-lieu agreement and include provisions especially if the lender decides to seek out some form of a deficiency judgement.
How Do Deficiency Judgements Work?
A deficiency judgement is the difference between fair market value and the total debt for the property. In many cases a homeowner will be released from having to pay any obligations and or liability under their mortgage but there may be some circumstances where the homeowner won’t be released from the deficiency and they will have to pay it.
To learn more about deed-in-lieu, or to view Southern California homes for sale, contact Fred Sed Realty today by calling us at (800) 921-9231 or click here to connect with us online.