A Deed in Lieu of Foreclosure (aka Deed in Lieu) is an alternative to foreclosure. Generally it is only used if a loan modification is not possible. It is used much less often than Short Sales as a method to end the foreclosure and settle the remaining debt on the home.
More literally, a Deed in Lieu of Foreclosure is a legal instrument whereby a homeowner voluntarily surrenders their home to the Servicer/Lender. In return the Servicer/Lender stops the foreclosure process and cancels the mortgage debt.
This process used to be referred to as “dangle mail” because it was akin to homeowners mailing their keys back to the bank in an envelope. Despite what you may have heard, banks will not simply accept the keys to cancel the note and mortgage. You must apply for a Deed In Lieu. The Servicer/Lender will want to see all of your financial information and you will be required to fill out a number of forms.
If your application is approved the bank will inform you and/or your attorney. The process will take a few months and it is important to stay in constant contact with the Servicer/Lender and the law firm handling the foreclosure.
The blog has dealt with deed in lieu of foreclosure – an alternative to foreclosure. If you have defaulted on making payments and if you have already tried out mortgage loan modification, but in vain, then another option available before you to avoid foreclosure is deed in lieu of foreclosure. In deed in lieu of foreclosure, you relinquish your property to the mortgage lender under the condition that your entire unpaid mortgages will be forgiven. Here the mortgage lender sells the property and use the sale proceeds to recover the dues. Anyways, a deed in lieu of foreclosure lowers down your credit score by around 250 points. To know more, go through this page - http://www.mortgagefit.com/deed-lieu.html
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