Refinances, loan modifications, and short sales receive most of the attention when alternatives to foreclosure are discussed. However, another option may begin to gain popularity. One of the nation's largest mortgage lenders, CitiMortgage, will soon start a program for borrowers to execute "deeds in lieu of foreclosure."
A deed in lieu of foreclosure is fairly straightforward. A struggling borrower and his or her lender agree that the borrower will turn over the deed to the home in exchange for the bank not foreclosing on the home. The borrower may remain in the home for a number of months and does not suffer as much damage to his or her credit rating as would occur with a foreclosure. The bank releases the borrower from all legal obligations to repay the loan. A deed in lieu involves less legal costs for a bank than foreclosure and also incentivizes borrowers to keep the homes in better condition.
CitiMortgage is planning a pilot program for deeds in lieu in a number of eastern and midwestern states. Qualified homeowners would receive six months to live in the home and $1000 in relocation assistance as long as they maintain the property in good condition. To qualify, a homeowner must be 90 days late on their mortgage and not have a second lien. Citi expects only about 1,000 borrowers to take advantage of the offer because of how many of its customers have second mortgages.
Other lenders consider deeds in lieu on an ad hoc basis. If you are interested in pursuing a deed in lieu or any alternative to foreclosure, contact a specialist who has helped many borrowers find a better option to foreclosure.
