We often talk about different short sale incentive programs—HAFA, TAP, Bank of America Cooperative. Some of these programs also offer options and incentives for borrowers who are considering a deed-in-lieu of foreclosure. I do not write about deed-in-lieu very much, but thought it an appropriate topic since I have gotten a few calls and emails from agents who want to 411.
A deed-in-lieu is simply the opportunity for a borrower (mortgagor) or homeowner to convey all the interest in the property back to the mortgagee (the lien holder or the bank). In exchange, the bank will not move ahead with the foreclosure proceedings.
Some borrowers who are having trouble making their payments and owe more to the bank than their homes are worth may have the option of participating in a deed-in-lieu of foreclosure. The other options available to homeowners include short sale and loan modification.
The federal government does offer some deed-in-lieu incentives to qualifying borrowers. The HAFA program (if the property and the seller qualify) will pay a $3000 incentive to a borrower who participates in a deed-in-lieu of foreclosure. The state of California also has deed-in-lieu incentives as part of the Transition Assistance Program.
Borrowers who are seriously considering participating in a deed-in-lieu of foreclosure need to know this: deed-in-lieu is generally most successful if a borrower has only one mortgage. So, borrowers with more than one mortgage may want to explore other options such as short sale and loan modification.
To my friends that have been asking me about deed-in-lieu, hope that helps!