Short Sales and Deed in Lieu of Foreclosure

Helping FL Residents Read the Fine Print

If you are looking for a definitive answer to the question of how to deal with your mortgage that is now unaffordable, you may have discussed the possibility of a short sale or a deed in lieu of foreclosure agreement with your lending institution. With a deed in lieu of foreclosure arrangement, a mortgage holder will agree to sign the deed over to the bank rather than going through the foreclosure process. No more monthly bills for mortgage payments will come due.

Is It in Your Best Interests to Agree to Turn Over the Deed in Lieu of Foreclosure?

This option may be in the best interests of the lending institution, but is it in your best interests? To answer that question, you will need to make absolutely sure that the bank is going to release you from the balance of the mortgage after accepting the deed in lieu of foreclosure. Some mortgage borrowers have been devastated after learning that they were still considered “on the hook” for the remainder of the value of the mortgage when the bank sold the house after the borrower had turned over the deed to the bank. This is called a deficiency balance, and it has taken many a candidate for foreclosure by surprise.

Furthermore, a borrower who turns over a deed to the bank in lieu of foreclosure must vacate the home immediately. This is very disruptive to an individual or family in financial distress.

In sum: Watch out for the fine print. Watch out for slick-talking lending bank representatives. Do not assume that they are your friends. They are not. Their sole purpose is to curtail their own losses when a mortgage is in trouble. You should not attempt to negotiate a critical transaction such as turning over your house deed to the bank in lieu of foreclosure without first consulting with a Tampa bankruptcy attorney who is prepared and qualified to advise you as your advocate, pointing the way to solutions that are inyour best interests.

When Might Foreclosure Actually Work as a “Bridge Loan?”

Many of our clients at Debt Relief Legal Group have decided to ride out a foreclosure and have been able to stay in their homes for another year or two until completion of the foreclosure. They have “bought” extra time with no rent or mortgage payments due, allowing them to regroup and move forward in a thoughtful, careful manner rather than suddenly becoming homeless.

Many have filed bankruptcy in the meantime, emerged from bankruptcy with a fresh start and have begun to save money for the first time in a very long time. Some have saved up the first and last month’s rent necessary to rent a home in their own neighborhoods without the continuing responsibilities of home ownership.

Many people say that owning a home is the foundation of the American dream and the best investment a person or couple can make. Why, then, have out-of-control mortgage problems brought about some of our clients’ worst nightmares? Consider all your options, including foreclosure and bankruptcy, if your mortgage and your total financial picture are in serious trouble.