In Depth: Deed in Lieu of Foreclosure

What are my options if I am facing foreclosure of my home?

Nationwide, close to a million homes will be affected by foreclosure proceedings every year.  While foreclosure rates have dropped nationally since the peak of the housing crisis, rates remain high and seem to be rising in New York.  While most states experienced a decline in foreclosures in 2017, New York did not follow the trend.  One in every 1,672 housing units in New York was foreclosed in September of 2017, a 15 percent increase since August 2017.

If you are facing foreclosure, you have several options available to you that could allow you to save your home or at least avoid the tremendous expense of a deficiency judgement.  One option you may wish to explore is a deed in lieu of foreclosure.  Our lawyers at the law firm of Roman & Piccinnini, PLLC explain the basics of deed in lieu of foreclosure below.

What is a Deed in Lieu of Foreclosure?

 A deed in lieu of foreclosure can occur when the lender agrees to receive the deed of the home and in exchange cancels the mortgage agreement.  Usually, a deed in lieu of foreclosure is said to fully satisfy the debt.  In New York, however, current laws allow mortgage lenders to still seek a deficiency judgement following a deed in lieu of foreclosure.  The deficiency amount will be the difference between the price obtained for the home and the total debt.

Those seeking a deed in lieu of foreclosure can ensure they will not face a deficiency judgment.  Your attorney can assist you in drafting the deed in lieu of foreclosure agreement so that the lender expressly agrees that the deed constitutes full satisfaction of the debt.  Without this critical provision, you could find yourself faced with a deficiency judgment at a later date.

Requirements of a Deed in Lieu of Foreclosure

To be eligible to receive a deed in lieu of foreclosure, you must demonstrate that you listed the home for sale for a period of time, typically 90 days.  The home must not have any liens or encumbrances (besides the outstanding mortgage).  You will need to act before the home is actively in foreclosure.

Deed in lieu of foreclosure can have the beneficial effect of allowing you to avoid the negative repercussions of a foreclosure, like the hit on your credit score.  Other options to prevent foreclosure may include short sales, automatic stays through bankruptcy, and much more.  Contact a foreclosure defense lawyer for more assistance.

Posted in: Foreclosure/Default