Home-Buddies

Convincing Your Lender to Accept a DIL –Deed in Lieu

Let’s begin by pointing out to you some very important facts for you to seriously consider before you choose to just transfer your property directly back to your lender with a Deed in Lieu (DIL).

Convincing your lender to accept a Deed in Lieu (DIL) of foreclosure, should only be used as your very last, extreme resort to avoid a foreclosure. It can quickly release you from all or most of your debt that is associated with your defaulted loan. It does not save your home, but it is a little less damaging on your credit report than a foreclosure would be. The credit report will still show that your loan went into arrears, how many months of late payments you had, and that the lender closed the account.

Even though a Deed in Lieu (DIL) is less time consuming, and less expensive than a foreclosure for the lender, as well as for you, most lenders will still prefer to negotiate a workout plan, or accept a short sale.

So what about a Short Sale? The short sale option, if the offer is accepted by the lender, is not as quick of a solution as the Deed in Lieu (DIL). The sale still must be approved and accepted by the lender. And you and your lender may not always agree on the amount. Your lender is basically allowing you to sell your home for less than what you still owe on it. And your lender is the one getting stuck with the loss. And in comparison to the effect upon your credit as opposed to a Deed in Lieu (DIL), the short sale is less damaging than a foreclosure, because it is usually listed as a “settled debt”. But, it is still harmful and can reduce your credit score by at least 200 points.

So let’s convince your lender to accept a Deed in Lieu (DIL). There are certain eligibility requirements that you must meet, before your lender will even entertain the option to accept a Deed in Lieu from you:
• Are you imminently facing foreclosure? Are you at least 31 days delinquent?
• Have you exhausted all means to avoid foreclosure?
• You, the borrower, must voluntarily submit a written offer of the Deed in Lieu and it must specifically state that the offer to enter these negotiations is being made voluntarily. You must list all the conditions for which the DIL will be accepted. Including the agreed upon transfer date of the property. On that date, the property must be vacant and clear of all your personal property.
• Usually the lender requires that you have listed your home with a Realtor for at least 30 days. They need to see that you have attempted to sell the property, but that you have been unable to sell the property. They prefer for there to be no other liens against the property at all.
• The property should still be occupied, unless you provide documentation that can verify your need to vacate the property, i.e. loss of income, increased living expenses.
• The property is not a rental investment, nor used as a rental for more than 12 months.

Keep in mind, that neither you nor the lender is obligated to proceed with the Deed in Lieu unless a final agreement is reached. The lender is not required to accept the Deed in Lieu. And as each day continues to pass, you may become further in default with your mortgage. If the Deed in Lieu has been approved, the lender must complete the process within 90 days that it was initiated.

Your biggest advantage in pursuing any solution to your financial difficulties with your mortgage, is to act as soon as possible! Keep yourself in a strong position to negotiate with your lender. Once you have become delinquent on your loan, the fees and penalties add up so quickly, that it becomes an even larger debt for you to overcome. Do something, and do it now! Good Luck.

Barbara Partaka
Home-Buddies