Deed in Lieu of Foreclosure

Deed in Lieu of Foreclosure

A deed in lieu of Foreclosure (DILF) allows you , the homeowner, to transfer the title of your property to the mortgage lender, avoiding foreclosure, and get out of the home loan by eliminating mortgage payments. The Federal Government has created several programs to facilitate this process such as the Home Affordable Foreclosure Alternatives program.

To determine if you are eligible for a deed in lieu of foreclosure you must call your mortgage lender and provide information about your financial situation and why you are unable to make mortgage payments. If you qualify for a DILF you must vacate your property immediately.


When can I get out of my home loan through a DILF?

  1. You are not eligible to refinance your home loan.
  2. You are suffering a long-term hardship.
  3. You have been unable to make your mortgage payments.
  4. Your home is worth less than your owe.
  5. You have not been able to sell your home.
  6. You are no longer able to financially afford your home and you are ready to vacate the property.

Short Sale vs. Deed in lieu of Foreclosure

A short sale allows the homeowner to sell the home prior to foreclosure. The lender must agree to the sell. Through a short sale the mortgage company recovers partial payment for the value of the home. The short sale may be a good option to relieve the homeowner of the burden of a foreclosure and allow the lender to avoid some of the costs associated with a foreclosure.

Foreclosure allows the mortgage company to repossess a home and take ownership of the property.  Foreclosure can take three to twelve months to complete and can be costly for the mortgage company. Homeowners, depending on state laws, may be forced to pay the deficiency, which is the difference between the final sale price of the home (generally sold at auction) and the amount of the initial home loan. The deficiency is considered an unsecured debt, and the bank has the legal right to collect this deficiency payment from you, the original homeowner.


Credit impact for a Deed in Lieu of Foreclosure, Foreclosure and Short Sell

A short sell, deed in lieu of foreclosure and foreclosure can all damage your credit report. Additionally, the IRS may consider any debts which are forgiven to be taxable income.

A foreclosure and deed in lieu of foreclosure will remain on your credit report for 7 years, but you can begin to repair your score immediately following a foreclosure. Under a short sale the impact on your credit report will depend how the lender details the transaction. For instance, if the mortgage company reports the agreement as a “settled” account this will have far less impact than if they report the transaction as “Closed but not paid in full’ which can remain on the your account for 7 years.