Question: We walked away from our house as we could no longer afford it. The interest rate on our mortgage was unreasonably high by today's standards and still our bank was not willing to renegotiate the terms. Therefore, we have been out of the house for several months now. At this point we would just like the bank to proceed with foreclosure and take possession of the house, but it's not happening. We heard about a process called "Deed in lieu of Foreclosure". How do we go about this or see if we qualify?
Response: Foreclosure is a complex, legal process. Just because you stopped making payments and physically walked away from the house does not mean that the bank can just take the house away. The bank must initiate a lawsuit and follow all the proper legal procedural steps before it can get to the actual sale of your home. By executing a deed-in-lieu of foreclosure, you can expedite the process. Essentially, by doing a deed-in-lieu, you are transferring the title of your house to the bank, thus avoiding foreclosure and all the fees and costs that the bank accrues as a result of having to sue you. However, there may be tax consequences, depending on the value of your home at the time the transfer takes place. Generally, a deed-in-lieu is a better alternative than foreclosure if you have no intentions to save your home. As a side note, please take into consideration that if foreclosure action would take place in New York, there are mandatory settlement conferences in New York, whereby banks are bound to negotiate with the borrower in good faith, and it is oftentimes, easier to negotiate with the bank and have the interest lowered than going through the court process. Furthermore, it is important to note that a deed-in-lieu still places the headache of re-selling the property on the bank. Therefore, the lender might not agree to a deed-in-lieu unless the homeowner has tried all other loss mitigation options first, such as short sale.
In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.
The information contained in the legal blog of Attorney Svetlana Kaplun is for informational purposes only, and should not be construed as a legal advice on any subject matter. Please read our full disclaimer or contact the Law Office of Svetlana Kaplun, P.C. by telephone at 718-444-1115 for more information.
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