What does a “Deed in Lieu of Foreclosure” mean?
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What does a “Deed in Lieu of Foreclosure” mean?
My mother passed about 6 months ago. She had a living Trust which at the time of her death had no assets, except for her house. She had a reverse mortgage on the home. She owes $250,000 and it appraised at $131,000. She also had mortgage insurance. My brother and I have been served with foreclosure papers and they list us as “Successor Trustees”. I have been calling and trying to get everything settled for 5 months. We signed a Deed in Lieu of foreclosure last month. When I received the letter from the attorney for the bank, I called and they said the deed in lieu doesn’t stop foreclosure. We have offered to sign it over to them, we have no interest in the house. I did respond but will this tarnish my credit.
Asked on August 22, 2014 under Real Estate Law, Florida
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 9 years ago | Contributor
Well that attorney was incorrect. A deed in Lieu of Foreclosure is a transaction where the homeowner voluntarily transfers title to the property to the lender in exchange for a release from the mortgage obligation. By doing so it stops the foreclosure process. I would speak with a lawyer about this an possible retain him or her on a limited basis - say writing a few letters and contacting the bank - to have the matter resolved. Make sure you discuss that the deficiency is waived. That is VERY important. Your credit may or may not be involved given that the house is in the name of the trust. It should not reach you directly but it is good to check and make sure that the bank does the right thing. Good luck.
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