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Deed in Lieu

Deed in Lieu of Foreclosure

Found 9 blog entries about Deed in Lieu.

Connecticut home prices have not recovered significantly over the last ten years, leaving many folks still underwater in their homes. While many have decided to sit tight and stick it out, sometimes life makes that impossible. When facing an employment relocation, job loss or change, divorce, income change or other life event - sometimes just holding out is not possible. When facing the prospect of no longer being able to keep up with the mortgage - you  have several options:

  • Work out payment arrangements with your lender: While changing payment terms won't help you out of a negative equity situation, if you wish to remain in the home and you just need a payment adjustment or some time to pull it together (your hardship is temporary), most lenders
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Credit events such as short sales, foreclosures, bankruptcies and deed-in-lieus present special challenges to former homeowners wanting to get back into homeownership after a home loss. While these former homeowners are generally in a better position financially after relieving themselves of an overleveraged home or excessive debt - there are usually some obstacles in the way of being able to purchase a home again, such as:


Credit score: All these events have some impact on the credit score. It will take some time of establishing good credit again to get yoru FICO scores back up to where you will considered for a new loan.

Down payment: Although there are a few programs that will loan at 100% of value, most lenders will want at least 3.5% of the

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Even after losing or short selling a home, most folks will eventually want to own another home. While re-establishing credit and meeting other lending guidelines will be necessary, there are minimum waiting periods for getting new loans after significant negative credit events. Below are the timelines for new loans for Fannie Mae and Freddie Mac Conventional Conforming Mortgage Loans meeting FNMA and FHMLC Guidelines, Federal Housing Administration (FHA)  Insured Loans, Veterans Administration (VA)  Guaranteed Loan, and United States Department of Agriculture (USDA) Rural Development Loans. Please note that extenuating circumstances may have an impact on some of these timelines, other requirements apply, and these basic guidelines do not serve as a

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Almost 16 months after investigation into robo-signing began, a deal has been reached between feds and 5 of the nation’s major loan servicers: 

  • Bank of America
  • GMAC/Ally
  • Wells Fargo
  • Citi
  • JP Morgan Chase 

The settlement goes down as the largest consumer financial protection settlement in US history and settles state and federal findings that servicers violated state foreclosure laws. Borrowers in 49 states (Oklahoma did not join the settlement) will be eligible for relief including: 

Principal reduction for eligible borrowers:  Homeowners behind on their payments will be eligible for loan modifications, including first and second lien principal reduction. Due to the number of borrowers affected the reduction is expected to be about

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housekey_397Well I’ll just send the keys in then- the bank can have the house!

Just wait a minute there! Unfortunately it’s just not that easy. Despite popular belief that you can just slip your keys in an envelope, mail them to your lender and then walk away from your house- it simply doesn’t work that way.

Giving the house to the bank  - known as a deed in lieu of foreclosure, involves a process and the lender does not have to agree to a deed in lieu. You can call the lender and discuss the deed in lieu and they will tell you what the process is and you can apply. However a deed in lieu is usually not a possibility for you:

  • If you have more than one lien against your property
  • Until you have attempted a short sale

Most lenders will force you to

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Fannie Mae Guidelines Update: No new mortgages for 7 YEARS after foreclosure

Fannie Mae has recently introduced new guidelines for mortgage underwriting, and is getting tougher on those who have experienced a prior foreclosure.

The time that must have elapsed after a foreclosure is up to 7 years from the previous 5. The changes highlight the importance of borrowers working with their servicers to avoid foreclosure and pursue other workout solutions, including short sales. 

Fannie Mae Waiting Period Requirements as of 10/1/2010

BANKRUPTCY Chapter 7 or 11: 4 years

BANKRUPTCY Chapter 13: 2 years from discharge date or 4 years from dismissal date



  • 2 years - 80%
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HAFA: the painfully slow road to a deed in lieu of foreclosure.

It has been 17 months since the launch of HAFA - government's "streamlined" short sale program - meant to simplify the short sale process and save families from foreclosure.

Unfortunately this program is proving to have the opposite effect. I have personally had a few of my sellers go through this program and at this point I am recommending all sellers steer clear of this program due to its many flaws and simple lack of desired effect.

A few examples:

One of my sellers has spent 6 months waiting to be approved into the program. 6 months later he has been approved, but to date we cannot get anyone at HAFA to actually tell us the terms of approval. Meanwhile, my seller has missed 7

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Are you dealing with a Connecticut foreclosure and running out of time?

Resolutions take time. Short sales take time, loan modifications take time, and deeds in lieu take time.

Banks are not very effective at communicating their workout plans to their attorneys, and attorneys will frequently move forward with a foreclosure, even if you are in the middle of a workout with your lender.

This is preventable.

Connecticut offers a foreclosure mediation service. This is free to qualified homeowners. Basically the state will assign a mediator to help you deal with your servicer (bank) in court, and most importantly help you get the time you need to get through a workout with your lender.

The offer to sign up for mediation generally comes at the same

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Effective April 30, 2010, Fannie Mae has changed the required waiting period for a borrower to be eligible for a mortgage loan after a preforeclosure event. The waiting period commences on the completion date of the preforeclosure event, and may vary based on the maximum allowable LTV, CLTV, and HCLTV ratios (referred to herein as LTV ratios) and occupancy of the property.

A summary of the changes: 

Read the entire Fannie Mae announcement

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