Negotiate a Deed-in-Lieu of Foreclosure

Negotiating a deed-in-lieu of foreclosure with your mortgage lender can take up to three months, says Bank of America. Lenders aren't always eager to negotiate a deed-in-lieu, and convincing your lender to forgive your mortgage debt takes time and effort. But if you can successfully negotiate a deed-in-lieu, you can walk away from your home loan and stop making home loan payments.

Definition of Deed-in-Lieu

A deed-in-lieu is one of several programs designed to help owners avoid mortgage foreclosure. Other programs might involve borrowers remaining in the property and paying a cheaper or reduced payment to retain the home. A deed-in-lieu works differently, and borrowers who petition lenders consent to giving up ownership. Mortgage lenders take ownership of the property and borrowers walk away from the deed and equity.

What You Need to Qualify?

Understand that your mortgage lender is not likely to give an answer over the phone, and asking for a deed-in-lieu doesn't mean that the lender will approve the request. To negotiate a deed-in-lieu and avoid foreclosure, you must prove and show compelling evidence that you can no longer make your home loan payment. A property owner may request a deed-in-lieu because he's tired of living in his property and wants to move. This excuse doesn't motivate lenders to act. If you can't meet the mortgage obligation, or if you have exhausted all other financial options, your lender might review your situation to see if you qualify.

What to Consider?

Even if you have lost a job and have zero income, your lender might deny your request for other reasons. Getting a deed-in-liue requires meeting specific requirements. Did you try to sell the house before contacting your lender? Do you have money in savings? Because a deed-in-lieu is a last resort option, lenders will carefully review your finances before making a decision. Before your lender agrees to take back the property, the company might first modify your loan term and reduce your monthly payment to ease the financial burden.

"Deed-in-Lieu," Known Your Options by Fannie Mae
Steve McLinden, "Go Through a Foreclosure or Walk Away," Bankrate.com