What is a deed-in-lieu of foreclosure and should I consider that instead of doing a short sale with my lender?
A deed-in-lieu is what we call a “friendly foreclosure” that is done by mutual agreement by the homeowner and lender. It allows a mortgagor in default that does not qualify for any HUD Loss Mitigation option to sign the house back over to the mortgage company. To be eligible, the property typically should be owner occupied, no “walk aways” or investment properties. The mortgagor must be 31 days delinquent or more when the deed-in-lieu is executed. From a credit profile standpoint, this is a better option than just being foreclosed on, or just walking away from the property. However, a short sale will impact your credit much less than a deed-in-lieu.
