Expert Foreclosure Help

What Happens With a Deed in Lieu of Foreclosure? Credit Effect Answers

Wondering about a deed in lieu of foreclosure? Credit effects of this alternative are as serious as those caused by all-out foreclosure. Basically, with a deed in lieu of foreclosure, you agree to give your home back to the bank or mortgage lender, without requiring it to go through with the foreclosure process. This option is generally best as a last resort, as there are better ways to put an end to the foreclosure process and preserve your credit.

Deed in Lieu of Foreclosure and Credit Effect Negotiations

While a deed in lieu of foreclosure is as damaging to your credit as foreclosure itself, there may be a way to save your credit. If you can negotiate with your lender to keep it off your credit report and list your debt as paid, you both stand to win. You get to keep your credit score from taking a dramatic plunge, and your lender gets to avoid foreclosure proceedings. Why would your lender care about avoiding them? It costs your lender money to go through with the foreclosure process. There are lawyers and court fees to pay, and having you simply hand over your house will save your lender not only money, but also time.

Your lender probably won’t offer to keep your credit report clear. You’ll have to press for this yourself. To gain the best negotiating standing, don’t wait until the last minute when it is obvious that you are truly desperate. Put this offer on the table as soon as you determine it is your best option, but before your lender knows you’re grasping at straws. If your lender agrees to keep the deed in lieu of foreclosure off your credit report, make sure you get the deal in writing. This way, your lender can’t later say you simply misunderstood what was going to happen.

With a deed in lieu of foreclosure, credit effects are serious, and you may not always have success with negotiating to preserve your credit. Fortunately, there are other options for stopping a foreclosure.

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