Limited to Special Cases
The deed-in-lieu of foreclosure process can be helpful for those who are ineligible for refinancing or modification, face long-term hardship, behind on payments or will fall behind in the near future, and are unable to complete a short sale. Unlike a short sale, the deed of the property is simply returned to the mortgage company and the debt is considered satisfied.
This process will still affect the income of the homeowner on their taxes and a 1099 form is issued similarly to a short sale.
Unfortunately, deed-in-lieu of foreclosure is usually not a viable alternative to a short sale for most homeowners in California. Thanks to a quick, non-judicial foreclosure process in this state, the banks are loath to grant a deed-in-lieu.
Also, deed-in-lieu of foreclosure transactions have almost equal effect to your FICO score as a foreclosure would. Extreme hardships such as imprisonment or sudden onset of severe disability, death, or emigration from the United States are some of the few cases where a deed-in-lieu of foreclosure is granted.
Dependent on your lender and your unique situation, you may receive up to $3,000 in relocation assistance through the Home Affordable Foreclosure Alternatives (HAFA) program, and you may even be able to stay in the home rent free for a short time. Options vary by the individual’s needs. Call Upside Down CA at 877.442.4577 to discuss your situation with an experienced professional.