Figure Property is auctioned and sold in a foreclosure. The foreclosure laws vary among countries; therefore, lenders have to go through necessary criteria to ensure foreclosure.
In the United States, 22 states require judicial foreclosure i. If the foreclosure is approved by the courts, the property will be auctioned and sold to the highest bidder. This procedure is known as mortgage modification. The difference between deed in lieu and foreclosure is not a very detailed one; the end result of both is similar since the ownership will ultimately be transferred to the lender.
Since foreclosure is a formal arrangement, it results in both lender and borrower incurring more costs and the procedure is time-consuming. This can be avoided to a significant extent by using deed in lieu, which is a more informal process.
You can download PDF version of this article and use it for offline purposes as per citation notes. Available here. Fontinelle, Amy. Dili has a professional qualification in Management and Financial Accounting. Your email address will not be published. Leave a Reply Cancel reply Your email address will not be published. Deed in Lieu vs Foreclosure. Deed in lieu is referred to the situation where the borrower transfers the ownership of the property to the lender as a result of being unable to make repayments of a loan in order to avoid foreclosure proceedings.
Foreclosure is referred to as the procedure of a lender taking possession of a mortgaged property of a borrower in case he or she fails to make loan payments.
Deed in lieu is conducted to avoid the need of formal foreclosure. Foreclosure is a formal procedure of transferring the ownership of a property. Cost and Time. Deed in lieu is less costly and less time-consuming compared to foreclosure. According to Steve Irwin, its executive vice president, "the borrower certainly can sell the house and is only responsible for paying the lender 95 percent of the newly appraised value of the house through that sale.
But, Irwin added, "If that is not an option, then the borrower could pursue a deed in lieu of foreclosure. This is a typical deed in lieu process and not different from other Federal Housing Administration loans. Regardless of which route you take, your mother is obligated to ensure that taxes and insurance are paid until the loan is paid off.
If she does not pay for these property charges, then the lender must advance funds to pay for these charges so as to protect the collateral. Such advances would be added to the loan balance and collected through the disposition of the property. The foreclosure process is very time-consuming. The lender has to comply with state and sometimes local law, advertise the property in a newspaper of general circulation and in some states participate in mediation before the sale can take place.
Accordingly, either selling the property or giving the deed to the lender — that is, a deed in lieu — would be a quicker method for resolving this matter. Benny Kass is a practicing attorney in Washington, D. He does not provide specific legal or financial advice to any reader. Readers may email him, but he cannot guarantee a personal response.
Skip to content. If an older parent with a reverse mortgage must be moved to an assisted living facility and owes more than the home is worth, the family may pursue a "deed in lieu" transaction instead of a foreclosure. This means giving the title back to the lender. Getty Images. What is the difference between foreclosure and "deed in lieu"? Can you tell me which option would be best?
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