Deed in Lieu of Foreclosure
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy.
In order to be considered a
deed in lieu of foreclosure, the indebtedness must be
secured by the real estate being transferred. Both sides must
enter into the transaction voluntary and in good faith. The
settlement agreement must have total consideration that is at
least equal to the fair market value of the property being
conveyed. Generally, the lender will not proceed with a deed in
lieu of foreclosure if the current fair market value of the
property exceeds the outstanding indebtedness of the borrower.
Home Insurance Companies |
Vancouver Real Estate
Because of the requirement that the instrument be voluntary,
lenders will often not act upon a deed in lieu of foreclosure
unless they receive a written offer of such a conveyance from
the borrower that specifically states that the offer to enter
into negotiations is being made voluntarily.
This will enact the parol
evidence rule and protect the lender from a possible subsequent
claim that the lender acted in bad faith or pressured the
borrower into the settlement. Both sides may then proceed with
settlement negotiations.
Source: Wikipedia