Sarasota Real Estate - Attorney Warns Homeowners!

Sarasota Real Estate Attorney Warns Against Deed-In-Lieu-Of-Foreclosure!

Attorney warns distressed homeowners to beware bank's deed-in-lieu-of-foreclosure offer.

Lauren & Steve S. are facing foreclosure.

They tried and failed at loan modification, similar to what happens to 99.9% of all other homeowners trying to save their homes and avoid foreclosure.

It was then that this Sarasota (FL) couple received an invitation from their mortgage lender. Relieved but cautious, Steve & Lauren consulted with an attorney after talking with their mortgage lender.

What Steve & Lauren discovered about deed-in-lieu stunned them, destroying their hopes of handing the keys to their bank and walking away to a new beginning. Their attorney, who specializing in foreclosure defense, strongly advised them NOT to pursue deed-in-lieu-of foreclosure.

Their attorney called deed-in-lieu (DIL) a "...TROJAN HORSE - good for the banks; bad for the homeowner."

Steve & Lauren discovered Deed in Lieu is similar to a voluntary repossession. Apparently, a homeowner agrees to sign over the deed or title" to his/her property and the lender agrees to cancel the mortgage.

In other words, the typical deed in lieu of foreclosure is a consensual transaction homeowner complies with a long list of requirements imposed by the mortgage debt owner.

The mortgage lender evaluates a property owner's financials and circumstances and, if lucky, the lender agrees to take the house instead of suing!

If approved, the mortgage lender draws up the Deed in Lieu of Foreclosure Agreement which is signed by the grantor (i.e. homeowner) and witnessed by two people and then notarized.

Upon execution, the deed in lieu must then be delivered to the grantee (i.e. mortgage lender). The deed is also typically recorded at the local clerk of court in the public records.

No Clean "Getaway"....

Unfortunately, the DIL process is NOT as quick, clearly-defined or painless as the banks' PR people make it sound.

For instance, the lender:

1. Requires a mountain of financial paperwork to determine a property owner's eligibility.
2. Will (typically) NOT consider DIL if you have more than one mortgage encumbering your property.
3. Will (typically) NOT approve DIL if you possess (in the lender's estimation) the ability now or later to pay what you owe.
4. Reserves the right to seek a deficiency judgment against you. Unless otherwise stipulated in the Deed in Lieu of Foreclosure agreement, the lender may come after you for the unpaid debt.
5. Requires you to suffer documented hardship such as loss of job, sickness, dissolution of marriage, etc
6. Requires property considered for DIL to be your primary residence (that is, DIL (typically) is NOT for abandoned and/or investment properties.
7. Requires you to exhaust ALL other options and DRAIN any money you've put away for emergencies and/or retirement.
8. Requires you to list the property between 90 and 180 days.
9. (If approved) will require you leave the property in clean condition (lender will require an inventory & a statement of condition).

Finally, here's why Steve & Lauren's attorney could not recommend they proceed with deed-in-lieu of foreclosure, which their attorney called a "Trojan Horse."

Steve said, "Our lawyer strongly advised us not to consider deed-in-lieu. He (attorney) believed it was 'pre-judgment discovery' and advised us not to do it. He said a DIL is purely voluntary on the part of the lender and they most likely would not give me one, but would benefit by knowing all of our financial info. before they filed foreclosure."

Further, their attorney mentioned something else of interest.

Their attorney believes banks only are suggesting DIL to those with potentially fraudulent mortgages (bank @ fault) or those property owners who can be accused of fraudulent 1003 loan applications.

This attorney apparently believes myriad future lawsuits will arise from illegally transferred titles through MERS - the Mortgage Electronic Registration Systems, which mortgage debt owners used to avoid paying state transfer fees and simplify the way mortgage ownership and servicing rights are originated, sold and tracked.

For Steve & Lauren, the potential backlash convinced them to reject Deed-In-Lieu despite what their bank's PR people advertised:

1. Sign your house over & walk away with NO deficiency.
2. Receive $3,000 - $15,000 "walking" money.
3. Save your credit.

Steve & Lauren chose not to pursue deed-in-lieu-of-foreclosure.

Nagging Question!

Not to question an attorney (since he/she is attorney for heaven's sake) but I wonder if it's prudent to accept just (one) attorney's viewpoint. Why not get a 2nd opinion on something as serious as mortgage default? To me, Steve & Lauren did not get enough information from their lender about DIL for (them).

What do you think? Do you have experience with deed-in-lieu? What questions do you have about DIL or mortgage default options including foreclosure, short sale, deed-in-lieu?

Many Sarasota homes for sale remain abandoned, closed up in Florida's heat & humidity without air conditioning. Short sales are unpredictable at best with more and more banks demanding property owners provide lump sum contribution at closing or sign a promissory note before providing full payoff & satisfaction. Loan modifications continue to fail, despite happy-talk from government reports. And now, deed-in-lieu is the mortgage industry's latest marketing attempt to reduce foreclosures. What's best for you depends on your attorney, tax professional & real estate agent.

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