In our last post, we began speaking about some of the alternatives for homeowners who are delinquent on their mortgage payments. Here we’d like to pick up on the topic of another possible alternative to foreclosure: deed in lieu of foreclosure. This is an arrangement in which the lender allows the homeowner to sign their home over to the lender rather than going through a foreclosure, allowing the lender to sell the home to make up for what was lost.
One important point to make about short sales and deeds in lieu of foreclosure is that there is a good possibility that the lender will suffer a loss and seek a deficiency judgment from the borrower. A deficiency judgment is a court order that requires the borrower to pay back the loss suffered by the lender at the sale of the home.