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Short sales and deeds-in-lieu of foreclosure, commonly called DILs are some viable alternatives to foreclosure. Short sales are when homeowners sell their homes for less than they owe on them. A DIL is when homeowners give their homes’ deeds to their lenders in return for their lenders’ agreement to not pursue foreclosure.

Lenders and Deeds in Lieu

Most mortgage lenders usually dislike accepting or processing deeds-in-lieu of foreclosure for a number of reasons. Mortgage lenders want money from their borrowers, not their borrowers’ homes and when a mortgage lender accepts a borrower’s DIL, it essentially ends that borrower’s mortgage loan commitment. Homes taken in by lenders because of DILs cost money to maintain and resell and mortgage lenders are not in business to own or manage large numbers of former mortgage borrowers’.

Have You Exhausted Other Options Before a DIL

Lenders want to see that borrowers proposing DILs have exhausted all other avenues, such as attempting to sell your home, or trying a short sale before accepting DILs.

Getting Lender Acceptance for a DIL

Your lender will not accept a DIL offer if there are any other liens on your home’s title. It is best to provide evidence of financial hardship when proposing a deed-in-lieu of foreclosure to your mortgage lender. Lenders considering DIL requests are sometimes more accepting of them when they see their borrowers are at least 31 days delinquent on their mortgage payments. Also, you should ensure you have correctly filled out your mortgage lender’s DIL application package.

Deficiences and Deeds in Lieu

You should obtain, in writing, your lender’s forgiveness of any negative loan balance resulting from your DIL.

Other Alternatives to Foreclosure

There are credit score implications for mortgage borrowers using DILs. Having your mortgage payment reduced might help more than a DIL would. The federal government offers the Home Affordable Modification Program. And California offersother mortgage foreclosure alternatives. Mortgage modification and even mortgage payment assistance, can help homeowners get back on track through reducing their mortgage payments to levels they can afford.

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