Thomas Paralegal

Irwin cites other possible options you may discuss with your lender to avoid foreclosures:
1) restructure the mortgage by extending the term so that you have lower payments as long as the lender does not ultimately lose any interest,
2) temporarily allow you to miss payments until you get back on your feet by adding interest not paid in the amount of the loan, and
3) completely forgive interest or grant a vacation from payments for up to a year or more, as long as you can demonstrate you have the potential to once again pick up payments after that time.

Some property owners may attempt to sell their property before it is foreclosed. That means they could lose their entire equity if the buyer is not found quickly. Buyers of real estate know that the best time to approach sellers who are in foreclosure is sometime before the property is sold. If it goes on sale, the buyers may get the property at a good price, but the terms would be stiff— all cash. This may be difficult if the buyers have not developed a quick source of cash through their bankers or friends. If the buyers meet with the distressed sellers prior to the sale, the sellers may be motivated to dispose of the property up to 30 percent under market. The sellers may accept extremely creative terms with some flexible carry back financing. Perhaps the buyers could trade them a recreational lot and a personal note. These sellers are not in a position to drive a hard bargain (Beckley, supra),

A deed in lieu of foreclosure is a way of allowing a mortgagee to take back the title to the property in lieu of foreclosure so that your credit report does not have a foreclosure showing up on it. When this happens, the mortgage lender takes the deed to the property without foreclosure proceedings in the event the owner fails to make defaults or violates his mortgage payment schedule. If the lender would accept a deed in lieu of foreclosure, the borrower would transfer the property to the lender immediately without forcing the lender to go through the expensive foreclosure process. The lender could turn around and sell the property to another person. This arrangement is mutually beneficial to both parties. Lenders do not relish foreclosing on assets. Once a creditor forecloses or takes back mortgaged property, it becomes a liability, not an asset to the lender. Expenses related to the payment of property taxes, insurance, security and maintenance are too onerous for some banks, Institutional lenders would rather prefer to give borrowers every chance to keep the house or to wiggle out of a tight situation by selling the property to others prior to the foreclosure of the property. The deed in lieu of foreclosure is a technique used by debtors to forestall loss of property to lenders. It is common for a mortgagee to take a conveyance from the mortgagor in full or partial satisfaction of the mortgage obligation and as a substitute for foreclosure. This practice often occurs frequently in both the commercial “workout” context and in residential mortgage default settings. This device is attractive to the parties for several reasons.
The mortgagee may seek to avoid the delay and expense associated with foreclosure. This consideration may be especially compelling in a jurisdiction where a judicial proceeding is the only foreclosure remedy, and the delay and expense may well be exacerbated if the mortgagor files a bankruptcy petition prior to the completion of the foreclosure. In addition, the mortgagor is frequently of dubious solvency and the mortgagee may be perfectly willing to for ego seeking a deficiency judgment. The mortgagee may find the deed-in-lieu transaction advantageous as a means of avoiding long post-foreclosure redemption periods. Finally, a mortgagee may be motivated either by a genuine desire to aid the mortgagor or by an aversion to the publicity associated with a court action (Restatement Third, supra). However, lenders are not required to accede to the deed in lieu of foreclosure arrangement. Some lenders absolutely refuse to take part in this procedure.