The New Alternative to Foreclosures

[Jennifer Griner]

In an effort to stem the growing tide of mortgage loan defaults across the country, the federal government has come up with yet another alternative: a deed in lieu of foreclosure agreement (DIL).

The DIL offers another option to homeowners who are unable to complete a short sale or who don't qualify for one.

The Home Affordable Foreclosure Alternative program (HAFA) is intended to encourage lenders to facilitate short sales and deeds in lieu as alternatives to foreclosure. HAFA is part of the Home Affordable Modification Program (HAMP).

A deed in lieu of foreclosure allows a homeowner to hand the house over to the bank and walk away from the property. While it would still negatively impact the home seller's credit score, it is preferable to a foreclosure. A foreclosure can stay on the credit report for about five years; a deed-in-lieu can be wiped out in about four years.

A DIL also allows homeowners to voluntarily give up the home to satisfy the first mortgage, even if the home is worth less than the loan balance.

Here are the HAMP guidelines...



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