What Is a Deed in Lieu of Foreclosure in PA?
It is important to know that if you are unable to make your mortgage payments, your lender will need to take action. However, a deed in lieu of foreclosure could potentially prevent the negative consequences of a foreclosure.
There are both benefits and drawbacks to pursuing a deed in lieu of foreclosure, and seeking guidance from our knowledgeable lawyers is recommended. While a deed in lieu of foreclosure will be reflected on the homeowner’s credit report, it is a more favorable outcome than foreclosure. Additionally, this option would put a stop to foreclosure proceedings if they have already begun and prevent the homeowner from enduring a prolonged wait before losing their home.
For a free case evaluation with our Pennsylvania deed in lieu of foreclosure lawyers, contact Young, Marr, Mallis & Deane today at (215) 701-6519.
What Is a Deed in Lieu of Foreclosure in Pennsylvania?
If a homeowner in Pennsylvania wants to avoid foreclosure proceedings or a final judgment of foreclosure, there are various methods available. One possible option is a deed in lieu of foreclosure, which can assist the homeowner in escaping a difficult financial situation. However, the homeowner must exercise caution while navigating the process to avoid being liable for any outstanding debts once it is completed.
Through a deed in lieu of foreclosure, the homeowner and the mortgage lender come to an agreement where the homeowner surrenders the property’s deed to the lender. In exchange, the lender will cease any foreclosure proceedings and cancel the mortgage loan. After the lender receives the deed, they can sell the property to offset the loan.
If you experience a foreclosure, it can have a lasting impact on your ability to buy another home in the future due to its appearance on your credit report. However, our Pennsylvania deed in lieu of foreclosure attorneys can help you navigate the complex process to ensure you make the best choice. A deed in lieu of foreclosure can release you from your mortgage obligations and prevent a foreclosure from negatively affecting your credit report.
To complete a deed in lieu of foreclosure, you will need to surrender the deed to the lender. This will allow the lender to remove their lien on the property and recoup some of their losses. Additionally, this action will release you from any remaining mortgage debt. Homeowners who find themselves with an underwater mortgage, where they owe more than the home is worth, often seek out this type of agreement.
What Is the Difference Between a Deed in Lieu and a Foreclosure in Pennsylvania?
It is important to note that a deed in lieu and a foreclosure are not interchangeable terms. When you enter into a deed in lieu agreement, it means that you and your lender have come to the realization that you can no longer afford to make your mortgage payments. The lender agrees not to initiate foreclosure proceedings as long as you willingly transfer ownership of the property to them.
In return, the lender releases you from your mortgage obligations and might even provide you with financial assistance to maintain the property until you vacate. While a deed in lieu will be reflected on your credit report, it will not have as severe an impact as a foreclosure.
If your lender goes through the foreclosure process, they must follow legal procedures to regain control of the property. However, this process can have negative consequences for you, such as a damaged credit score that lasts for up to 7 years. Buying another home during this time might be challenging unless you can pay for it in cash. Additionally, your lender might or might not offer you financial compensation to vacate the property if it goes into foreclosure.
Keep in mind that foreclosure proceedings are both lengthy and costly for both you and the lender. It is crucial to consider all options before agreeing to give up ownership of your home. In many instances, restructuring your mortgage might be the best solution for both parties instead of moving forward with a foreclosure.
Reasons Why a Lender Will Accept a Deed in Lieu of Foreclosure in Pennsylvania
There are several advantages that can motivate a lender to agree to a deed in lieu of foreclosure. If you are considering this option in Pennsylvania, it is helpful to know some of the benefits that your lender can receive by accepting your deed in lieu of foreclosure.
Lenders often prefer to gain possession of well-maintained properties since they are more likely to fetch a higher price and sell faster. In such cases, a lender might require the borrower to maintain the property in good condition through a deed in lieu agreement.
Control Over the Property
When a borrower fails to make timely mortgage payments, the lender has the option to seek legal action to take possession of the property through foreclosure. This process involves hiring attorneys to represent the lender in court and prove that the borrower has not been meeting their financial obligations. Even after obtaining court approval, the lender must still go through the legal process of evicting the borrower from the property. However, an alternative option for lenders is the deed in lieu. This option allows the borrower to voluntarily transfer property ownership to the lender, saving both time and money for all parties involved.
Reasons Why a Lender Will Deny a Deed in Lieu of Foreclosure in Pennsylvania
As a borrower, it is crucial to remember that your lender is not obligated to accept a deed in lieu agreement. There are several reasons why a lender might choose to reject a deed in lieu request, including the following:
Tax Judgments or Liens Against the Property
Clearing a secondary lien or judgment can make relinquishing your property deed more difficult. However, some lenders might be willing to collaborate with you to remove the lien if they notice any other claims on the property.
Depreciated Home Value
Your home’s value might decrease, which could result in owing more on your loan than your home is worth. If this happens, a lender might offer a deed in lieu agreement. However, the lender might require you to pay the difference between the appraised value and what you owe in order to agree to the deed in lieu agreement. It is important to note that Rocket Mortgage does not participate in this practice.
Poor Property Conditions
It is important to note that if the condition of your home is subpar, it is possible that your lender might decline any proposed deed in lieu agreement. It is recommended that you ensure the condition of your home meets the necessary requirements before proposing such an agreement to your lender.
Our Pennsylvania Deed in Lieu of Foreclosure Lawyers Can Help
Our Philadelphia foreclosure attorneys at Young, Marr, Mallis & Deane are here to provide you with a free review of your case by calling us today at (215) 701-6519.