Deed in Lieu of Foreclosure

A deed in lieu of foreclosure occurs when the borrower agrees to voluntarily transfer title of their home to the mortgage company in exchange for cancellation of the note.  The lender then tries to sell the home to recover as much of the loan balance that you owe as possible.  Since the foreclosure process is relatively quick in Texas as compared to other states, it will probably be difficult to find a lender willing to accept this option.  If your lender is willing to accept a deed in lieu of foreclosure, you should first speak with an attorney to understand all of the legal ramifications involved.  Also keep in mind that forgiveness of debt is usually seen as income for tax purposes so you should also consult with a tax professional.

Please be aware that there are number of scams out there that involve “signing over the deed to your property”.  Transferring ownership of your property to your mortgage company through a “deed in lieu of foreclosure” to forgive your debt is legal and may be an option if the lender is willing to do so.  However, if you “sign your deed” to transfer the property to anyone else, all you’ve done is transfer ownership to that other party – you would STILL be responsible for the outstanding debt/mortgage on the property.

Remember, the time to consider these options is before your home has been foreclosed – you must act quickly!  If you have any questions or need help understanding the options available to you, please don’t hesitate to contact us.

All articles about foreclosure on this blog relate to foreclosure in the State of Texas.  State laws determine how foreclosures will proceed and the laws may vary from state to state.  It is highly recommended that you consult with an attorney regarding the legal consequences of foreclosure as well as seek the advice of financial and tax professionals.  You can also talk to foreclosure avoidance counseling agencies approved by HUD completely free of charge.