Losing your home to foreclosure can be devastating, both financially and emotionally. But if you’re struggling to make mortgage payments, there are options beyond simply letting the process run its course. Two key alternatives are consent foreclosure and deed in lieu of foreclosure, both allowing you to surrender your property while potentially mitigating the damage. This blog post explores what I have experienced as the key differences between Consent Foreclosure and Deed In Lieu of Foreclosure to help you make an informed decision about your future.
What is Consent Foreclosure?
Consent Foreclosure is a streamlined foreclosure process where you agree not to fight the bank’s legal action in exchange for waiving a deficiency judgment. Here’s what else you need to know:
- Court Involvement: A foreclosure case already needs to be open for this option.
- Negotiation: Your lawyer negotiates with the bank’s attorney for a waiver of pursuing you for the remaining debt after selling the property.
- Benefits:
- While generally faster than traditional foreclosure, you still have some control over the pace of the process. You can choose when to agree to the consent judgment, as long as it’s before the judgment of foreclosure and sale has been entered(and in some rare cases, even after the judgment order has been signed).
- Avoids potentially lengthy and stressful court proceedings.
- No need to submit detailed financial information to the bank, protecting privacy if you have significant assets.
- Drawbacks:
- Doesn’t necessarily remove the foreclosure record from your credit report.
- Still negatively impacts your credit score, though potentially less than a traditional foreclosure.
What is Deed in Lieu of Foreclosure?
Think of this as a direct agreement with the lender, outside of court, to avoid foreclosure altogether. You voluntarily hand over the deed to your property in exchange for the bank releasing you from further mortgage obligations.
- Court Involvement: No court action is required.
- Negotiation: You work directly with the lender, often involving documentation like pay stubs and tax returns.
- Benefits:
- Can potentially keep a foreclosure filing off your record. The moment a foreclosure case gets filed in court, it gets entered in the public records section of your credit report, potentially causing significant damage to your score. To minimize the impact, aim to approach the bank within the first 90 days of missing a payment, before the case reaches court. This early intervention is crucial in potentially keeping the foreclosure off your record and shielding your credit score from unnecessary harm. Time is of the essence!
- Faster process than traditional foreclosure in some cases.
- Eliminates deficiency judgment like consent foreclosure.
- Drawbacks:
- Requires detailed financial disclosure to the lender.
- May not be available if the lender refuses to accept a deed in lieu.
- Still negatively impacts your credit score, though potentially less than a traditional foreclosure.
Which Option is Right for You?
The best choice depends on your specific circumstances and goals. Consider these factors:
- Timeframe: Do you need a quick resolution, or do you want a longer court process? When do you want to vacate the property?
- Credit Score: How important is minimizing the impact on your credit?
- Financial Assets: Are you concerned about protecting assets from a deficiency judgment?
- Lender Preference: What option is your lender more receptive to?
Consulting with an experienced foreclosure attorney is crucial. They can assess your situation, explain the legal nuances of each option, and guide you towards the best course of action for your unique needs. In some cases, challenging the lender’s standing may also be a viable foreclosure defense, potentially delaying or even stopping the foreclosure process if the lender cannot prove they have the right to foreclose.
Remember:
- Both consent foreclosure and deed in lieu can help you avoid the full brunt of foreclosure and its consequences.
- Each option has its own benefits and drawbacks, so careful consideration is key.
- Seeking professional legal advice is essential to navigate this complex process and protect your interests.
Don’t face foreclosure alone. By understanding your options and working with a qualified attorney, you can minimize the damage and move forward with confidence.
