Credit Implications of a Deed in Lieu of Foreclosure

oceantide

LoanSafe Member
Sep 13, 2011
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Hi oceantide

Thanks for your post.

No, I don't think you'll ever need to file BK. I advised not paying off your CC balances. But, were it me, I'd let them go delinquent. Why? "Cash in fist" - your fist of course, LOL.

If your first was purchase money it's likely non-recourse and you won't be issued a 1099-C. If it's recourse, I'm glad to hear you may be able to get the insolvency exemption. In either instance, IMO you're better off going to FC because you'll be able to stay rent free for a much longer time.
Letting them go delinquent...sure more $ in hand but then my score (which I don't care about unless I need a rental for a few months before leaving the country) takes a hit and wind up in collections....where I may be able to settle for less than I owed? Is that the benefit to your recommendation there?

First was $0 down.

After meeting with a real estate attorney (who is also a real estate agent in short sales :p) he said DIL was a long shot, he could handle our short sale (of course he will!), and we would get a 1099-C with a FC even though WA State is 99.9% nonrecourse. Sigh, so many conflicting stories about whether or not you get a 1099-C, if it means anything or not, and how to handle it.
 

TomEason

LoanSafe Guide
Jun 18, 2009
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oceantide

Why not just read the WA statutes governing mortgages and foreclosures? It's easy.

Who cares if your CCs end up in collections? How will they collect. Even better that you'll be out of country, LOL.
 

oceantide

LoanSafe Member
Sep 13, 2011
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Thanks Tom! You've definitely given me some food for thought.

If going down the FC route in WA state where most are non-judicial, does that make recourse loans in effect non-recourse loans? Its been a while since I've gone over my loan docs but it does have the power of sale in the deed of trust. However when on the phone with BECU one time a lady said I had a recourse loan (though that may have been a scare tactic). Is there a certain spot usually where I can find "recourse" or "non-recourse" verbiage?
 

TomEason

LoanSafe Guide
Jun 18, 2009
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oceantide

Again, why not just read the applicable WA statutes? If you use Google, you'll find them.

FYI, you won't find anything applicable in your loan docs. In my state, if a loan is purchase money, not only is it non-recourse, but there can be no potential IRS liability for COD income. Was your BECU loan purchase money?
 

oceantide

LoanSafe Member
Sep 13, 2011
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Hey Tom, I keep reading sites about receiving up to $2K compensation from the mortgagee/lender for a DIL (though one site said you pay the lender up to $2K) though I can't seem to find out why they would pay you, other than the fact that it saves them money over a foreclosure. But why give you any money at all? Which is it receive or pay and why? Only for HAFA loans? Thanks.
 
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TomEason

LoanSafe Guide
Jun 18, 2009
12,390
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SF Bay Area CA
Hey Tom, I keep reading sites about receiving up to $2K compensation from the mortgagee/lender for a DIL (though one site said you pay the lender up to $2K) though I can't seem to find out why they would pay you, other than the fact that it saves them money over a foreclosure. But why give you any money at all? Which is it receive or pay and why? Only for HAFA loans? Thanks.
Sorry but I don't have a clue; I've never participated in a DIL.
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
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Colorado
www.loansafe.org
Hey Tom, I keep reading sites about receiving up to $2K compensation from the mortgagee/lender for a DIL (though one site said you pay the lender up to $2K) though I can't seem to find out why they would pay you, other than the fact that it saves them money over a foreclosure. But why give you any money at all? Which is it receive or pay and why? Only for HAFA loans? Thanks.
HAFA is only available to those loans backed by Fannie Mae and Freddie Mac;

Home Affordable Foreclosure Alternatives (HAFA) Program

The lenders pay a compensation such as Cash for Keys in exchange for the property being left in good condition.

FHA also offers compensation;

Mortgagee can pay, not to exceed $2,000 compensation, to the mortgagor.
 

crazyeyes

LoanSafe Member
Mar 6, 2012
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Sorry I know this post is old, but DIL is a matter of signing paperwork. It takes a couple of weeks. It's a good option if you want to get it over with and avoid a deficiency. Plus most banks are offering cash incentives up to $20k.
 

TomEason

LoanSafe Guide
Jun 18, 2009
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Hi Chickamole

If you visit that thread and read post #1, you'll see my reasons. But they're my personal opinion, and not universally shared.
 

olivianphoenix

LoanSafe Member
Jul 10, 2011
28
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Arizona
Hi. it's been along time since I posted here. I let the bank foreclose in March 2012. I now need to know the exact date they transferred title. I've checked the county assessor site (Maricopa, Az) but that transfer doesn't show. It just has my purchase of the property in 2007 and then the current owner's purchase from Fannie Mae in Sept 2012. Anyone know how to find the actual date? Thanks!
 

Bebzmle

LoanSafe Member
Mar 11, 2013
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Hi, I hope one of you can give me some words of wisdom. My DIL actually happened in 2009. The property was in Las Vegas and it was owned by my father and stepmother BUT my name was solely on the loan (yes, stupid me!). The DIL was with Chase Mortgage and it took about a year to process and get approved. Anyway, during the whole time the DIL was in process the mortgage was not being paid because the renter was gone and my father had lost his job. I never expected to be saddled with delinquent payments totaling at least $23,000 on my credit report even though the DIL was accepted. I just assumed that the missed payments would disappear once the DIL was accepted by Chase. Is there anything I can do about the delinquent payments showing on my credit report? My husband and I are currently banking with Chase for the last 2.5 years but I have not heard anything from Chase about my delinquent payments on that Las Vegas property. What recourse do I have with regards to this delinquent amount on my credit report? Will this prevent me from being able to apply for a home loan or any kind of credit/loan? Thank you.
 

buchanovich

LoanSafe Member
Oct 9, 2013
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New Jersey
There's not much you can do about the payments record because those payments are indeed delinquent. Did your DIL specifically cover the entire balance due? If so, time is the only remedy. If the DIL did not specifically forgive the debt in such a way that deficiency is excluded, the first thing you really need to do is get your account out of there. I do not know NV law but it's generally uniform throughout the country that a bank has the right of "offset" meaning they can seize money from one account to pay for a delinquency in another. There are certain technicalities which can prevent this, such as the account being joint and the debt being only yours. This is if NV recognizes "Tenancy by the Entirety" in bank accounts and further, that TBE is presumed. Another protection would be for Social Security money for 60 days rolling. Even so, someone can make a mistake and foul you up. I can';t see that happening because of the time lapse but be aware. Move the account unless they ruled out deficiency. Otherwise, not much you can do for another two years when that amount should roll off.

Should not be a problem with loan applications if your ratios are good. Loan applications I've seen (bought a house last year) ask about foreclosure or DIL within the last 3 years, though a few used 5 years. I did a VA, which generally is more restrictive and they asked about 3 years: VA guidelines make one eligible 2 years after such an event. So, you should be OK. One clever thing you could do is to allow the new lender to talk you into opening an account with them so, if that's the plan then just keep the Chase balance low and carefully manage you cash flow until then.