Foreclosure Alternatives

SELECTIVE FORECLOSURE ALTERNATIVES (NON-RETENTION OF REAL PROPERTY):

The below alternatives must be considered in more detail, we only present a brief overview for information purposes.

I. Deed in Lieu of Foreclosure

Both the Lender and the Borrower have to agree.  The Borrower/Homeowner “gives back” the property to Lender without need for further legal action. Borrower deeds property to lender and lender in most situations agrees not to pursue personal deficiency.   Because a completed Foreclosure action destroys all other “secondary” liens (2^nd mortgage, home equity line of credit, mechanic’s liens, real estate taxes, in some cases condominium association dues), and the Deed in Lieu of Foreclosure does not, this procedure is not popular with the Lenders.

Some reasons why borrowers consider doing it:

• Avoidance of negative impact on credit score to some extent: deed in lieu is not as detrimental to a credit rating as a foreclosure sale;
• Borrower cannot reinstate mortgage;
• No equity in the property (equity being cash value after all liens, loans, and fees are paid off).

II. “Short Sale”

Both the Lender and the Borrower have to agree.  Instead of taking back the subject property, the Lender agrees to a reduced payoff so that the Borrower can actually sell to a third party.  Tenenbaum Law Group has extensive negotiating experience, it successfully closed numerous complex short sales.

Some critical features:

• Sale price does not cover outstanding mortgage;
• Lender approval required and as well as negotiations with all other lien holders in order to transfer clean title to the third party buyers;
• Banks typically offer relocation assistance at closing if the property is a primary residence, which amount varies greatly, and in some cases are significant.

III. Consent Judgment

• Similar to Deed in Lieu of Foreclosure except for the situation with the 2-nd  mortgage on property.
• 2-nd mortgagee bound, it has to agree with the Judgment if proper notice has been given and legal requirements complied with, and 2-nd mortgagee does not object.

2-nd mortgagee can later file a collection case based on the Note even though the mortgage is foreclosed.