Bank of America This is an attempt to collect a debt

[Greebo]

I'm curious why she'd recommend not doing a deed in lieu. If the bank will do a deed in lieu, you walk away with no responsibility for the difference. If they foreclose and you're in a recourse state, they can come after you or the difference later.

I'd go back and re-question that advice.

[NikoSan999]

Greebo, I specifically went in to ask that question a second time. First being on the consult. This was back in June or July. I swear I can't remember now why she said "not a good thing to do." It made perfect sense at the time but now...just can't remember. We have an appointment with another lawyer Wednesday. We're going to find out then whether both houses can go down cause in the Wells Fargo thread a Scott said a house can't be wiped out. This is the first I've heard or read of this. And we are in a recourse state. We need to wipe out both houses. We will find out more Wednesday.

Wish I could remember why not.....

[scottp999]

Deed in Lieu's are tricky.

Depends on if your property has mortgage insurance or not. Sometimes even if mortgage insurance was not on at the time of closing (no mention on the HUD1, settlement statement) the lender would purchase MI after closing as a condition of being able to sell the loan to fannie or freddie.

Speaking in general terms, if you have mortgage insurance, they can decide the rules and terms of the DIL acceptance because they are the ones that end up holding the bag and making payment for part or all of the loss to Fannie or Freddie. Through subrogation they end up with standing to sue and recover losses.

Radian is one of the larger MI companies. They require it is an owner occupied property, on the market for fair value at least 90 days, and must be discharged from a chapter 7 bankruptcy. In addition, the real kicker is that they may require a cash contribution or promissory note from the buyer to approve the DIL. If they see $150 a month wiggle room in your cash flow after the mortgage is gone they will likely demand you sign a promissory note at 0% interest for 30 years at that amount.

Radian's servicing guide is available online in pdf.


Freddie Mac has an online servicing guide, but again if you have mortgage insurance they would override freddie's rules, if freddie is looking to recover losses from the insurance.

Freddie's rules for considering a DIL and Eligibility Requirements are in Volume 2 of their servicing guide, Chapter B65, Sections 43 and 44. Their definition (section 42) of a DIL says it results in a discharge of debt:

B65.42: What is a deed-in-lieu of foreclosure? (09/30/98)

A deed-in-lieu of foreclosure is a Borrower's voluntary conveyance of clear title to the property to us in exchange for a discharge of debt.

B65.43: When to consider a deed-in-lieu of foreclosure (01/02/04)

If the Borrower's involuntary inability to pay is permanent or long term and he or she cannot retain ownership of the property, and has been unsuccessful in attempts to sell the property, then you should explore the possibility of a deed-in-lieu of foreclosure as a solution to the Delinquency.

All other relief and workout options should be considered before recommending a deed-in-lieu of foreclosure. If the property is located in a State requiring a judicial foreclosure, and the foreclosure process takes longer than six months, then a deed-in-lieu of foreclosure may be appropriate to avoid a lengthy and costly foreclosure.

We will not accept a deed-in-lieu of foreclosure on a Mortgage secured by a Manufactured Home, unless the BPO indicates that the property is in very good condition, there are no other liens on the property and the Borrower has been unable to sell the property.

If a Borrower has been discharged from a Chapter 7 bankruptcy and the Mortgage payments are not current, then you should consider recommending a deed-in-lieu of foreclosure.

B65.44: Eligibility requirements (09/30/98)

To recommend a Borrower for a deed-in-lieu of foreclosure you must ensure that all of the following eligibility requirements are met:

(a) Borrower Requirements

The Borrower must:

1. Be experiencing or have experienced an involuntary inability to pay

2. Be delinquent in his or her payments, or in imminent danger of default

3. Complete Form 1126

4. Be cooperative and allow access to the interior of the property for a BPO

5. Have had the property listed for sale in the Multiple Listing Service (MLS) (unless there is no MLS in the area where the property is located) with a licensed real estate broker for at least 90 days, at no more than 110 percent of market value, and all attempts to sell the property have been unsuccessful


(b) Requirements when the Borrower does not have an involuntary inability to pay

If the Borrower does not meet the involuntary inability to pay requirement, but all of the following conditions exist, you may consider recommending the Borrower for a deed-in-lieu of foreclosure:

1. The property is located in a state where pursuit of a deficiency judgment is not practical, and

2. The total indebtedness is equal to or greater than 115 percent of the probable sale price of the property based on an as-is value with a 90-day marketing timeframe

3. The Mortgage is 90 days or more delinquent


(c) Property requirements

The property must not:

1. Have any type of structural damage, environmental hazard, or condition that poses a health or safety risk

2. Pose a Risk of Property Ownership to us

3. Have any other liens or encumbrances filed against it, or if so, the lien holder must agree to release its lien


Servicing Note:

You must order a BPO to determine the value and condition of the property.

They can change requirements any time. The latest FHLMC guide is located on the AllRegs link on the upper-right of this page:

http://www.freddiemac.com/sell/guide/bulletins/

[scottp999]

In addition, looking at the 2009 Fannie Mae Selling Guide, B3-5.3-08, Derogatory Credit Information (04/01/2009) .

A DIL requires waiting a minimum of 4 years to qualify for a new loan. In comparison it is 2 for Short Sale (pre-foreclosure sale) and 5 for a foreclosure.

[ravenmaniac]

I realize mortgage companies can not really set their own rules. I will admit I am not financially savvy when it comes to mortgages.

When we had issues my husband and I asked tons of questions and wrote everything down. Our mortgage company was very helpful and willing to work with us.

Nikko - I hope you can find a solution and peace of mind for your situation. You have been given some excellent advice to follow.