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Discussion Starter #1
Does anyone know anything about a deed in lieu? We are trying to go thru the process with Wells Fargo. We have made it to the negotiator step. Any ideas how long it will take or what the chases of it going thru are?

Thanks,
 

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From what I can gather every lender handles it a little differently. We are experiencing a short sale and it's been all very strange. My mother in law is also doing a short sale and she is months ahead of us but so far everything that she has had to do our lender has done none of. IDK
 

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Here is an actual forum within the forum of loansafe.org for just deeds in lieu :

Deed in Lieu of Foreclosure - Do You Need Help to Walk Away?

The only thing you have to be careful of is a short sale etc which you are not doing. In that you must be up on the rules of your state, IRS etc as sometimes in certain cases , in certain states you can be charged the difference of what the house sells for ( the new buyer pays) and what you owe. You might also owe the difference in state taxes and IRS. Good luck to anyone going through any of these proceedings. Proceed with caution.
 

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Happy Momma posted a great site for you. I spent many hours there when i was working on a short sale for a friend. There were some good contacts listed, and details of each company's process.

Once I started working with this particular bank it was a long frustrating process, and we lost one buyer. The second buyer stuck through the short sale process because we were able to swap in his offer in the middle of the process, avoiding starting at all over again.

With DIL I think your credit takes a bigger hit than SS. I took off work in April 2009 to get the house in great listing shape, listed the house in May 2009, and we closed the SS in the middle of November 2009. Getting the property in great shape was key to getting the final buyer to wait through the process.

In the end it was an administrative assistant to an executive at BOA that felt sorry for me that made the deal work. BOA did a massive re-org and overnight the lossmit department i worked with in PA for over 5 months, no longer handled loss mit, and no one would answer the phone. I used her number that I originally got on the loansafe site, and she found the department that was now handling the loan in CA. The manager called me back, got someone assigned and we got documents done in a few hours late at night and closed withing a week. If she had not helped me, we would have lost the second buyer and a foreclosure was coming fast. The fact that I was referred to the new manager in CA by a SVP's administrative assistant, gave us priority from the manager. It was plain old luck. For our luck, I am sure their were 200 other people that got frustrated and ended up being foreclosed on.

We were able to take advantage of the debt forgiveness act at that time to avoid taxes, but things may have changed since then.

Good luck.
 
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Discussion Starter #6
Update - we have been approved by the Negotiator. Now we are waiting for final paperwork from the Attorneys. So far, all they have asked us to do is be out of the property by the 15th....we already are...pay homeowners association fees.....there are none....and have no liens on the property....dont beleive there are.....So, please keep us in your prayers for this to finally be done and behind us.
 

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Good luck!
 

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We were advised by 3 attorneys NOT to do a deed in lieu. But that's not you.

Wells Fargo is up to their ears in just as much trouble as Bank of Hell ever as for false paperwork, robo signing and to many other issues to go into. They just tried to sue us. The two run neck and neck for nasty and crooked.

The debt forgiveness for the taxes on the house isn't up until Dec 2012. So you should be ok there unless it's a refinance and the money was used for anything other than upgrading to add value to the house.

I assume one of the attorneys is for you ONLY. If they, meaning Wells Fargo, starts balking ask your attorney to ask them for the ORGINAL, and only orginal, paperwork from when the house was bought...in it's entirety. See if they can produce it...doubtful. If they can't they might be more open to "working" with you.

Deed in lieu is NOT the same as short sale. Make sure in the paperwork is the fact that they hold you harmless meaning they will not come back on you for anything, any way, shape or form.

DO NOT SIGN ANYTHING UNTIL YOU YOURSELF HAVE READ EVERY LINE....AND THEN READ IT AGAIN. DDon't just let the lawyer tell you what it says. READ IT YOURSELF AND ASK QUESTIONS. That's what he is paid for. Take it home and do it...away from the ...sign here...and here...and here....with no chance to read anything....you can always take it back to him or mail it back to him. In the very end YOU are responsible for knowing what is in there....the lawyer is only there to make a living...you are there to be able to live. Be armed with all the information you can get. If you have a question ask the attorney. That's what he is getting paid for...
 
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Potential tax liabilities


An overlooked downside to a deed in lieu of foreclosure is the possible forgiveness of the deficiency balance. Under federal law, a creditor is required to file a 1099C whenever it forgives a loan balance greater than $600. This may create a tax liability for the former property owner because it is considered "income." However, the Mortgage Forgiveness Debt Relief Act of 2007 provides tax relief for some loans forgiven in 2007 through 2012. Key being some.....

The key issue in a deed in lieu of foreclosure is whether the lender is willing to forgive the deficiency balance. Read the contract carefully to see how the deficiency balance issue is handled. If the document is unclear, take it to an attorney with experience in property law. An attorney's time is not cheap, but will be a bargain compared to signing an agreement you do not understand and are surprised later to realize its implications.

It all depends on how the paperwork is signed : you might owe the difference in deficient as stated in my above one. If works for you great , but proceed with caution. I would still go to the forum and a attorney to make sure the paperwork you are signing is not leaving you with a possible deficiency not just taxes which might or might not be forgiven depending on situation.


If the lender agrees to accept a deed in lieu of foreclosure, the responsibility for the mortgage deficit is not finished. The lender generally has the homeowner sign an Acceptance Agreement as well as a new deed. This agreement will stipulate that if the lender sells or transfers the property for less than what is owed on the loan (including all penalties, interest, and attorneys' fees), the guarantor of the loan (usually the homeowner) will owe any deficiency. This deficiency amount can then be pursued in the courts as a deficiency judgment or the lender can issue the homeowner an IRS Form 1099. In this latter case the deficit becomes "Phantom Income" to the homeowner. Federal legislation enacted in December 2007 now allows the homeowner to avoid income taxes on this phantom income under certain strict circumstances.

Once again depending on the bank, the circumstances, the agreement , the state ( as some don't have the forgiveness for state taxes) a possible deficiency judgement all entering into these need our prayers but the knowledge, an attorney, and a good understanding of what they will be free and clear on and what they might owe. Each state has different regulations as well. Proceed with caution!!! Knowledge is power.

By the way good job and kudos Scott for your diligence and knowledge helping your friend in the short sale.
 

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Warning proceed with caution

I understand you are doing a deed in lieu but thought I would put the laws of your state in case , other possibilities come into play or others seeing this understand what they might face, each state has different laws etc. Even deeds in lieu have deficiency possibilities. Hope this helps.


I have not seen any other walk aways from Arkansas. I did a Google search on foreclosure laws in your state and they are quite different than those of other states. Below is what I found. The bad is that the banks can get a deficiency judgment, the good and interesting part is that they property had to be valued before it is forclosued and put on the market by the bank and the bank and only sue for the difference between sale and market value and they have only 12 months to do so.

Best of luck!
Quick Facts on Arkansas
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust, Mortgage
- Timeline: Typically 120 days
- Right of Redemption: Varies
- Deficiency Judgments Allowed: Varies
In Arkansas, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process. However, an appraisal of the property must be made prior to the schedule date of foreclosure.
In any foreclosure under a mortgage or deed of trust in Arkansas, the property must sell for not less than two-thirds of the appraised value. If it does not, then it may be offered for sale again within twelve (12) months. The second sale may be to the highest bidder without reference to the previous appraisal.
Judicial Foreclosure
In judicial foreclosure, a court decrees the amount of the borrowers debt and gives him or her a short time to pay. If the borrower fails to pay within that time, then the clerk of the court, as commissioner, advertises the property for sale.
Sales of real property under court order will be on a credit of not less than three (3) months, but not more than six (6) months, or on installments to not more than four (4) months credit overall. To secure payment, a lien will be retained on the property for its price and the purchaser must also give a bond with surety for the amount of the purchase price.
The lender may bid at the sale by crediting a portion (or all) of the amount the court found was owed to the lender against the sales price of the property purchased at the foreclosure sale. If the real estate does not sell for an amount equal to what�s due on the mortgage loan, then the lender may seize other property from the borrower as in an ordinary judgment.
The borrower has one (1) year from the date of the sale to redeem the property by paying the amount for which the property was sold, plus interest.
Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".
Power of Sale Foreclosure Guidelines
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:
The trustee must record a notice of sale in the office of the recorder of the county where the property is located. The mortgagee's or trustee's notice of default and intention to sell shall be mailed within thirty (30) days of the recording of the notice by certified mail to the borrower. This includes any borrower of record or of whom the lender has actual notice. The notice must also be mailed to anyone who records a Request for Notice that specifically described the mortgagee including its recording information.
Within five (5) days after the notice is recorded, the trustee must mail, by certified mail, a copy of the notice of sale to each of the people who are parties to the trust deed, except for himself. Additionally, the notice of default and intention to sell must appear in a newspaper in the county where the property is located once a week for four (4) consecutive weeks, with the last notice being published not less than ten (10) days prior to the date of the sale.
Said notice of default and intention to sell must contain the names of the parties to the mortgage or deed of trust, a legal description of the trust property and, if applicable, the street address of the property, the book and page numbers where the mortgage or deed of trust is recorded or the recorder's document number, the default for which foreclosure is made, the mortgagee's or trustee's intention to sell the trust property to satisfy the obligation, including, in conspicuous type, a warning as follows: "YOU MAY LOSE YOUR PROPERTY IF YOU DO NOT TAKE IMMEDIATE ACTION" and the time, date, and place of sale.
Any person including the mortgagee (lender) may bid at the sale, except the trustee, who may bid on the behalf of the beneficiary (lender) but not for himself or herself in deed of trust sales. The high bidder must pay the price bid at the time of sale, or within ten (10) days. The lender may bid by canceling out what it is owed on the loan, including unpaid taxes, insurance, costs or sale and maintenance, but for cash for any higher price.
The trustee may postpone the sale by public proclamation at the time, place and date last appointed for sale, up to seven (7) days past the original date, but if for a longer time, then the whole notice procedure must be performed a second time, including the sixty (60) day wait.
Once the sale is complete, the proceeds will go to the pay for the expenses of the foreclosure sale, then toward the obligations secured by the trust deed that was foreclosed and then to junior lien holders in order of their priority. The original borrower is entitled to receive any remaining funds. The successful bidder receives a trustee�s deed.
The lender may sue the borrower for a deficiency within twelve (12) months of a power of sale clause foreclosure. The lender may sue for (1) the difference between the foreclosure sale price and the balance due on the loan, or (2) the balance due on the loan minus the fair market value of the property, whichever is less.
Source: Loansafe
 

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If the lender agrees to accept a deed in lieu of foreclosure, the responsibility for the mortgage deficit is not finished. The lender generally has the homeowner sign an Acceptance Agreement as well as a new deed. This agreement will stipulate that if the lender sells or transfers the property for less than what is owed on the loan (including all penalties, interest, and attorneys' fees), the guarantor of the loan (usually the homeowner) will owe any deficiency. This deficiency amount can then be pursued in the courts as a deficiency judgment or the lender can issue the homeowner an IRS Form 1099. In this latter case the deficit becomes "Phantom Income" to the homeowner. Federal legislation enacted in December 2007 now allows the homeowner to avoid income taxes on this phantom income under certain strict circumstances.

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This is Bank of Hell's policy. Wells Fargo I don't know. We went thru this for almost 2 years back and forth.
One I do know, they can't do a 1099C for cancellation of debt AND do a deficiency judgement. It's one or the other. And in Florida it's the deficiency judgement they are going for.
The best type of lawyer to go to is a foreclosure lawyer and they are now everywhere with most a free consultation. We've used 2. This is where they specialize.
Quite honestly, I'm glad the house went down in the bankruptcy so we don't have to deal with either. 2 years of BS is enough
 
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Big hugs to you Nikko, what a horrible horrible time for you. I pray that your blessings and abundance flows to you now, and all the ugly is over. You are such a strong woman to have gotten through all this.
 
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Great points on the deficiency amount. Sometimes the bank will not give final approval unless you sign a promissory note to pay back the deficiency or some fraction of it.

We ended up signing a promissory note to get out of the house that was a short sale. I negotiated the amount down, got a 0% interest rate that was spread over 25 years, so the monthly payment was very small and there would be no reason to pay it off early.

BOA immediately sold that note to a collections agency who probably bought it at 25-30 cents on the dollar. They made a first offer of 50% off the loan balance for full payment within the first couple of months. They just made a second offer of 60% off for full payment now. It has to suck to be sitting on a 0% note for 25 years as you watch the dollars real value drop everyday.

There is still no reason to pay it off, even at the 60% discount. I hated that we had to agree to it to get the job done, but the analysis made it obvious to take the deal, and get out of the property taxes, HOA, insurance, maintenance, etc., and head for greener pastures with much lower monthly housing related costs (about $1500 per month savings on housing related costs alone). Then add in the ability to be forgiven the taxes on the difference and it was a no brainer.

Like Niko said, read everything and don't trust that your attorney will catch all the details. Write down all your questions to be answered before signing.
 

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Discussion Starter #14
So far no money to be exchanged. I will wait for the final paperwork, but all requirements/agreements have been met and money wasnt one of them. So, saying prayers that it stays that way. I will update once we get the final papers.....
 
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