Foreclosure FAQ

Questions:

• Will my bank negotiate with me or lower my rate so I can avoid foreclosure?
• Can I sell my house for less than I owe on my mortgage (short sale)?
• Can bankruptcy stop a foreclosure?
• What is a deed in lieu of foreclosure?
• What happens to renters when a property is foreclosed on?
• Are there foreclosure protections for military personnel?

Answer:

What is a deed in lieu of foreclosure?

With a deed in lieu of foreclosure, you give your home to the lender (the "deed"), and in exchange, the lender cancels the loan rather than foreclosing on the property. In most states, a lender is allowed to sue you to recover any remaining deficiency--the difference between what the lender can sell the house for and what you owed on the mortgage. Before you agree to a deed in lieu of foreclosure, make sure that the lender agrees, in writing, to forgive any deficiency that exists. Deeds in lieu of foreclosure are not possible if there is a second mortgage, unless the same lender owns both loans. For more information, see Nolo's article Short Sales and Deeds in Lieu of Foreclosure.