A mortgage release, also known as a deed in lieu of foreclosure, essentially transfers ownership of a property back to the mortgage company in exchange for releasing the borrower from making any more loan payments. Deeds in lieu are usually initiated by the borrowers and need to be mutually agreed-upon and conducted in good faith.
Deeds in lieu are beneficial for the borrowers, as it releases them from further obligation and saves them the embarrassment and credit damage that would come from a foreclosure. They are also beneficial to the lender, as foreclosures and forced removals are themselves costly. Also, deeds in lieu greatly reduce the risk of borrower revenge, since the borrowers are incentivized to maintain the property to receive more generous terms.
A deed in lieu of foreclosure could be a good option for borrowers that are underwater, behind in payments, or are unable to sell the property. Sometimes, lenders include relocation incentives or allow the borrowers to remain in the property, rent free, while other living situations are secured.
As with any legal document, it is strongly advised that you have an experienced real estate attorney review the deed in lieu to make sure that the terms are satisfactory and that you are getting the best deal possible. The language in these documents can be dense and complicated, so it is worth the money to have an attorney review them to ensure the language is optimal for you.
Additionally, you may also want to speak with a CPA to remain informed of any tax implications from the deed in lieu. You don’t want any surprises when April 15 rolls around.
If you are having difficulty paying your mortgage, just remember that there are options available to you. Be sure to contact an experienced attorney to go over your specific situation and recommend the course of action that will be most beneficial to you and your family.
Stephen K. Hachey, a Florida real estate attorney, can help you navigate this process and make the most of a difficult situation. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.