To complete a deed in lieu of foreclosure, homeowners must request and fill out a loss mitigation packet from the mortgage company, according to All Law. If the deed in lieu of foreclosure is accepted the mortgage company will have the homeowners sign a grant deed transferring ownership of the property to the bank, and an estoppel affidavit.
- Contact the lender
- Fill out the loss mitigation packet
- Sign over the property
Contact the mortgage lender as soon as possible. The deed in lieu of foreclosure process can take months. Ask about a possible deed in lieu of foreclosure. Some lenders may want homeowners to attempt a sale of the home before accepting a deed in lieu of foreclosure, according to All Law. If the lender is willing they will send out a loss mitigation packet.
Complete the loss mitigation packet, including all of the required forms. These packets usually require proof of income, financial statements, bank statements and a hardship letter explaining why the deed in lieu of foreclosure is needed. Return the packet to the lender.
Sign the deed transfer papers and the estoppel affidavit if the lender approves the deed in lieu of foreclosure. These documents give the lender the right to the property in exchange for canceling the loan debt. However, the lender may still want to have the homeowners pay off some of the loan debt, depending on the value of the property, states Nolo. If so, the lender will notify the homeowners during the application review process.