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July 28, 2014

Banks Increasingly Turning to Deeds-in-Lieu of Foreclosure

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Banks Increasingly Turning to Deeds-in-Lieu of Foreclosure

Short sales and loan modifications have grown to help offset foreclosures, but banks are also turning to deeds-in-lieu of foreclosure more too. Slightly above 20,000 deeds-in-lieu of foreclosure occurred nationwide in 2012, which is up nearly 40 percent from 2011, according to RealtyTrac. 

Some states are even seeing larger increases. For example, deeds in lieu of foreclosure skyrocketed 76 percent year-over-year in California, 53 percent in Nevada, and 49 percent in Florida.

Deeds-in-lieu of foreclosure permit a lender to take possession of a home without having to undergo the foreclosure process. The home owner is allowed to leave their mortgage debt and avoid foreclosure by turning over the home to the bank. Often times, a deed- in-lieu of foreclosure offers “cash for keys,” providing a cash payment to the distressed home owner in order for them to vacate the home, without letting the home fall into foreclosure. 

Source: “Deeds in Lieu of Foreclosure: Naughty or Nice?” Forbes (April 23, 2013)

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