Deed In Lieu Of Foreclosure - Short Sale Opportunity?
I have found an owner with a 1st and a 2nd and he is thinking of doing a Deed in Lieu of Foreclosure. He has not missed any payments so far but is about to.
If he does this I am wondering how if any it would affect the 2nd?
Another words, would the 2nd be motivated to do a Short Sale if they knew the owner was going to do a Deed in Lieu of Foreclosure, or would the 2nd's security deed remain attached to the property since no foreclosure took place?
Btw, if the numbers matter they are 1st=83k, 2nd=25k and "as is" market value=$120k.
Thanks for you help!
:-?
The first will not accept/consider a DIL. The second might consider accepting a bit less than it's owed... but what is their motivation if they would be made whole if they foreclosed?
SSP - why won't the first consider a DIL? I always see that as an option on the material that they mail to the delinquent home owner. Is it because the home owner is not yet in foreclosure?
Thank you Pro.
Specifically why would the 1st not accept a DIL? Because of the 2nd or because the owner is not behind on payments?
Thanks again.
Though mortgagees' boilerplate non foreclosure literature includes the option, DIL, they rarely consider that option... Since I never say never, I'll say that almost never when there are junior mortgages or other liens. The lender would want to liquidate the property ASAP, and if there are any juniors... they would have to be addressed. They also want to avoid holding costs... insurance, taxes, security, etc.
It's much easier to simply foreclose and extinguish the juniors. No fuss. No muss.
I think it's more of a psychological ploy... preparing the Homeowner for the eventuality that they may get nothing in return for their home.
The reasoning for accepting a DIL must be soooo compelling that that act of interrupting the foreclosure process and taking title outweigh the risks... Lenders prefer a Sheriff's Deed or Trustee's Deed to a DIL.
Usually, the mortgagee will first attempt to cure the default via forbearance, then recommend preforeclosure sale, and, if necessary, preforeclosure short sale.
SSP - so if there are junior liens the DIL is almost a no go. That makes sense. But if there are not other liens, you still think that the lender is unlikely to do DIL?
Brenda
In 25 years I can count on one hand (and not use all my fingers) the number of DILs I've seen...
a lien is a lien whether it's a mortgage lien or a judgment