Deed-in-Lieu of Foreclosure - HAFA Assistance
by Trevor from Phoenix, Arizona
Ask Kate about deed-in-lieu of foreclosure and $10,000 (increased from $3000) HAFA relocation assistance to avoid the negative effects of foreclosure: Simply defined as taking possession of mortgaged real estate due to failure to make mortgage payments, the definition of foreclosure doesn't come close to explaining the emotional toll it takes on the lives of affected homeowners.
Meet Trevor who tells his story of applying for a deed-in-lieu of foreclosure, one of the Making Home Affordable Foreclosure Alternatives (HAFA) that includes $10,000 to help with transitioning to a new home.
Trevor's Story of Deed-in-Lieu of Foreclosure and $10,000 HAFA Relocation Assistance
Hi Kate, I've been on the verge of foreclosure for a few years while trying to avoid losing my home.
But unemployment (me) and illness (my mom) has chipped away at savings.
I got a loan modification which helped make life more affordable. But eventually, the struggle to save my home (I've owned it for 15 years) took over my life.
So I saw on your website that I could make an appointment with Fannie Mae to discuss options rather than lose my home. (I have a Fannie Mae loan.)
After talking, I decided to apply for a deed-in-lieu of foreclosure rather than a short sale.
But then a week or so later, I heard from my bank (not Fannie Mae). They were very rude.
They didn't like that I'd contacted Fannie Mae and requested (not so nicely) that I work directly with them since they are the loan servicer. Go figure.
A few more weeks passed and I didn't hear anything from the bank. So my person at Fannie called me for an update, I complained about the bank's lack of communication.
I don't know what happened but a few days later, my bank called me about the deed-in-lieu and says it shouldn't be a problem to get the HAFA relocation money too.
Today I heard again from the bank. There has to be an inspection. They told me I have to be 100% out of the house including all of my belongings or I won't get the full amount.
This is not easy to get out of the house so quickly. I hope I did the right thing. A friend told me a deed-in-lieu is better for my credit than foreclosure. Is this true?
Kate Answers: Deed-in-Lieu of Foreclosure and $10,000 HAFA Relocation Assistance
I'm glad you considered a deed-in-lieu (DIL) vs going through foreclosure. Because there is an approval process and lender cooperation, I think struggling homeowners come through the process with more dignity in tact vs sitting on the edge of their chairs, waiting for the bank to foreclose on their home
But as you said, the process is not without challenge. Banks can be rude and accusatory. The process can drag on and on and overworked representatives appear aloof.
Maybe though you discovered how to get the bank to sit up and take note of a homeowner's request! Perhaps by first contacting Fannie Mae (or Freddie Mac) before the lender, you've stumbled onto a better way to engage the cooperation of lenders!
Of course, here is what Freddie Mac (Investor) says...
Your lender wants to help you and should be your first call for assistance. However, if you still have questions or need additional guidance after talking to your lender, you may contact a Freddie Mac representative at 800-373-3343 and selecting option #2.
However Fannie Mae (Investor) says...
Contact your mortgage company or a Fannie Mae Mortgage Help Center—Tell them you are interested in a Mortgage Release and you want to see if you qualify.
Yet I say...
Contact both the investor and loan servicer and work with whoever talks to you!
Deed-In-Lieu vs Foreclosure and Credit Scores
Lastly, you asked if a deed-in-lieu is easier on the credit than a traditional foreclosure. Because deeding back the title is a voluntarily transfer of ownership to the loan servicer, the homeowner receives a full satisfaction of the total mortgage balance.
Making Home Affordable claims their HAFA deed-in-lieu and short sale program
has a less negative effect on your credit score
than conventional short sale, or mortgage foreclosure.
In addition, the $10,000 relocation assistance money helps take out some of the sting! Read more about this here: Short Sale Foreclosure Alternatives
Good luck and best wishes,
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