Property Q&A in 95835>Question Details

Kristeta, Home Buyer in Sacramento, CA

how does deed in leiu of forclosure work if u have 2 lenders?

Asked by Kristeta, Sacramento, CA Mon Jun 29, 2009

wells fargo and golden 1

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The 1st answer is the best... I was a title officer in my past life before becoming a Real Estate Broker... The 1st won't do it because they would be on the hook for the 2nd and ANY OTHER LIENS you might have against you.

The 2nd won't do it because they'd have to take over the 1st and ANY JUNIOR LIENS behind them if any... and I'm guessing your 1st loan is more than your home is worth....

Short sale is your option - 2nd loans will have to get a small piece of the action or they won't deal... and release the loan...

Good luck.. I hope this helps...

Make it a Great Day...
0 votes Thank Flag Link Mon Jun 29, 2009
Even when there's only one loan, I'm finding that lenders are not accepting a deed in lieu of foreclosure. I actually had a client who offered to both their first and second lenders the deed in lieu of foreclosure. In the case where the second lienholder is offered the deed, they would still be responsible for payment of the first loan. We were told that under no circumstances would that lender accept a DIL on a second. In the case of the first lienholder, they were only interested in a short sale situation.

But that was a while ago. That was before banks were being so aggressive on loan modification programs.

While I don't think anything's changed in terms of bank's policies in terms of DIL, I would suggest you exhaust the option of loan modification first. If that doesn't work, then short sale the property. It's the same paperwork. And foreclosure is your worst option.

Where to start? Call your lender and ask them! And if you're not comfortable doing that, work with one of the realtors here to help you.

Good luck! You will feel better taking control of this situation and learning the facts.
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0 votes Thank Flag Link Mon Jun 29, 2009
Hi Kristeta: Your question is very difficult to answer without complete information.

As a starting point, you will need to begin negotiation with your 2nd trust deed holder. If there is not enough equity in your home to get them paid with a sale, I would be very surprised if they would accept a Deed in Lieu of Foreclosure. Sooooooo, it all depends on the current market value of your home and the balance owing on the current liens on your home.

I would suggest you meet with one of the Realtors on Trulia and discuss your possibilities and the details of your situation so that your questions could be answered more accurately. We will always advise you to seek legal counsel along with our advice as we are not attorneys but are rather real estate market experts.
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0 votes Thank Flag Link Mon Jun 29, 2009
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