Gina, Other/Just Looking in Hawaii

Help to clarify deed in lieu of foreclosure issue

Asked by Gina, Hawaii Thu Sep 20, 2007

If one has a deed in lieu of foreclosure on their credit report how do you prove to a creditor that it was not a foreclosure? and should this affect your credit the same as a foreclosure?
If a letter of explanation is needed from the lender does anyone have suggestions how to obtain this? It is nearly impossible to get anything in writing from lenders!
Any help would would be hugely appreciated!

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John Olmstead, Agent, Lawrence, KS
Thu Sep 20, 2007
Gina -

Is your lender a local lender or a large, national company? Have you tried calling your lender and specifically asking for a letter of explanation? Is your credit being affected negatively on one national credit service or is it multiple?

As previously mentioned, a real estate attorney could assist you easily, but it might cost a bit. If refinancing your current mortgage would be financially beneficial I would suggest shopping for competent mortgage lenders that would care enough to assist you in clearly up your credit score. Many local lenders around here offer credit score assistance to help discern themselves from larger, national lending companies. If you happened to find a lender was good at what they do, and actually cares about heir clients, you might be surprised how they can help in poor credit situations...

Thanks -
1 vote
Lorie Gould, Agent, Duluth, GA
Sat Jan 5, 2008
Gina... a deed in lieu of foreclosure and a foreclosure have just about the same effect on credit according the lenders I have spoken with regarding this very same thing. What a deed in lieu of foreclosure communicates to future financial institutions is that you knew you could not pay and were responsible enough to communicate with the bank and make arrangements to give the home back saving the bank money and time versus others who choose to stay in the home without paying forcing the bank to foreclose on them because they could not pay. In some cases consumers live in a home for a year paying 0 dollars... basically taken a free ride.

Since it has been a while since your question was asked we would love an update on any additional information you discovered.
0 votes
David Scheer, , Battle Ground, WA
Sat Jan 5, 2008
In my opinion a "deed in lieu" simply means you almost foreclosed but didn't. Further research may determine credit and financial ramifications of a deed in lieu vs. foreclosure but for credit purposes it probably affects your fico score about the same. Your portfolio lenders may treat it differently but I think most conventional programs would consider it about the same as a foreclosure.

We do welcome anyone else who has more info on this topic to chime in.
0 votes
Duke Hayes, Agent, Vancouver, WA
Thu Sep 20, 2007
Hi Gina,

I fully support Linette's answer. It appears your problem may be a legal one regading your lenders and is not something we can help with.

I hope this helps...

0 votes
Linette Carr…, Agent, Wilmington, DE
Thu Sep 20, 2007
I would suggest talking with a Real Estate Lawyer.
0 votes
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