A Deed in Lieu of Foreclosure (“DIL”) is a deed instrument that satisfies a loan, presenting a unique opportunity to avoid foreclosure and still satisfy both Lender and borrower. In this system, the borrower conveys all the interest in the property being secured to the Lender and will help avoid foreclosure proceedings.
Deed in Lieu of Foreclosure is of benefit to both the Lender and the borrower. For the borrower, it frees them from all the debt involved with a loan in default. The borrower also has privacy in case their building is getting foreclosed. Therefore, Deed in Lieu is more preferred than foreclosure in most cases. For the Lender, it includes a reduction in time, cost of property re-proposition, and many more.
Preliminary Deed in Lieu Steps by Lender involves six steps which include:
- Confirm that the proposed terms of the offer from the borrower are in writing. If the proposed offer is not in writing, require a written recommendation from the borrower.
- Confirm the complete information involved in the loan, like the extent of all existing borrower defaults, default interest, and late fees, if any, etc.
- Review the loan documents to ensure their completeness.
- Reviewing the current title search of the borrower.
- Research property trustworthiness.
- Ordering and reviewing independent appraisal.
To execute this to near-perfection, it is also important to observe the following:
- Drafting and Negotiating the Deed in Lieu
- Pre-Closing Matters
- Preparing a closing checklist.
- Handling Ownership Matters.
- Preparing the Closing Statement.
- Closing Statement Tips
Under the Deed in Lieu, the closing statement should include accountability for security deposits, including disbursements paid at the closing, account for payment of counsel fees, account for additional sums that the Lender agrees to pay, and credit for outstanding loan escrow balances.
Are you a lender seeking to avoid foreclosure or open to the idea of a DIL? Click here to find out more.
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