There are thousands of homeowners huddled in their houses today, hiding in the giant shadow of looming foreclosure.  I talked with one earlier today and our conversation turned to the phenomenon of Deed in Lieu of Foreclosure.

Sometimes mortgage companies will agree to work with homeowners, but only if they can prove their ability to pay future house payments if a loan modification is granted.  Other times, it’s simply better for the homeowner to cut his/her losses and walk.

Before you take that drastic action, however, it’s ALWAYS better to stay in contact with the lender.  See if they can help.  In most cases, people have confided in me that the mortgage company won’t do anything until they’ve missed X number of payments.  After this has happened, they are told they won’t help until they get caught up.  O.o

Every now and then, however, a mortgage company will realize it’s more sensible to work with a homeowner and accept a deed in lieu of foreclosure. The company will tell a homeowner they can remain in the property for a certain amount of time, but will need to vacate by a specific date. The homeowner has the opportunity to find another place to live (and is sometimes paid so they don’t destroy the property), while the mortgage company saves on the massive cost of performing an actual foreclosure.

I just asked a local lender about the possibilities of a Deed in Lieu Of from his company. He advised homeowners to contact the Loss Mitigation Department, but overall that they would allow the Deed in Lieu Of was very rare.

Read more about other options other than foreclosure here at Being Frugal.

Nevertheless, good luck!