Full question:
In August 2008 I had to move from my house. I had not made payments since Dec 2007 and my wife had just died a year prior with a 60% loss of income, I could not keep up with escalating mortgage payments. The house was supposed to be sold by courts the last week of August 2008. That sale has still not taken place and I am still on the hook for the home owners dues, taxes, and assessments. Can I offer up a 'deed on lieu' get it registered at the court house, and thereby pass title to the mortgage co? I am 67 yrs old and raising a 13 year old granddaughter and feel the need to move on with my life. Right now the house is in limbo, they took it off the sale block and it is just sitting empty. I had it up for sale for 18 months and within a week after I moved out, they kicked my realtor out and changed the locks. They offered it back to me under this new program about a year ago, but I do not want it back, just want it out of my life. Are they in any way obligated to accept a deed in lieu?
- Category: Real Property
- Subcategory: Foreclosure
- Date:
- State: Colorado
Answer:
A "Deed in Lieu of Foreclosure" is a process used when a lender agrees to accept a deed to the homeowner's property in foreclosure instead of continuing the foreclosure process and incurring more expenses to get the deed anyway. However, this does not mean the homeowner is no longer responsible for a loan deficit if the lender sells the home for less money than is owed.
This legal transaction starts after the homeowner has fallen behind on his loan payments and is in foreclosure. Even if the foreclosure has not started yet, the lender can be approached and asked if they will accept a "deed in lieu of" continuing into the foreclosure process. Sometimes the lenders regulations require the homeowner to be behind on his payments before they will consider accepting the deed, usually 90 days in judicial foreclosure states and 30 days in non-judicial states.
The advantages to doing a deed in lieu of foreclosure (at least in Colorado) is the amount of time it takes to complete. Colorado foreclosure laws have statutory time lines, whereas "deed in lieu of foreclosure" can be accomplished much quicker, as both parties agree to the timing. For the homeowner it is more private, no public notices are published in the newspapers.
An important fact to remember, if the homeowner is successful in obtaining a short sale or a deed in lieu of foreclosure, these are a taxable event in the eyes of the IRS. The homeowner may still have a tax obligation, it is wise to consult a tax professional to determine the amount of tax due.
It would be important for you to review carefully the details of the court proceedings that have already occurred to ensure that the lender has not already succeeded in the foreclosure action. It needs to be determined who owns the property now and thus would have the authority to change the locks on the home. Typcially, a court sale is the result of an action brought by someone who had a lien on the property (usually the mortgage company but could also be the tax office).
The court would not take possession of the property itself. It would be beneficial for you to seek the advice of a local real estate attorney who can review the specific facts involved.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
