Thanks to new federal programs that offer cash incentives, some lenders are turning to deeds-in-lieu as the best solution for underwater borrowers, who are willing to turn over their properties.
It’s cheaper for lenders to do deeds-in-lieu because it gives them overnight control of the property. With mortgage rates at less than 5 percent, lenders believe that they can resell a property faster and on more favorable terms than they would going through a short sale.
Matt Vernon, an expert in short sales and deed-in-lieu deals for Bank of America, says his company is offering cash incentives that range from $3,000 to $15,000 to persuade trouble borrowers to sign on.
Deeds-in-lieu don’t harm a borrower's credit rating as much as a foreclosure or a bankruptcy, but because they are treated as debts that are “not paid as agreed,” they do leave a mark.
Source: Washington Post, Ken Harney (06/26/2010)
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