As a Connecticut homeowner in financial distress, you want to avoid foreclosure on your property and the negative consequences it can have on your credit score. To accomplish this, sometimes you need to make some sacrifices. A deed-in-lieu of foreclosure is an arrangement in which your mortgage lender agrees not to foreclose on you in exchange for you turning over ownership of your property.
According to the Consumer Financial Protection Bureau, a deed-in-lieu is a method of mitigating loss. The benefit is that you avoid the negative credit impact from a foreclosure, which may make it somewhat easier to start over new. However, one of the downsides of a deed-in-lieu is that you still lose your house.
Another downside of a deed-in-lieu in Connecticut is that your mortgage lender may ask you to make up the deficiency, which is the amount you still owe subtracted from the value of the property. You may be able to avoid this by asking your lender to waive the deficiency when you ask for a deed-in-lieu. Fortunately, lenders are often willing to grant you a deficiency waiver. For your own protection, however, you should obtain a written copy of the waiver and keep it for your records.
While a deed-in-lieu requires you to vacate the premises, you may be able to obtain assistance with the expenses related to relocation. “Cash-for-keys” are private programs that provide funds in such situations. You can ask your mortgage lender for more information about cash-for-keys programs in your vicinity.
Along with bankruptcy, mortgage modification and short sale, a deed-in-lieu is one of several alternatives to foreclosure available to you when you are in dire financial straits. A deed-in-lieu may require you to talk to a counselor approved by the Department of Housing and Urban Development.
The information in this article is not intended as legal advice but provided for educational purposes only.