Business Builder Plan Blog

Recently lenders have been taking deeds in lieu of foreclosure from homeowners to resolve foreclosures. The lender simply accepts a deed in exchange for forgiving the homeowner of his mortgage or deed of trust loan.

Let’s look more closely and see the ramifications of this legal transaction. It usually starts after the homeowner has fallen behind on his loan payments and is considering foreclosure, or he has already been served with a “default notice”. Time is against the homeowner because the lender will or already has started foreclosure proceedings. The homeowner is being bombarded by outside information sources because his foreclosure has become a part of the public record or he is getting information from well-meaning but uninformed people.

Considering what is happening in the mortgage industry, it’s important for us real estate agents to make sure our buyers are going to be able to get financing once they get into escrow. Today, because of the fallout of the sub-prime mortgage industry, lenders have tightened up standards and are examining borrowers much more closely.

One unfortunate result of this is that it can create a situation where a buyer can have their loan “pulled” at the last minute even though the loan documents have already been signed. There was a recent case that involved an invest (who had great credit) made a $79,000 initial deposit on an investment property. After he signed his loan documents at the title company, the lender notified him the they are pulling his loan due to a change in underwriting criteria. Long story short, he had to forfeit his $79,000 initial deposit.