The federal government launched rules earlier this month to help facilitate short sales. But for some homeowners who are unable to complete a short sale or who don't qualify for one, there may be an alternative to foreclosure. (With a short sale, the bank agrees to let you sell the house for less than the value of your mortgage.)
The alternative is a "deed in lieu of foreclosure" agreement, which allows homeowners to voluntarily turn over the deed to their house to the lender.
This option often allows the homeowners to negotiate more favorable exit terms than a foreclosure allows, including staying in the home for several extra months or potentially lessening the negative impact on their credit, says Keith Gumbinger, vice president at mortgage-education firm HSH Associates.
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