Foreclosure Non-Retention Options

If you have a property in foreclosure, your mortgage lender will likely send you all sorts of correspondence. You may have modification or reinstatement options, which is great if you want to retain the property. But for a variety of reasons, the bank or servicer may not be willing to entertain modification or refinance. In that case, they will probably starting suggesting foreclosure non-retention options.

Foreclosure Non-Retention Options -- Lee Legal -- DC VA MD

Basically, foreclosure non-retention options are your choices when the bank assesses that you can no longer keep the property. You may no longer be able to afford the property. Or your net-present value (NPV) may be too high. If you have a high NPV, the bank will calculate better odds of getting paid by foreclosing than by modifying your loan.

You may want to keep your home, in which case you can discuss Chapter 13 or Chapter 11 bankruptcy. In those chapter of bankruptcy, you can propose an extended repayment period to make up the missed payments. But if you must give up the property, learn more about your foreclosure non-retention options.

Foreclosure non-retention options: sell the property

Open market sale. If you have sufficient time to list and market your property, contact a real estate agent and discuss your options. This option is reserved for properties where there you have equity in the property. You must act quickly because the foreclosure process can take as little as 45 days in the DMV area.

Short sale. If there is no equity in the property, however, you may want to consider a short sale. Like a sale on the open market, you must move quickly if you are facing foreclosure. Attempts to sell the property, no matter how valiant, will not stop a foreclosure unless consummated prior to the auction.

Other foreclosure non-retention options

Cash for keys. Several mortgage lenders still offer cash-for-keys type programs. The lender will pay you to vacate the home and leave it in broom-swept condition. Cash for keys remains a good option for those willing to surrender but who lack the funds to move. These arrangements make sense for the lender because it can more quickly take control of a foreclosure property. Most homeowners, however, do not qualify for this type of relief, and it is usually difficult to negotiate.

Deed-in-lieu of foreclosure. Sometimes simply called a “deed in lieu,” this option is legally transfers ownership of real property to the mortgage company. The deed in lieu conveys the homeowner’s interest in the property back to the lender, usually in exchange for forgiveness of mortgage balance. The IRS considers forgiven debt to be taxable income, however, so you should consider the tax implications of a deed-in-lieu of foreclosure before you pursue this option.

Consensual surrender. If you cannot possibly pay any deficiency judgement against you for the balance of the mortgage, consensual surrender may be an option. We may even be able to negotiate an antideficiency agreement with your lender. The bank may be willing to forego the right to collect against you later rather than have the foreclosure litigation drag on months longer than necessary.

Eviction. The least elegant of the foreclosure non-retention options is eviction. A contracted moving company will remove all of your possessions from the home and deposit them either on the curb or in a storage unit. Sheriffs will accompany the moving company. And you will be forcibly removed from the property if the need arises. For many obvious reasons, eviction should not be your preferred foreclosure non-retention option.

One more foreclosure non-retention option: bankruptcy

There’s one more nonretention option the bank won’t tell you about: bankruptcy. Chapter 7 allows you to completely discharge your personal liability on the mortgage. Obviously, the bank does not want to advise you to discharge your mortgage. If you are facing foreclosure and want to examine any of your various non-retention options, call Lee Legal for a free consultation.

About Brian V. Lee 487 Articles
Brian V. Lee provides bankruptcy, foreclosure defense, business turnaround, and litigation services to clients in the District of Columbia, Virginia, and Maryland. Brian was the Washington, D.C. state chair of the National Association of Consumer Bankruptcy Attorneys from 2016 to 2018.