Many of the largest mortgage lenders in the country are launching campaigns targeting carefully selected borrowers facing foreclosure, offering them cash incentives if they sign over the title of their deed in what is called a deed-in-lieu-of-foreclosure. Bank of America alone has mailed out 100,000 deed-in-lieu-of foreclosure solicitations and deed-in-lieu-of-foreclosure transactions completed is breaking company records. The deal is basic — the mortgage lender offers troubled borrowers a deed-in-lieu-of-foreclosure deal and promises not to come after them for a deficiency judgment. The borrower takes the deal because they are facing foreclosure anyway and they see a deed-in-lieu-of-foreclosure as an easy way out of the situation. But what exactly is motivating mortgage lenders to get involved and even encourage deed-in-lieu-of-foreclosure? The answer is simple – money.
- Mortgage companies are offering deed-in-lieu-of-foreclosure deals to only a few select homeowners and you can bet your last dollar that it isn’t the homeowners with no equity in their home. Many homeowners facing foreclosure now are those who have lost jobs, have equity in their home; but can’t get it out because of tighter lending standards. Mortgage companies are licking their chops at the sight of these homeowners and are even offering them “cash incentives” has high as 5 figures. The mortgage company is even betting that they can sell these homes fast.
- Foreclosure and short-sales are expensive and time consuming. Mortgage companies want to save money and since time is money, they don’t’ want to invest the months it can take to complete a foreclosure or short-sale. A deed-in-lieu-of-foreclosure is a relatively easy and cheap process for the lender comparatively speaking.
- Since the mortgage industry is facing a massive backlog of shadow inventory of foreclosures that have not been put back on the market, they want to avoid adding new foreclosure to the mix if they can. Their deed-in-lieu-of-foreclosure scheme offers them a quick, cheap and easy way to do just that.