Can I just give the house back to the lender and walk away?
I hear this question a lot, but unfortunately your bank never owned your home, and can't just "take it back." The only way for the lender to get ownership of your home is for them to go through the foreclosure process, or agree to take a deed-in-lieu of foreclosure from you.
What's a deed-in-lieu of foreclosure?
A deed in lieu (DIL) of foreclosure is basically a voluntary foreclosure. Instead of going all the way through the legal proceedings, the lender agrees to let you sign over the title of the home to them and takes over ownership of the home.
Are you a candidate for a deed in lieu?
You must apply and be approved to get a deed in lieu. You may be a candidate if:
- You have exhausted all other available workout options. Lenders will generally prefer you modify the loan or pursue a short sale before accepting a DIL.
- There are no second mortgages, helocs or other liens against the home. DIL's only settle the mortgage. In order to transfer title, all liens must be addressed.
What other ways can I stop foreclosure and get out of my upside down home?
Contrary to popular belief, your lender does not want to own your home. Banks are not in the home selling business and will prefer you pursue other options besides foreclosure or even a deed in lieu of foreclosure to cure a mortgage default.
Once staying in the home has been eliminated as an option, lenders will first push you to sell or short sell the home before considering a deed in lieu. In a short sale, the home is sold for less than the balance of the mortgage and the lender agrees to forgive the difference.
What if I simply walk away from the home without having a deed in lieu of foreclosure?
Your lender will have to go through the foreclosure process to get title of the home. Florida is a deficiency judgment state. That means that in addition to taking possession of and selling your home, the lender is also able to sue you after a completed foreclosure to pursue any further losses on the loan.
Not only can a foreclosure in Florida take years to complete, your mortgage debt problems will survive the foreclosure and turn into a new set of problems.
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Last Updated on January 7, 2025 by Minna Reid