Don't Say I Didn't Warn You About Deeds In Lieu Of Foreclosure

Just a few days ago I posted an article about banks luring homeowners into signing  false deeds in lieu of foreclosure. Here’s the first example. Friday, I received the following email from an attorney who has an active and successful mortgage defense practice:

"I had a client retain me with a deficiency judgment suit this morning. Peoples Bank. They offered him a deed in lieu telling him it would resolve the claims. He signed the deed. Although the DIL started with language which said "this deed is an absolute conveyance in satisfaction of the mortgage", it had one sentence hidden in the document which says "Grantee acknowledges that Grantee reserves the right to proceed with a deficiency decree".

In the old days, a deed in lieu was an exchange of property for a release. Today, many banks are using the "deed in lieu" as a way to avoid the time and expense of foreclosure without releasing the homeowner from anything. They are presenting deed in lieu offers to homeowners who are not represented by attorneys  that the offer does not include a true release of the homeowner. In signing a deed in lieu you will lose all your foreclosure defenses which you need to negotiate favorable settlements with the mortgage company.

So, I warn all you people with upside down houses and delinquent mortgages– if your lender offers you a deed in lieu of foreclosure make sure you read all the fine print when they send you the documents. Better yet, consult an experienced real estate attorney who has been helping people defend foreclosures (not me; I don’t do that type of work).

Comments

[Mike]

GREAT tip, Jonathon! For 3 years now, debt owners (including Servicers & SMO's) progressively are attempting to slide in damaging docs or statements.

It's the same with "lien release" vs. "Full payoff and settlement of debt."

Wachovia is the WORST offender. Default is short sale department. However, their short sale department only grants LIEN RELEASE if accepted at all.

You have to KNOW to ask for their SETTLEMENT department if you want to walk away with no deficiency after sale.

Sneaky b*stards.

By the way, settlement department is operated (outsourced) to NCO Financial, the WORST debt collection company on the planet. Sued by FTC more than one time for illegal debt collection practices.

Thanks, Jonathon, for sharing this valuable tip. Often, we don't know what we don't know.

Mike

[Tye Van Buren, Esq]

I agree with your warning and advice, but would also suggest that if a homeowner signs something like the Deed in Lieu described, that he/she contact an experienced contract attorney. Very possibly there will be a cause of action for rescission due to fraudulent inducement and lack of consideration, thereby allowing the contract to be nullified.

[Barry Kratzer]

I don't know if the statement "Grantee acknowledges that Grantee, etc."
is a typo or not by the author, but if it is not, then the statement should not
mean a thing. Now, if it said GRANTOR, then it would.