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).