There are occasions in which a borrower wishes to avoid having a foreclosure appear against their credit history. Similarly, a lender may wish to avoid the expense of either foreclosing judicially (through the court system) or non-judicially (using a foreclosure trustee). The solution for both may be for the property owner to simply execute a deed transferring title to the lender.
This may sound very simple, but both sides need to be aware of certain potential risks! For example, the borrower may want to make sure that after the transfer he owes no more money upon the loan. Conversely, the lender may want to preserve its right to sue the borrower for any deficiency, namely, the difference between what the borrower owed and the present fair market value of the property.
There may also be serious tax consequences to the borrower. Should Congress fail to once again extend the mortgage debt forgiveness laws (which expired on December 31, 2013), borrowers may incur taxable income upon debt forgiven, yet be without the funds to pay such tax. This is also a serious issue for anyone considering a short sale at this time.
Contact us for assistance through these problematic areas.
