For homeowners in foreclosure who do not want to save their homes, there may seem to be few options. After all, they have told the bank they would pay the mortgage, and now they are unable to work out any arrangement that will let them stay in their homes. One of the better options in such a situation may be to offer the bank a deed in lieu of foreclosure.
Obviously, it would be better to offer the bank a deed in lieu of foreclosure if they accept it, rather than wait until the property is sold off at a public sheriff sale. With the deed in lieu, the homeowners will make sure they are completely done with the house and do not have to worry about judgments after foreclosure or anything else to do with the mortgage. Once the bank accepts the deed, the former owners have no other responsibilities towards the loan or the house.
With a deed in lieu of foreclosure, the foreclosing bank accepts the transfer of ownership as payment in full of the mortgage loan. There is really nothing left for the mortgage company to go after once they accept the house back through this method. They are agreeing to take the house instead of the payment on the loan, and they can not keep foreclosing on the house once deed has been transferred.
If homeowners can not afford their house anymore, and do not have any other options to lower the payment to where it is affordable (filing bankruptcy to stop foreclosure will not do this), then offering the bank a deed in lieu might be the best option. It does not save the house, but at least it gets the foreclosure process over with while avoiding sheriff sales, deficiencies, and other lawsuits and headaches after foreclosure.
Homeowners just need to remember that the bank will not usually bring up the option of a deed in lieu until the owers do. That is because a deed in lieu has to be offered voluntarily by the homeowners, so it can not look like the bank is forcing or persuading foreclosure victims into it. And anyway, banks will end up with the house in either case — through foreclosure or deed in lieu — so it does not make much difference to them in the end.
Too many homeowners, when they realize they have no reasonable solution to save their home, simply give up and walk away. This is often a mistake if they have not even attempted to work with the bank to accept a deed in lieu of foreclosure. While this option does not result in the owners being able to remain in their homes, it offers them a chance to get out from under the mortgage completely and obtain a fresh start without worrying about the past.