Unfortunately, many homeowners seem to buy into the myth that simply transferring ownership of their home will somehow relieve them of the responsibility to pay the mortgage and will end the foreclosure. This is a somewhat naive position, though, as putting the house into someone else’s name will not prevent the foreclosure from going through, nor will it prevent the worst of the financial consequences from affecting the former homeowners. Transferring title does not eliminate the defaulted mortgage, and the bank will continue to foreclose no matter who is currently on the deed.
Transferring the ownership of the property will not release homeowners in foreclosure from the obligation to pay their mortgage. If they signed for the mortgage loan when the house was originally purchased and put in property in their names, they will have no other choice when facing foreclosure other than to get the mortgage out of their name if they want to avoid the longer-term consequences of foreclosure.
That means the owners have only a few options to get out from under the foreclosure if they do not want to save the house, but wish to keep as much of their credit and financial situation intact as possible. First, they can try refinancing and keeping the house, but this can be difficult to qualify for and may be completely pointless if it does not lower the monthly payment. For homeowners who have already left the house and moved far away because of changing job circumstances, they might not want to get a different loan, since they still remain responsible for the payments on the house. But at least refinancing would take the loan out of the hands of the current mortgage company.
Second, selling the house is another good option, depending on the conditions in the local real estate market. When owners have someone interested in the property, the potential buyers will get a new loan to replace the one currently on the house, and the foreclosure victims will transfer ownership of the house into their names. This is probably the easiest way to transfer ownership out of one name and into another, as well as eliminating the responsibility for the mortgage. Even if the owners have to sell at a short sale, where the bank takes less than what they are owed, the end result will still remove their names from all of the paperwork and stop the foreclosure.
Finally, as a last resort the owners could try to offer the bank a deed in lieu of foreclosure. This is when the mortgage company takes the deed to the house back instead of proceeding with the foreclosure. Not all banks accept this as an alternative to foreclosure, but it is definitely worth the effort to try and ask them to work out a deal on the house. In this case, they owners would just transfer the house into the name of the bank that owns the mortgage and the lender would release the former owners from the loan.
If the county sheriff sale is coming up soon, the homeowners do not have much time to work out any solution. A sheriff sale is when the house is auctioned off at the county courthouse to satisfy the defaulted mortgage loan and is one of the last steps in the entire process of taking a home through foreclosure. The county government sells the home to pay off the bank’s judgment on the house due to the foreclosure. Homeowners can try and request more time from the bank and stop the auction, though, if they need additional time to work out a solution.
Leaving a house in foreclosure is never an easy decision to make, but the fact that a house can not be saved does not mean that the homeowners need to endure the worst consequences of foreclosure. Transferring ownership of a property, as enticing as it may seem, does not relieve homeowners of the responsibility to work out a solution for their mortgage problem. Refinancing or loss mitigation may not always work, so other alternatives should be kept in mind, such as selling, short sales, and deed in lieu of foreclosure. Although banks may not be willing to go along with any option, at least the owners will know that they tried to do everything they could to fix the problem and they may even be able to keep the worst of the situation from affecting their financial lives far into the future.