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Has anyone heard of the bank taking a D-I-L rather than foreclose lately?
My experience is the bank doesn't want the property and would rather foreclose than d-i-l but if my client has alternatives to a short sale I want to know about them.
Heck yes a D_I_L is better for the lender than a foreclosure if the borrower is as broke as broke can be and /or they can't /won't come after the borrower.
As an alternative to a short sale it is driven by the borrower's "system" and if they see the value in getting clear title with no legal expenses and having a marketable property then go for it.
What We have seen is that DinL works if the bank is resigned to the seller having no reachable assets. Then it is a no brainer for all concerned. Sometimes the lender will work a deal where they DinL or short sale with an unsecured note from the seller.
Sometimes the lender will work a deal where they DinL or short sale with an unsecured note from the seller.
Whatever works.
That seems to be exactly what the bank is doing in our case. March 23 we made an offer on a short sale. In April the bank accepted a deed in lieu from the sellers. Yesterday they approved our short sale offer, and when we received the HUD-1 statement, the sellers names are still on it...very confusing!
I've heard that Deed in Lieu is counted the same as a foreclosure on credit and the time it takes to be able to purchase a home. So, no, in our area, clients would rather do a short sale.
Which also is going be the SAME big red mark on a credit report...
Quote:
Originally Posted by azcater
I've heard that Deed in Lieu is counted the same as a foreclosure on credit and the time it takes to be able to purchase a home. So, no, in our area, clients would rather do a short sale.
...really, do you think there is some "reward" for getting the lender LESS than they are owed? The size of the shortfall does not really matter, on a credit report a "charge off loss on mortgage" is the SAME whether it is due to DIL, foreclosure, short sale or anything else.
Lenders will NOT just ignore any of those entries! Getting another mortgage is going to be costly and many lenders will NOT even look at such an applicant for years.
The entry itself will be on the credit report for the same length of time.
I suppose lenders that use manual underwriting / portfolio lenders MIGHT make individual calls on whether based on the market where the applicant wants to buy, but with manual underwriting the lender can also try to discern a lot of other things. Did the borrower use good judgement in the length of time between selling/ buying? Has the borrower demonstrated lower than desired levels of responsibility in other financial decisions? Is the borrower's behavior likely to lead to profits for the lender?
chet, sorry you don't agree with it, it doesn't always have to make sense. My statement that DIL shows the same as foreclosure came directly from 2 lenders that I work with.
The lenders that I work with say that borrowers with a short sale on their report will be able to apply again within 2 years, but with a foreclosure it will be more like 5 years. You might be able to save 25-50 points by doing a short sale vs foreclosure, so the benefit is really in the timeframe to buy again.
Not my rules, directly from the lender's mouth in the many short sale classes I've taken.
ETA: our market is about 75% short sales and foreclosures right now, so I've become very familiar with lenders and short sales (not by choice!)
Quote:
Originally Posted by chet everett
...really, do you think there is some "reward" for getting the lender LESS than they are owed? The size of the shortfall does not really matter, on a credit report a "charge off loss on mortgage" is the SAME whether it is due to DIL, foreclosure, short sale or anything else.
Lenders will NOT just ignore any of those entries! Getting another mortgage is going to be costly and many lenders will NOT even look at such an applicant for years.
The entry itself will be on the credit report for the same length of time.
I suppose lenders that use manual underwriting / portfolio lenders MIGHT make individual calls on whether based on the market where the applicant wants to buy, but with manual underwriting the lender can also try to discern a lot of other things. Did the borrower use good judgement in the length of time between selling/ buying? Has the borrower demonstrated lower than desired levels of responsibility in other financial decisions? Is the borrower's behavior likely to lead to profits for the lender?
AZ -- I don't think we are disagreeing. The question in my mind is what is the basis for the difference?
A DIL is faster, cheaper, and ought to allow the lender to remarket the property with much more success than a foreclosure.
Lenders have some very stupid people working for them and the credit bureaus are making things up as they go long now. There is simple no 'history' to use a basis for anything of this magnitude with distressed borrowers...
Sometimes you just wanna scream.
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Which also is going be the SAME big red mark on a credit report...
