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Deed in Lieu of Foreclosure Approach to an Upside Down Mortgage

Posted on in Bankruptcy Attorney

Facing an upside down mortgage can literally turn anyone's financial stability upside down as well. An upside down mortgage or when the collateral that secured a mortgage loan is considerably worth less than the balance owed has secured prominent standing in the U.S. real estate market in the past seven years. Unfortunately many homeowners are at a loss and have fallen victim to foreclosure and long-term damage to their credit rating but have often overlooked the option of a Deed in Lieu of Foreclosure.

For those seeking this form of debt relief, it is often in their best interest to contact an experienced foreclosure attorney, especially if you reside in Illinois where the laws regarding Deed in Lieu of Foreclosure can be complicated and add even more stress to an already frustrating situation.

This type of economic relief by which the borrower conveys all interest in real property to the lender to satisfy the loan agreement, currently in default, to avoid a full foreclosure of said real property. The majority of states follow guidelines set forth by the U.S. Department of Housing and Urban Development or HUD and include:

  • If approved for a Deed in Lieu of Foreclosure, the borrower has up to 90 days to complete the transfer of title or face disciplinary monetary action,
  • The borrower may be awarded up to $2,000 for any additional liens on the property before relinquishing the property,
  • The lender maintains the final decision as to whether the borrower will be approved for the Deed in Lieu process or opt for full foreclosure.

The interpretation and implementation of these HUD guidelines vary from state to state, including Illinois. Under the Illinois General Assembly's compiled statutes and Section 15-1401 of Chapter 110, Illinois offers provisions of economic relief only if both the lender and the borrower agree to a Deed in Lieu of Foreclosure, if the homeowner's interest is fully terminated and all personal liability tied to the real property by junior lien holders is relinquished as well.

For those facing an uncertain economic future due to an upside down mortgage, the assistance of an experienced Illinois foreclosure attorney is key to understanding your rights under Illinois foreclosure law. The experienced legal team of Newland & Newland, LLP are here to help. For the past 20 years, our law firm has been offering sound legal advice to residents of Cook, Lake, McHenry, DuPage and Will counties. We understand the complexity and stress associated with overbearing mortgage debt and will personally assess your financial situation to determine if a Deed in Lieu of Foreclosure is the best possible course of action for you and your family. Contact us to schedule your initial consultation today.

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