Originally published: July 19, 2019 -- Updated: November 8, 2021
UPDATE: A consent foreclosure, as described below, may be a beneficial way for a person to relinquish ownership of their home and avoid a deficiency judgment. However, homeowners who are considering a consent foreclosure should be sure to understand how this will affect their credit. The completion of a foreclosure will be included in a person’s credit report, which could affect their ability to secure a mortgage in the future. If this will be a concern, a homeowner may need to determine whether completing a short sale or using a deed in lieu of foreclosure will be a more beneficial option.
Homeowners should also understand how junior liens such as a second mortgage or home equity line of credit may affect their ability to complete a consent foreclosure. A consent foreclosure will remove all liens from the title of the home, and a mortgage lender will waive their right to pursue a deficiency judgment to collect any additional amounts owed on a mortgage. All lenders who have an interest in the property must consent to this type of foreclosure. Because junior mortgage lenders may not be able to recover what is owed, they may object to a consent foreclosure. If objections prevent a homeowner from completing a consent foreclosure, they may need to consider other options. In some cases, a judicial foreclosure may be completed, and a person may need to file for bankruptcy to address deficiency judgments by one or more mortgage lenders.
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