In Colorado, can I ask my mortgage company to take a deed in lieu of foreclosure?
Full Question:
Answer:
A "Deed in Lieu of Foreclosure" is a process used when a lender agrees to accept a deed to the homeowner's property in foreclosure instead of continuing the foreclosure process and incurring more expenses to get the deed anyway. However, this does not mean the homeowner is no longer responsible for a loan deficit if the lender sells the home for less money than is owed.
This legal transaction starts after the homeowner has fallen behind on his loan payments and is in foreclosure. Even if the foreclosure has not started yet, the lender can be approached and asked if they will accept a "deed in lieu of" continuing into the foreclosure process. Sometimes the lenders regulations require the homeowner to be behind on his payments before they will consider accepting the deed, usually 90 days in judicial foreclosure states and 30 days in non-judicial states.
The advantages to doing a deed in lieu of foreclosure (at least in Colorado) is the amount of time it takes to complete. Colorado foreclosure laws have statutory time lines, whereas "deed in lieu of foreclosure" can be accomplished much quicker, as both parties agree to the timing. For the homeowner it is more private, no public notices are published in the newspapers.
An important fact to remember, if the homeowner is successful in obtaining a short sale or a deed in lieu of foreclosure, these are a taxable event in the eyes of the IRS. The homeowner may still have a tax obligation, it is wise to consult a tax professional to determine the amount of tax due.
It would be important for you to review carefully the details of the court proceedings that have already occurred to ensure that the lender has not already succeeded in the foreclosure action. It needs to be determined who owns the property now and thus would have the authority to change the locks on the home. Typcially, a court sale is the result of an action brought by someone who had a lien on the property (usually the mortgage company but could also be the tax office).
The court would not take possession of the property itself. It would be beneficial for you to seek the advice of a local real estate attorney who can review the specific facts involved.
