How to Grant a Deed to a House to Avoid Judgment

Some foreclosures carry additional consequences that homeowners aren't aware of. For example, if you owe more on your mortgage than your lender can recover through the sale of your foreclosed home, your state may grant the company the legal right to sue you for the loan deficiency, according to Nolo.com. The lender then would have a judgment against you that it could use to garnish your wages and bank accounts. Some lenders, however, will accept the deed to your home through a process known as "deed in lieu of foreclosure." Done properly, granting a deed in lieu can help you avoid a lawsuit and judgment from your mortgage lender.

• 1

  Call your bank's loss mitigation department and ask about your lender's policies regarding deed in lieu agreements. All banks' policies differ slightly and its imperative that you closely follow your lender's specific rules to obtain an approved deed-in-lieu agreement.

• 2

  Compare the amount that you owe on your mortgage to your home's value. Your bank may not consider your deed-in-lieu proposal unless the value of your home exceeds the amount that you owe on the loan.

• 3

  Place your house on the market. While selling your home for enough money to cover your outstanding mortgage balance would mean financial salvation, your goal is to demonstrate to your lender that you are taking action on your own to avoid foreclosure. Lenders look more favorably on borrowers that make pointed efforts to pay off their mortgages. In addition, some lenders require that borrowers attempt to sell their properties on their own before agreeing to accept the home's deed rather than foreclose.

• 4

  Make copies of financial documents proving that you do not currently possess the assets or income necessary to continue making payments on your mortgage loan. Examples of documents that your lender may require include, but are not limited to, pay stubs, investment records and tax returns.

• 5

  Write a letter to your lender requesting a deed in lieu of foreclosure. Note that you cannot afford the mortgage, but also point out how the agreement would be advantageous to the bank. For example, you would turn over all equity in the property, leave it undamaged and save the bank the cost of foreclosure proceedings.

• 6

  Mail your letter and the copies of your financial documents proving that you cannot pay your mortgage to the bank's loss mitigation department via certified mail with a return receipt. This ensures that your lender will receive your paperwork and, when it does, the U.S. Postal Service will provide you with a signature card proving that the delivery was successful.

• 7

  Call the bank's loss mitigation department if you have not heard anything from them after 30 days and inquire as to the status of your deed in lieu of foreclosure application. At this point, the bank may request further documentation, set up a meeting with you or inform you of whether or not your application has been accepted.

• 8

  Visit the bank on your scheduled meeting day and sign over all rights to your home to the bank. If your lender is not local, you may complete this process via mail. The final paperwork will include a date by which you must vacate the property.