For homeowners who have a mortgage through the Department of Housing and Urban Development (HUD) insured by the Federal Housing Administration (FHA), there may be additional options to obtain a deed in lieu of foreclosure to avoid the worst consequences of losing a home. The requirements for this program and how homeowners can find out if they qualify are surprisingly simple in theory. All homeowners who have their loan insured by the FHA are able to contact HUD at the first sign of falling behind in payments. HUD provides various services to borrowers who are in danger of defaulting on a mortgage, such as free counseling and assistance with negotiating with a bank for a short sale. The deed in lieu program, although lesser-known, is another option. The assistance that HUD provides in these cases is encouraging a mortgage company to accept a deed in lieu. But homeowners are not just able to call and have HUD automatically help them. There are three main requirements that homeowners facing foreclosure must meet in order for HUD to encourage the lender the accept the proposed deed. First, borrowers must have become late on their mortgage due to no fault of their own. This may be from a job loss or transfer, serious illness, death in the family, or other involuntary financial hardship. Most homeowners will be able to meet this requirement quite easily in the current economic climate, but this is also designed to prevent against fraud or abuse of the system. The second requirement homeowners must meet is that they will be unlikely to recover financially to the point of being able to make the mortgage payment again. Even with payment assistance or a forbearance agreement, some borrowers would be unable just to pay the regular monthly bill. A deed in lieu of foreclosure may definitely be appropriate in such cases. The last requirement is the most difficult for borrowers to meet. It states that no junior liens may be present on the property or that the homeowners must pay them off within twenty (20) days of the request for the deed in lieu. For many borrowers with 80/20 loans or Home Equity Lines of Credit (HELOCs), a deed in lieu with HUD's assistance may be impossible to qualify for under this condition. For every other borrower with a loan through the FHA who can meet these three requirements and desires government assistance with a deed in lieu of foreclosure, they can contact HUD directly. Of course, they will also want to work on other solutions to foreclosure, because HUD will only encourage the bank to accept the deed in lieu -- they will not force the lender to accept it. A deed in lieu is usually a last resort for homeowners who can not save their homes any other way but do not just want to abandon it. Banks are not usually very open to this option, but with the encouragement of HUD and the persistence of the borrowers, they may decide it is in the best interests of everyone involved to end the foreclosure early and accept the deed in lieu of foreclosure.
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