Man Caught In Deed-In-Lieu Of Foreclosure Hell

Since he had to get rid of his house and move to take advantage of some new opportunities, Joe has been working for months to get Chase to accept a deed-in-lieu of foreclosure on his condo in Chicago. A deed-in-lieu is when you hand over your house to the bank rather than go through a normal foreclosure process that is lengthy and costly for both parties. He met the requirements and began his descent into hell, full of lost paperwork, unreturned calls, and missed deadlines, despite contacting the executive offices of Chase, Freddie Mac, and Chase Home lending. Finally he catches a break, only to have his hopes snatched away again at the last moment…

Now they won’t move forward because he doesn’t have an active listing. An active listing? What agent is going to list a dead property like this? Joe used to have an active listing, for a long time, but it fell off because of the bank delays. What can he do now?

Joe writes:

After contacting the heads of Chase and of the Home Lending department we were assigned a new contact within the Home Executive Lending Office. She is a very nice and knowledgeable employee. We re-faxed the paperwork and she pushed it through.

This morning, she contacted me about our packet not including an active listing agreement. Quick history. Our listing agreement expired in July, well after 90 days had passed and 2 months after we initially started this process. Today I was informed that our packet was rejected because we no longer have an active listing agreement, even though the Freddie Mac guidelines only demand 90+ days on the market AND when we started the entire process there was an active listing agreement that was over 90 days. To further complicate the problem, they said we need a new active listing agreement that is active for 90 days. How are we going to be able to do this? What agent would spend the money to list a property that he really has no hope of selling?

Is there any advice or anything that can be done within Chase to get them to acknowledge that we did meet the requirements, both in days and that at the time of filing we had an active listing agreement and that due to the fact that Chase has lost/messed up the two prior applications we no longer have an active listing?

Thank you for any help you can provide,

Joe

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  1. MsAnthrope says:

    Going through the same thing…also in Chicago, but with Citimortgage. They initially required the condo to be listed for 90 days. Ok, done. Then they decided that we needed to have it listed for 90 more days with the price cut in half. I’m halfway through that second 90-day period. It seems to me like they’re still just pushing for a short sale.

    If you have a solution, let me know, but from where I sit, they’re driving this bus, and I’m just along for an endless, hellish ride.

    • mianne prays her parents outlive the TSA says:

      Sounds like a case for a strategic default. Mail the keys along with a notarized statement stating that you are releasing your interest in the house to the bank to dispose of as they please. Yep, your credit with be hit–hit hard, but not sure it makes any difference vis a vis a short sale or a foreclosure. . But honestly what else can they do.. They can still initiate a foreclosure on the house if they wanted to, you don’t contest it, they win the default judgment, they still get the house, but paid a whole bunch more in legal fees to do so.

      If they try to sue for damages, you can always point to having tried working with them, but couldn’t continue dealing when their moving of the goalposts.

      • Megalomania says:

        Figure out how much you’ll owe the bank in either case first – I don’t think Illinois is non-recourse.

      • mac-phisto says:

        the reason people typically opt for deed-in-lieu is twofold. first, it’s not supposed to be as big of a hit on your credit as a full-blown foreclosure. second, because you are saving the banks boatloads of recovery costs, you can often get them to agree not to go after you for the deficient balance. in some states, they can’t sue you anyway & in others they can only sue you for the deficiency if they go thru what’s known as “judicial foreclosure”. deed-in-lieu is a way to secure yourself from future recourse in these states that require a judicial foreclosure to recover a deficiency.

        so the point is, the OP most likely doesn’t want to just mail the keys in & allow a judicial foreclosure to proceed – they want to resolve this outside of court so that they won’t be responsible for any deficient balance.

        • More_Cowbell says:

          More than that even, my friend got paid by the bank ~$5,000 to leave his place in good shape and by X date (around a month after the paperwork was finished). That was before the recession.
          Sadly my girlfriend is going through the same process now – and the banks (she had two first mortgages) can not agree on anything. BoA (main loan) offered her a deed-in-leiu, but can’t agree to budge one inch for the smaller loan. This is AFTER she lost all short sale offers because BoA refused to sell (for more than the house was appraised at AND more than the principal owed on the loan) because they would have to give some tiny sum to Wells Fargo. Buyer offered more to cover it, but they took so long that the $8,000 home buyer tax credit expired… Yes this was April, and still nothing has happened.
          Well over a year now in total…

          • mac-phisto says:

            i’m a little confused. first, you can’t have two first mortgages. you can have two mortgages (or more), but only one can be in first lien position. each additional mortgage appears in position behind that according to a concept known as “subordination”.

            it sounds like maybe wells fargo killed your friend’s deal. if they’re the owner of the second lien, they (as well as any other lienholder) have to sign off on the short sale as well. perhaps they thought they were getting shafted on the deal.

            this has been causing a lot of problems in the home industry lately. as valuations shrink, secondary lienholders are beginning to see losses on their investments – something that hasn’t happened in decades. & though they’ll likely lose either way, many opt not to agree to a short sale b/c they can sue for deficiency later if they allow the foreclosure to proceed.

            someone needs to remind them of the time-honored phrase: “a bird in the hand is worth two in the bush.”

  2. 310Drew says:

    There are fee for service Realtors out there who would put it on the market for you for a flat fee, with the understanding that the only service they are providing is putting it on the MLS. It’s called a limited service agreement. If anyone needs this done in Ohio, for the low price of $995 I would be happy to help!

    • calchip says:

      $995 for the privilege of keying information provided to you into MLS and nothing else? I can only hope there’s nobody stupid enough to actually pay that. The going rate in California was more like $250, and there were places such as buysiderealty.com that did it for free.

      No wonder the real estate market is so fucked up when real estate agents believe they are entitled to $1000 for taking 10 minutes to enter something into MLS.

      • Mrbyte says:

        And if and when it finally does sell, it’ll be surveyed for only $300 because nobody wants to pay more than that for important information that may affect the title (neighbor’s fence over property line, shortages or overages in area, especially when paying $X per acre, etc.). The real estate industry as a whole is really screwed up.

  3. Gulliver says:

    I am not sure why you care about a deed in lieu. It has the exact same impact credit wise. Tell Chase, you will no longer pay for the home. They can either put through the deed in lieu or go thrpough the foreclosure process. The foreclosure process will not cost you anything. In fact, Freddie and Fannie will likely do a cash for keys deal so you don’t wipe out the house.

  4. Tom Foolery says:

    Do your research, and don’t just take my word for it…but i don’t think there’s any real advantage to a deed in lieu over letting it go to sale. I work in loss mitigation for a big bank, but in retention and not in liquidation, so what i’ve picked up is second hand. My understanding though is that the credit hit for a deed in lieu is about the same as if your house goes to sale. I’ve also been told that except in very rare cases, even in states where they can do so banks won’t go after any unpaid balances that they might be able to claim. The overwhelming majority of the time a property goes into foreclosure because the owner can’t afford to pay. If they can’t afford to pay the mortgage, they usually can’t pay much towards outstanding balances either. Do some more research though, don’t base a decision just on what i’ve said.

    • Hobart007 says:

      Agreed. I work in liquidation and can say that banks do not need the ill will and the hassle of going after borrowers who couldn’t pay to begin with in court.

      The easy way to tell right away if it is planned is to check your tax docs at the end of the year. If you get a 1099 for a forgiven debt then you are home free from a litigation standpoint. Of course you still could have to pay taxes on that ‘income’.

      • coffeeculture says:

        if your state is “one-action” then you are home free when the auction happens…unless you have a pesky 2nd mortgage co. which didn’t exercise their “one-action.” In that case, bankruptcy might be the best option to discharge.

  5. Hobart007 says:

    My question is why is the property unable to sell as a short sale? The Freddie Mac guidelines state that the property has to have been unable to be sold as a short sale prior to being eligible for a Deed in Lieu. If the price is in line with market conditions (slightly below value) and shown there is no reason for it not to have activity unless the house is damaged somehow.

    That said, if you have documentation that your property was listed for the requisite amount of time and was unable to sell then I would point out to the bank that that part of the requirement has been met. If they need an active listing then I would list it actively and tell the broker that you want to aggressively pursue a short sale and need to price it to move. Then you have an active listing as well as the requisite time on market without activity.

    • cosmic.charlie says:

      The property is unable to sell as a short sale because in chicago there are thousands of condos in the same situation. Why pay premium for a used condo when there is a brand new one going up next door (or on the next block, or the one ofter that)?

      • EdnasEdibles says:

        So true. It’s horrible in Chicago. And honestly all of the foreclosures are driving me batty as someone who’s also trying to sell a condo from another state. Because I can’t compete at all with bank prices which are usually about $75,000 – $100,000 less than owner prices for similar condos. It’s like the banks are pretty much forcing everyone to go into foreclosure. Every time I check everyblock and see all of the deed transfers to banks I want to scream. There is no way to compete. No way at all.

  6. fair_and_balanced says:

    The bank does not have to do a dead-in-lieu, especially if they want to sue the foreclosed later for the difference they lose when the bank finally sells it at auction at a loss.

    Yes, it will cost the bank more money to foreclose, but it requires nothing from the owner.
    It seems like in this case the owner should just give up and move on.

  7. coffeeculture says:

    Foreclosure is easier, unplug the phone, wait for auction, and a real estate agent will call you when it’s over to offer you a couple grand to move out.

    Been a tenant twice doing this in family friends’ investment properties, pocketed $7k so far + negotiated reduced rent.

  8. Plasmafox says:

    How is HE responsible for THEIR inability to follow timely the process THEY arbitrarily created? He has little clear recourse here unless he lawyers up to force the issue in court and gets lucky. But that costs him money, and foreclosure doesn’t. So just because of that, they can do whatever they feel like and play with people like this.

  9. jim says:

    He failed to mention how much money he is going to screw them out of as part of his “get rid of his house and move to take advantage of some new opportunities” story. I pretty much have no sympathy for people that are just abusing the system.

    • Conformist138 says:

      You know, it could have just been a kind way of saying “had to move his family into a motel 50 miles away to get a job at a Burger King”.

      The wording was not his own, so no need to assume the guy is abusing anything.

    • daisu says:

      I am the OP. The property lost the majority of its value before we bought it. If they sell it at the average rate for similar properties in the neighborhood they would be losing about $5000.

  10. crazymatt1 says:

    FSBO.com has a flat-fee MLS for $299 in Illinois. That might be worth looking into.

  11. Cicadymn says:

    I guess you could say that he’s….*Puts on Sunglasses* Deed in the water….

    • scotchguard says:

      lol the theme song started playing in my head automatically as soon as I finished reading your comment.

  12. rdm says:

    I am dealing with the same thing, also with Chase, also with deed-in-lieu. They forced me to put the home for sale as part of their “pre-foreclosure sale program” where Chase/investors set the price. This is after the home was on the market for 18 months (and Chase blew every short sale offer we got due to their incompetence), they insisted we re-list. We re-listed and Chase did a title search and decided they didn’t like the way the title was filed and put me up for foreclosure (without notifying me or my realtor, who was still showing the house). Good luck. I think they foreclosed on me last week finally but have no idea. (The house is 1000 miles away)