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(Without extenuating circumstances, the waiting period for a Fannie Mae loan is seven years after a foreclosure or four years after a deed in lieu.)
The primary disadvantage to the borrower is the loss of the property, the income from the property, and the borrowers investment in the property. The conveyance of the property is also taxable. A borrowers offer to convey mortgaged property back to the lender must be truly voluntary.
A deed-in-lieu of foreclosure is an arrangement where you voluntarily turn over ownership of your home to the lender to avoid the foreclosure process.
Disadvantages to Lender A lender should also hesitate before accepting a lieu deed where there are outstanding subordinate liens or judgments against the property. In such a situation, the lender will have to foreclose its mortgage, with the attendant expense and time involved to obtain clear title.
Though less severe than foreclosure, a Deed in Lieu will still negatively impact your credit score and remain on your credit report for up to seven years.
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