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How to Give the Bank Back a Real Estate Property

by Jann Seal, studioD

One of the options for a homeowner or other real estate owner who is facing financial hardship is to offer to give the property back to the lender. The key term here is “financial hardship.” Known as a deed in lieu of foreclosure, or a mortgage release, returning the home to the lender is less damaging to your credit report than the foreclosure you are facing. The lender might also offer you compensation for avoiding the costly foreclosure process. Gaining in popularity over short sales, deeds in lieu were up 39 percent in 2012 over 2011, according to RealtyTrac.

Contact your lender and speak with an asset manager in its loss mitigation department. Keep trying to get through by telephone, as it’s often difficult to get the name of the person who can help you. Request that you be considered for a deed in lieu instead of a foreclosure because of financial difficulties you’re facing. Remind her that this will save the bank money as the bank won’t have to proceed with a costly foreclosure.

Answer the asset manager’s telephone questions honestly. Explain why you’re behind in your mortgage payments. Tell her of your attempts to sell the property, how they’ve failed and why. Ask that a foreclosure action be halted until a deed in lieu can be agreed upon.

Apply for a deed in lieu if your loan is government backed by Fannie Mae or Freddie Mac even if you’re not behind in your mortgage payments. Indicate any second mortgage debt, knowing that also will be covered in the deed in lieu. Be prepared to explain the hardships that won’t allow you to continue making mortgage payments. At the time this was written, you can apply only if your debt-to-income ratio is above 55 percent, if you are current in your mortgage payments or less than 31 days late. Check Fannie Mae and Freddie Mac websites for up-to-date information.

Ask the lender if it offers a cash for keys program in which it offers homeowners who are in foreclosure a cash payment in return for leaving the house well maintained, with all its appliances and systems intact -- and most likely within a specified timeframe.


  • Expect your credit score to be reduced considerably, but not as much as a foreclosure damages it.

About the Author

Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.

Photo Credits

  • Creatas/Creatas/Getty Images