According to the Federal Trade Commission, a person facing foreclosure can give his house back to the bank with a deed in lieu of foreclosure. In exchange for signing over the deed to the home, the bank forgives the debt owed on the home.Know More
When a debt is forgiven, the former homeowner must report the forgiven debt as income to the IRS, states the Federal Trade Commission. Although the income must be reported, the Mortgage Forgiveness Debt Relief Act of 2007 removes the tax liability for the amount of the forgiven debt. According to Bankrate, up to $2 million may be excluded; however, if a portion of the mortgage was used to pay for consumer purchases or to consolidate consumer debt, this portion of the loan is not excluded from the individual's taxable income.
As an alternative, the lender might agree to a short sale. According to the Federal Trade Commission, in a short sale, the homeowner sells the home and gives the proceeds to the lender. In exchange, the lender agrees not to foreclose on the home and to forgive the debt repaid by the sale. According to Bankrate, the amount forgiven is still reported as a partial charge off on the individual's credit report.Learn more in Credit & Lending
To avoid foreclosure, talk to your lender, contact a housing counselor and negotiate a work out plan. Consider a pre-foreclosure sale or short sale if all else fails.Full Answer >
The exact process for how foreclosure works varies by state law; however, there are some processes that are the same or similar across all states. In most cases, the foreclosure process begins with a borrower falling four months behind on mortgage payments.Full Answer >
A deed can be transferred to another person by getting a certified copy of the existing deed, filling out a form, and then having the executed deed recorded by the jurisdiction where the property is located, according to J. Hirby for The Law Dictionary. Homeowners should be familiar with legal basics of real property ownership.Full Answer >
A contract for deed is a type of real estate transaction. In a contract for deed, there is an agreement between a buyer and seller for the purchase of property. The seller provides financing and allows the buyer to buy the property for a set price by making monthly payments.Full Answer >