Length of Process for a Deed in Lieu

Listing Time

Lenders may require that a homeowner attempt to sell the home before considering a deed in lieu of foreclosure. Requirements will vary by lender, but it is common for a lender to want the homeowner to attempt to sell the home for three months. If a homeowner already has the home on the market, or has had it on the market in the last year, the lender may waive this requirement. The lender may even request that the homeowner attempt to market the home as a short sale, in which the lender allows the home to sell for less than the amount remaining on the mortgage.

Administrative Time

Lenders will require a homeowner to fill out a lengthy application for a deed in lieu and provide financial and other documentation explaining why she can't repay the loan. The lender will use this information to carefully review the homeowner's situation before approving a deed in lieu, as the lender is unlikely to want to take possession of the home. This process may take a few weeks, depending on the complexity of the situation as well as the number of applications that the lender is processing.

After Approval

Once a lender approves the deed in lieu of foreclosure, the amount of time that a homeowner will have to vacate the property varies. Generally, after the lender approves the deed in lieu of foreclosure, a homeowner should expect to be out of the home in about a month. However, in some situations, the homeowner and lender may negotiate the date when the homeowner has to be out. Some lenders may allow the homeowner to stay in the home for a period of months after approving the deed in lieu

HUD Rules

For a homeowner with a loan backed by the U.S. Department of Housing and Urban Development (HUD), special rules apply. The lender and homeowner must complete the deed in lieu of foreclose within six months of the date that the mortgage became delinquent and 90 days after the beginning of the deed in lieu process. HUD does allow exceptions to the delinquency date rule for homeowners who used other methods to avoid foreclosure after falling behind on the mortgage payments, such as mortgage modification, etc.. Homeowners or lenders may also apply for a date extension from HUD for other reasons.