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How can I surrender my property to the bank without being in foreclosure or behind in payments.

Washington, DC |

Property has been on market for a few months. No bites, am moving and would like to be rid of the mortgage completely. Payments are current. Property listed is 4 acres and has become too much for me alone to take care of. I would like to do the right thing but house is under water and I am tired. Can I walk away without facing legal action from the bank such as coming after my paycheck. Loan is a VA loan.

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Attorney answers 1


Have you approached the lender regarding a deed-in-lieu of foreclosure? If there is only one mortgage on the property, you may be able to save the lender foreclosure costs if you deed it back to the lender. I don't know what the property is worth, how much is owed on the mortgage or how much equity is in the home. If its a VA loan, you might also want to check with the VA to see if the VA will take the home by way of deed-in-lieu of foreclosure. There is no law that requires the mortgage lender to take the property by way of deed-in-lieu of foreclosure and the VA may have other requirements which you do or do not meet. However, its worth a shot. And a deed-in-lieu may still be reported on your credit. It will not be as bad as foreclosure or bankruptcy but still is going to affect it.

If the property is not moving, is it priced correctly? Have you considered renting the home so that you will have some income coming in with which to pay the mortgage? What about doing a short sale if the property is not worth what you owe?

Regarding you facing legal action, there is no free lunch. If you are not able to work out a deed-in-lieu or find a buyer, then the mortgage lender is going to foreclose on your property if you stop paying. Whether the lender will come after you for a deficiency depends on your state's deficiency laws. I don't know where exactly the land is located or the foreclosure/deficiency laws for your area. However, the VA may provide that regardless of the law, you can still be charged with the deficiency.

You need to talk to your realtor about these things as well as your lender and possibly a real estate attorney who assists with foreclosure defense as he/she may know the specifics of the anti-deficiency statute as it relates to VA loans in your area.

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