Missed six or eight mortgage payments because you spend your paychecks
on lotto tickets? Or massages, a la Al Gore? Or your 5th-grade
education didn't help you keep your job? Or your 310-pound [white]
wife ran off with the african-american school janitor?

Well, do mortgage lenders have welcome news for YOU! Sorta.

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"Foreclosure alternative gaining favor"

By Kenneth R. Harney
The Washington Post
Saturday, June 26, 2010; E01





SHORT SALES have been the hot solution for financially stressed
homeowners and their lenders for the past year, but here's another
potent foreclosure alternative that's about to take center stage:
deeds in lieu.

Some of the largest mortgage servicers and lenders in the country are
gearing up campaigns to reach out to carefully targeted borrowers with
cash incentives that sometimes range into five figures, plus a simple
message: Let's bypass the time-consuming hassles of short sales and
foreclosures. Just deed us the title to your underwater home, and
we'll call it a deal. We won't come after you to collect any
deficiency between what you owe us on the mortgage and what we obtain
from the home sale. We might even be able to wrap up the whole
transaction in as little as 30 to 45 days. How about it?

Mortgage companies say troubled borrowers are increasingly signing up.
One of the largest servicers, Bank of America, has mailed 100,000 deed-
in-lieu solicitations to customers in the past 60 days, and its volume
of completed transactions is breaking company records, according to
officials.

What are deeds in lieu? The full name is deeds in lieu of foreclosure.
They are voluntary transfers of property ownership from borrowers to
creditors that make court-directed foreclosures unnecessary.

The concept is one of the oldest in real estate, but it got a special
boost this year when the Obama administration included it as an option
in its Home Affordable Foreclosure Alternatives program, and mortgage
giant Fannie Mae cut the penalty-box time for homeowners who use the
technique from four years to two before they can qualify for another
home mortgage.

Deeds in lieu also are surging because they provide a win-win for
borrowers and mortgage investors that short sales often cannot match.
Tops on the list: speed. Travis Hamel Olsen, chief operating officer
of Loan Resolution, a Scottsdale, Ariz., firm that works with lenders
to solve troubled borrowers' problems, said deeds in lieu represent "a
very expeditious way to move on" for underwater borrowers who are
facing potential foreclosure.

"A lot of owners just want to be finished with it now," he said. "They
don't want to deal with [the house] anymore." They don't want to deal
with real estate agents or signs on the front lawn that reveal their
financial squeeze to neighbors. They don't want to haggle with
potential buyers coming in with lowball offers. But they also don't
want to simply walk away -- strategically default -- because that will
crater their credit files and scores for as much as seven years.

Greg Hebner, president of the MOS Group of San Diego, which also works
with banks and investors across the country to resolve defaulting
borrowers' situations, said a key motivation is that lenders are stuck
with massive backlogs of underwater homes that haven't yet gone
through foreclosure and been put on the market -- the so-called shadow
inventory.

Not only is it cheaper for them to do deeds in lieu to gain control of
those properties, but with mortgage rates below 5 percent, they also
will probably be able to resell them faster and on potentially more
favorable terms in the summer and fall.

"If you can get a lot of inventory moving in the next couple of
months" of prime home-buying season, Hebner said, "you are solving a
lot of problems."

Matt Vernon, Bank of America's top short sale and deed-in-lieu
executive, said the technique works so well for borrowers and mortgage
owners that his company is running pilot programs in major housing
markets to alert borrowers who might benefit but are not familiar with
deeds in lieu.

To sweeten the pot, Bank of America is offering cash incentives that
range from $3,000 to $15,000 -- and is getting a strong response,
Vernon said.

What are the downsides or limitations of deeds in lieu for homeowners?
Probably the most important, experts said, is that they don't work for
every situation involving serious mortgage default. For example, if
you have equity in the property, you'll probably want to pursue a loan
modification first, then a short sale, rather than hand your equity
stake over to the lender.

Deeds in lieu usually don't work when there are multiple mortgages
from different creditors encumbering the property. Also, though deeds
in lieu do less damage to borrowers' credit histories than
foreclosures or bankruptcies, they definitely leave a mark.

Fair Isaac, developer of the widely used FICO credit score, said on
its "MyFico" Web site that deeds in lieu and short sales are treated
as "not paid as agreed" accounts and are treated the same by the FICO
scoring model.

http://www.washingtonpost.com/wp-dyn...062500200.html

The U.S. housing industry can't survive unless it resumes granting
mortgages to deadbeats.