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Irwin Law
Irwin Law, Attorney
Category: Legal
Satisfied Customers: 7406
Experience:  Lawyer & Real Estate Broker, 30+ years, foreclosure, land contracts, inheritance, probate.
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I would like to sell my home but owe more than what it's

Customer Question

I would like to sell my home but owe more than what it's worth. I heard about a program with Fannie Mae called Mortgage Release (Deed-in-Lieu of foreclosure). Is this an option for me ? How can I explore this? Thank you.
JA: Since laws vary from place to place, what state is this in? And has any paperwork been filed?
Customer: NY. No paperwork has been filed.
JA: Has anything been filed or reported?
Customer: No
JA: Anything else you want the lawyer to know before I connect you?
Customer: What would prevent us from being eligible for this program?
Submitted: 8 months ago.
Category: Legal
Expert:  Irwin Law replied 8 months ago.

Since you mentioned the Fannie Mae mortgage release program, I presume that you have already look for information and you may have seen this:

You did not say if you are current on your mortgage or not. Generally, the lenders will not consider programs of any kind for mortgages that are in current status. By way general explanation, the deed in lieu of foreclosure means that you give the house back to the bank and they sell it. You are released from your mortgage loan liability. The alternative is for you to put your home on the market through a local real estate broker and try to obtain the highest possible price. If the best price. You can obtain is less than the mortgage balance. You can submit a request to the mortgage company to accept it. That is called a short sale. The banks prefer that you do a short sale rather than a deed in lieu of foreclosure.
Pay particular attention to the requirements for the lender to consider either the deed in lieu or short sale there pretty much the same and they seem to take forever to get worked out. See: You can see why it takes so long for decisions to be made. It is well known fact that buyers waiting for short sale approval will get frustrated and walk away. Sometimes more than one buyer will do that in any given sale.

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Customer: replied 8 months ago.
Thank you for this information. We are current on our mortgage at this time. My husband and I are looking to move into a bigger home but cannot afford to pay the difference on our current condo if we decide to sell. Also, we are not able to rent out due to our condo policy. This is why we are looking to move without our credit being impacted.
Expert:  Irwin Law replied 8 months ago.

In that case, your best option seems to be to buy the new home first, while your credit is still good, and then deal with the current condo either through a deed in Lieu, short sale, or an outright walk-away. There's no outright answer that will solve the condo problem without some credit damage. You literally have to "go with the flow".

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Customer: replied 8 months ago.
This makes sense and I have considered this option. My question now is, will a bank consider lending us money for a new home when we already have an outstanding loan with our current home?
Expert:  Irwin Law replied 8 months ago.

That's the $64,000 question. They would probably require you to show prospective rental income from it.