Can my lender seek a deficiency judgment against me if I give back the deed in lieu of foreclosure?

Bank sign on building

Q. If the bank agrees to take property under a deed in lieu of foreclosure, can it come back and file a deficiency judgment against me?

A. Making sure the lender can't pursue you for any losses or costs it incurs in repossessing your home is a critical part of any deed in lieu of foreclosure agreement.

Avoiding the threat of future legal action is the primary reason troubled homeowners should always ask lenders to take back their home in exchange for writing off their loan before walking away or allowing a foreclosure to proceed.

If you go this route, you'll need to sign a warranty, quit claim or grant deed, which conveys ownership of the property to the lender.

In exchange, the lender should provide you with two forms -- one that states the debt is canceled and another that waives the right to pursue a deficiency judgment.

It's very important to have this waiver as part of the settlement.

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