What does it mean when someone voluntarily forfeits their mortgage?

Question

What does it mean when someone voluntarily forfeits their mortgage? I need to know how this happens? What the benefits are? What are the disadvanatges? The person was going into foreclosure so is this a better option? If so why?

Answer 1

When you forfeit your mortgage it is called a Deed-in-lieu of Foreclosure.
Here is some more information on that.
http://www.afscanhelp.com/deed.cfm

Answer 2

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RE:
What does it mean when someone voluntarily forfeits their mortgage?
What does it mean when someone voluntarily forfeits their mortgage? I need to know how this happens? What the benefits are? What are the disadvanatges? The person was going into foreclosure so is this a better option? If so why?

Answer 3

That isn't a phrase that's used around here, but if it means the homeowner is walking away, that may mean with or without the lender's agreement. If the lender agrees, this is usually called "tender of a deed in lieu of foreclosure." While it may save money, as the lender is spared time and expense of going through a full foreclosure, and possibly saves the borrower from any deficiency should the lender ultimately lose money on the sale, it will show up on the borrower's credit report.

A better option is if there is a buyer, trying to persuade the lender to accept a "short sale" where they accept the net proceeds as payment in full on the loan. Usually lenders that will do this will not go below a certain percentage of the loan balance. Lenders often prefer this to any option that makes them the owner of the property, as it saves them taxes, insurance, and selling costs.