Q: After a deed in lieu is signed what happens next to borrowers
A: It depends on a number of variables. I would highly recommend you not sign such an important document without speaking to an attorney.
A:
In some cases, if the sale of the property does not cover the outstanding mortgage debt, the lender may pursue a deficiency judgment to recover the remaining balance. New York is a judicial foreclosure state, meaning any deficiency judgment must be pursued through the courts. However, in some cases, the lender may choose to waive this right as part of the deed in lieu agreement.
Borrowers may face potential tax liability for the amount of debt forgiven in the transaction. The IRS could consider forgiven mortgage debt as taxable income unless the borrower qualifies for an exclusion (such as insolvency or mortgage debt forgiveness programs).
Anthony M. Avery agrees with this answer
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