Mortgage Release™ (Deed-in-Lieu of Foreclosure)

When a Short Sale is not a viable option, you may qualify for a Mortgage Release. This program could help you resolve your delinquency and avoid foreclosure and it offers three exit options.

"We can’t afford this home anymore, but don’t want to have a foreclosure on our credit history. And we need time to plan our move."

What is a Mortgage Release?

A Mortgage Release is where you, the homeowner, voluntarily transfer the ownership of your property to the owner of your mortgage in exchange for a release from your mortgage loan and payments. Options are available (sometimes with a relocation incentive) to help you leave the home immediately; stay in the home for up to three months without paying rent; or lease the home (at market rates) for up to one year. Depending on your situation, you may be required to make a financial contribution to receive a mortgage release.

A Mortgage Release is an alternative to foreclosure and should be considered if:

  • You are ineligible to refinance or modify your mortgage
  • You are facing a long-term hardship
  • You are behind on your mortgage payments or will fall behind in the near future
  • You owe more on your home than it’s worth
  • You don’t want to sell your home or haven’t been able to sell your home
  • You can no longer afford your home and you are ready to leave

What are the benefits of a Mortgage Release?

  • Eliminate your remaining mortgage debt
  • Avoid the negative impact of a foreclosure
  • May be eligible for up to $3,000 relocation assistance in some cases
  • Start repairing your credit sooner than if you went through a foreclosure
  • May be eligible for a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (up to 7 years)
  • Flexible exit options let you leave the home immediately, stay in the home for up to three months without paying rent, or lease the home (at market rates) for up to one year

What is the process for Mortgage Release?

To qualify for Mortgage Release, you’ll work with your mortgage company to:

  • complete the eligibility process, such as determining the value of the property and how much you still owe as well as reviewing your current hardship
  • review the options available under Mortgage Release (your mortgage company will help you choose the best option for your situation)

If approved, you will be required to sign standard pre-closing documents as well as attend the closing. A Mortgage Release usually takes around 90 days to complete, but this could be shorter or longer depending upon your specific situation.

Your next steps depend on which option you’ve qualified for. These include immediately vacating the home, staying in the home for up to three months (no rent), or leasing the home (paying market-based rent monthly) for up to one year.

Additionally, when you vacate the home at the agreed-upon date, you are required to leave the home—inside and outside—in good condition, free of interior and exterior trash, debris or damage, and all personal belongings must be removed. In some cases, you may be eligible to receive up to $3,000 relocation assistance to use toward your moving expenses and to make the transition to new housing easier.

Next steps

Step 1

Gather your financial information—Make sure you have your basic financial and loan information on hand when you call your mortgage company. You’ll need:

  • your mortgage statements, including information on a second mortgage (if applicable);
  • your other monthly debt payments (e.g., car or student loans, credit card payments); and
  • your income details (paystubs and income tax returns).

Step 2

Explain your current situation—Be ready to outline your current hardship and explain why you are having trouble making your mortgage payment, why this is a long-term problem and confirm that you are ready to leave your home to avoid foreclosure. Your mortgage company will need to understand the reasons why you are having difficulty in order to find the right solution for you.

Step 3

Contact your mortgage company or a Fannie Mae Mortgage Help Center—Tell them you are interested in a Mortgage Release and you want to see if you qualify.

Use these helpful forms to help you prepare

Your mortgage company wants to help you avoid foreclosure and, in most cases, will be willing to work with you. The biggest mistake you can make is to wait any longer to take action. Contact your mortgage company today to determine if you are eligible for a Mortgage Release. If you need further assistance (before or after contacting your mortgage company), contact a Housing Counselor.

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