Magna is a metro township in Salt Lake County, Utah, United States. The population was 26,505 at the 2010 census, a moderate increase over the 2000 figure of 22,770. Settlement of the area began in 1851 shortly after pioneers reached the Salt Lake Valley. Early farmers settled in 1868 at the base of the northern Oquirrh Mountains and called their community Pleasant Green. By 1900, there were about 20 families in the area. One of the first Pleasant Green farmers was Abraham Coon, who established a livestock ranch and settlement called Coonville in a canyon mouth at about 5400 South. The canyon is now known as Coon Canyon, and Coon Creek flowing out of it, is one of the major Oquirrh Mountain drainages. Coon Creek flows north and west through Magna to the Great Salt Lake. The Pleasant Green Cemetery located in the Oquirrh foothills, at about 3500 South, was established in 1883. In 1890, in response to a law requiring all children to receive free public education, the first school was built in the community.
Deeds in Lieu of Foreclosure
A deed in lieu of foreclosure (deed in lieu) is one way that borrowers who are behind in their mortgage payments can avoid a foreclosure. Specifically, with a deed in lieu, the borrowers agree to sign title to the home over to the bank. In exchange, the bank agrees that the borrowers won’t be liable for all, or some, of the money due under the defaulted promissory note and to release the mortgage lien.
Deed in Lieu Process
To obtain a deed in lieu, you must first submit an application along with supporting documentation to your mortgage servicer (the company you make your mortgage payments to). If you meet all qualifications, the bank will approve your request, but typically only if there are no junior liens on the property, such as a second mortgage or judgment liens. One exception to this general rule is if the bank happens to hold both the first and second mortgage, then it may still approve the deed in lieu.
Documents You’ll Have to Sign
Once the bank approves a deed in lieu, it will send you several documents to sign to complete the transaction:
• a grant deed in lieu of foreclosure (which transfers title to the property to the bank), and
• an estoppel affidavit.
Among other things, the estoppel affidavit generally includes the terms of the agreement, such as whether or not the bank has the right to seek a deficiency judgment, which is explained in further detail below, as well as a provision that you are acting voluntarily, not under duress or undue influence. In some cases, there could be a separate deed in lieu agreement that contains the terms of the deal.
Get an Attorney — It’s a Good Idea
Below are some situations where you should consider hiring, or at least consulting with, an attorney to assist you with the deed in lieu. You don’t know how to fill out the deed in lieu application. Hiring an attorney may be a good idea if you want a deed in lieu, but you don’t understand the application process. For example, it may be worthwhile to hire an attorney if you’ve already spoken to your servicer about a deed in lieu, but are confused about:
• how to fill out the application, or
• what documentation you need to submit along with the application.
An attorney can help you fill out paperwork.
Keep in mind you can get free help with your application package from a HUD-approved housing counselor rather than hiring an attorney to help you. Go to the U.S. Department of Housing and Urban Development’s webpage to find the contact information for a housing counseling agency near you. The bank won’t release its right to pursue you for a deficiency judgment. With a deed in lieu, the “deficiency” is the difference between the fair market value of the property and the mortgage debt. For example, say your house is worth $150,000, but you owe the bank $175,0000. The deficiency is $25,000. States typically don’t have laws preventing lenders from getting deficiency judgments after a deed in lieu. In the past, banks would routinely agree not to seek a deficiency judgment after a deed in lieu in consideration for the borrowers agreeing to transfer the property. However, it is now more common for banks to try to recover some or all of the deficiency from the borrowers. To avoid a deficiency judgment after the deed in lieu is completed, the paperwork that the bank sends you to sign must expressly state that:
• the transaction is in full satisfaction of the debt, and/or
• the bank agrees not to seek a personal judgment against you.
If you can’t find this language in the deed in lieu documents (or if the bank specifically reserves the right to go after you for a deficiency judgment), an attorney who may be able to help you negotiate a release of your personal liability for the remaining debt or a reduced deficiency.
Potential Tax Consequences When the Bank Forgives the Deficiency
If the bank forgives all or part of the deficiency and issues you an IRS Form 1099-C (“Cancellation of Debt” form), the forgiven amount could be considered income for tax purposes. However, an exception or exclusion might save you from having to report the canceled debt as part of your income. For specific information about your particular situation, consider talking to a tax attorney. You don’t understand the deed in lieu documents. If you receive the deed in lieu documents from the bank, but can’t figure out what your rights are under the agreement or don’t fully understand what the documents that you’re signing actually mean, you should consider hiring an attorney to go over the paperwork and explain all of the terms and conditions to you.
On the other hand, if you have a good understanding of the deed in lieu process, application, and the documents you’re required to sign, there’s no requirement that you must have an attorney to help you with the transaction. For example, you might not need an attorney if all of the following are true.
• You have spoken to the servicer about completing a deed in lieu and a representative fully explained the process to you in way that you can understand.
• You understand how to fill out the deed in lieu application and what supporting documents you need to submit along with your request.
• You have done your homework to educate yourself about deeds in lieu and your rights under the transaction.
• Once you receive the deed in lieu documents, they clearly state that you are not liable for any deficiency.
• You’re satisfied with the terms of the deal.
• You have a thorough understanding about the contents of each document that you must sign to complete the deed in lieu transaction.
Negotiate a Deed in Lieu
For those concerned about the negative effects of foreclosure, a deed in lieu of foreclosure is an option. A deed in lieu allows you to sign over legal ownership of your home in exchange for your lender’s promise not to foreclose. Convincing your lender to accept a deed in lieu of foreclosure can take some work. Unfortunately, lenders actually may prefer to force a foreclosure rather than lose certain debt recovery rights under a deed in lieu.
A deed in lieu of foreclosure is the voluntary transfer of ownership of your property to your mortgage lender. In return for your home’s deed, the mortgage lender releases you from your mortgage loan and any responsibility for it. Deeds in lieu of foreclosure can benefit both homeowners and mortgage lenders. Under a deed in lieu, a homeowner avoids foreclosure while a mortgage lender quickly takes full and unencumbered possession of the home.
Negotiating with a lender to accept a deed in lieu of foreclosure means demonstrating financial hardship on your part. First, approach your lender with sufficient proof of inability to repay your mortgage, and then offer a deed in lieu of foreclosure. Second, negotiate the terms of any reports to credit bureaus your lender may make after it accepts your deed in lieu. Finally, make sure the lender won’t pursue you later for any financial loss it suffers.
If possible, hire a foreclosure attorney to represent your deed in lieu offer to your mortgage lender. Also, build a very comprehensive deed in lieu offer, and go over it thoroughly before presenting it to your lender. Be prepared to make use of other foreclosure prevention options quickly if your lender turns down your deed in lieu offer. In extreme cases, mentioning the possibility of bankruptcy could convince your lender to accept a deed in lieu.
Lenders almost never accept deed in lieu offers from homeowners with second mortgages on their titles. Additionally, if your home is worth less than you owe, a lender most likely will refuse your offer of a deed in lieu. However, if your lender insists on a foreclosure, you could have from several weeks to a year before it actually takes place. In California, even speedy foreclosures take about four to five months to complete.
How Long Does a Deed in Lieu of Foreclosure Stay on a Credit Report?
A deed in lieu stays on the credit report for up to seven years, the same as a foreclosure. Homeowners can use a deed in lieu of foreclosure as a method to avoid the generally harsher effects of actual foreclosure. Normally, it’s also an easier way for a homeowner to give up all interest in his home. The deed is handed over to the lender, and the lender, in return, forgives the money still owed on the home loan. Eventually, the lender tries to sell the home and use the proceeds to recoup its losses.
When you default on your home loan, the result may eventually lead to a foreclosure and subsequent loss of your home. The sting of default, just from the hit it deals to a credit score, may also be significant. In fact, scores have been known to drop as much as 250 points when foreclosures are involved. That’s why considering an alternative means of giving up your home, one of which is the deed in lieu, could make sense.
Effects on Credit
Deeds in lieu of foreclosure also negatively affect credit, though they may not be as severe or for as long. In general, while your credit score may decline as much as in a foreclosure, the overall negative effects are usually lessened. For example, while the deed in lieu will remain on your report for seven years, you’ll usually be able to purchase a home two to three years after the event occurs. You’ll need to begin building positive credit, though.
Process of Relinquishing Property
When a home loan goes into default, discussing a possible deed in lieu with the lender is an option. If you and your lender can agree to go that route, there are a number of forms you’ll be required to sign. These include a deed that transfers property interest to the lender. In return, the lender officially cancels the home loan debt. In addition, it also typically waives the right to seek any future deficiency judgment.
Tax Implications Of Foreclosure
Before the passage of the Mortgage Forgiveness Debt Relief Act of 2007, federal taxes were usually owed on the amount of the canceled loan debt. Fortunately, federal tax is now eliminated under many circumstances. In California, tax implications vary. The Golden State does have a similar law that forgives canceled mortgage debt up to $2,000,000, providing relief of principal resident properties.
Deeds in lieu may also supply certain benefits. For one, Fannie Mae, the government-sponsored entity specializing in purchasing mortgages from lenders, offers a number of incentives to consider one instead of a foreclosure. For homeowners, these include reducing the wait time after a deed in lieu to qualify for a new home loan, in some extreme cases as soon as 12 months. In most cases, it is two years. Lenders also receive certain financial incentives and guarantees from Fannie to encourage deeds in lieu rather than foreclosure actions.
If your mom can no longer live in the property, she can move out at any time and simply notify the servicer (you have their address and phone number if you are getting the statements and other correspondence) that she has vacated the property. She can sell the home or simply let them make arrangements to take the home back at that time. If there is no equity in the home, then I would assume she would allow them to take the home if you or any other heirs do not want to keep the home at a payoff of 95% of the current market value. They would arrange to take the home either by Deed in Lieu or through foreclosure but Deed in Lieu is much better for the lender as well. The down turn in the economy eroded the equity all borrowers had in their homes, not just the borrowers who had reverse mortgages. We have seen borrowers who borrowed more in 2005 – 2007 than their homes are still worth today. That does not make the loan a bad loan – those borrowers received more money than their house is currently worth and were allowed to live in their homes for 7 – 9 years without having to make a single payment and now that the loan is higher than the current value of the home, they are not required to pay one cent over the current value toward the payoff of the loan. In other words, the insurance that they paid for to HUD allowed them to receive more money than the home is currently worth, pay no interest on the money and have no recourse on other funds to them or their heirs when they move AND they were able to live in the property for years while under no burden of mortgage payments.
Always seek legal advice before jumping to give your bank a deed in lieu of foreclosure. Remember, it’s in the bank’s best interest to obtain the deed from you. It might not be in your best interest to comply. You could be adversely affected in a few ways:
• A deed in lieu will show up on your credit report, but the effect is usually less than the hit you would take for a foreclosure.
• You won’t be able to buy another home for a while. Fannie Mae and Freddie Mac won’t buy a mortgage in the second market when it’s made by a borrower who signed a deed in lieu without extenuating circumstances in the last four years. This drops to two years with extenuating circumstances. Compare the wait to buying after a foreclosure, which is seven years without extenuating circumstances, five with, and you’ve essentially picked up a three-year gain.
• Make sure that the deed in lieu specifically releases you from liability to repay all loans against the property. Otherwise, you could be liable for any loan deficiency even after turning the property over to the lender—the difference between the home’s value and the balance of your mortgage loan. There’s little point in handing over title if you’ll be pursued you for a deficiency, but this is typically negotiable. Just make sure you get any waiver in writing.
• You could be required to give the lender cash in addition to title to make up some of the difference if your loan balance is significantly more than the home’s fair market value.
When you need a foreclosure attorney in Utah, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Ascent Law LLC Ogden Utah Office
|Etymology: Kennecott Copper’s Magna Mill;
Latin word meaning “great” or “superior”
|First Settled (as Pleasant Green)||1868|
|Given Township Status||2001|
|Incorporated as a Metro Township||2017|
|• Municipal Administrator||Greg Shulz|
|• Total||37.48 sq mi (97.07 km2)|
|• Land||15.11 sq mi (39.13 km2)|
|• Water||22.37 sq mi (57.94 km2)|
||4,278 ft (1,304 m)|
| • Estimate
|• Density||1,783.88/sq mi (688.78/km2)|
|Time zone||UTC-7 (Mountain (MST))|
|• Summer (DST)||UTC-6 (MDT)|
|Area code(s)||385, 801|
|GNIS feature ID||1430037|
Magna (/ˈmæɡnə/ MAG-nə) is a metro township in Salt Lake County, Utah, United States. The current population of the township stands at 27,029 according to the 2020 census, a moderate increase over 22,770 in 2000.