Legal Question in Real Estate Law in New York

A deed in lieu is where a homeowner and a mortgage bank make a deal where the bank agrees to take the house in trade for the outstanding debt owed on the mortgage. The intention is to satisfy the debt and not be subject to having the bank obtain a deficiency judgment against the mortgagor (homeowner). Part of the problem is, as with any debt forgiveness, that the amount forgiven becomes income in the year the transaction is consummated. I suggest checking out the ramifications of the deed in lieu deal with an accountant before you agree to any deal.

Also, consider this, there are other alternatives, if you want to stay in the house. Yes, it costs money, but there are ways to defend against foreclosure cases and even have the case dismissed. Once you can get a case dismissed you're in a better bargaining position to make a deal with the bank because you've put the bank at risk of not getting any money on the mortgage. Just something to consider.