Question: Although home values are increasing in our North Phoenix neighborhood, we are still “underwater” ten years after we purchased our home at the top of the market. Due to medical expenses of one of our children, we are behind on our mortgage payments. Our mortgage company has now agreed to accept a deed in lieu of foreclosure (“DIL”) from us. We still love our home, and in the next few months we should finally be able to sell a lot we own near Flagstaff and have some money. If our mortgage company puts the home back on the market after the DIL is recorded, are there any laws that prohibit us from buying the home back from the mortgage company?
Answer: A DIL is a conveyance deed from the owner of the home to their mortgage company in exchange for the mortgage company “writing off” the mortgage loan. A DIL generally has a lengthy affidavit signed by the owner of the home. This affidavit has standard provisions primarily protecting the mortgage company from a “change of heart” later by the owner of the home. For example, standard provisions in the affidavit are that the seller is not signing the DIL under any duress, or in reliance upon any representations by the mortgage company. Finally, even if there is a provision in the affidavit prohibiting the buyer from buying the home back from the mortgage company, the mortgage company could still sell the home to you. Mortgage companies are in the business of making mortgages, and not in the business of owning homes.