What Suze Orman Doesn’t Know About Foreclosure, Part 2
Suze Orman was suggesting that a “deed in lieu of foreclosure” was a good idea for someone who’s behind on their mortgage, and can’t afford to stay.
As I mentioned in my last post, not only is this the least-approved method of foreclosure resolution, it’s also the one that the servicers get paid the least for.
The main reason she was suggesting this was to preserve the homeowner’s credit.
I came along this quote from Fair, Isaac’s March newsletter:
“Are other options better for my credit standing?
Recently, several alternatives to foreclosure have become popular - some of these include “short sales” and “deeds-in-lieu of foreclosure”. These may be viable options for you, and you should definitely do research to determine if these options make sense for your situation. However, as far as your FICO score in concerned, there is no difference between foreclosures and short sales or deeds-in-lieu of foreclosures. Each of these actions is considered an account that was “not paid as agreed”, and will have the same impact to your FICO score.”
Based on this, unless Fair, Isaac has changed their scoring methods in the last few months, it doesn’t look like this is a good choice for the homeowner in dire straits.
Sure, you could make a philosophical or ethical argument that it’s the “right thing to do,” but they’re not handing out a lot of awards for that sort of thing when you need to rent the next place or borrow money because your old beater died.
Bottom line: if you’re going to get foreclosure advice, get it from someone who specializes in dealing with foreclosure.
Whether you get your advice from me or someone else, be sure to qualify your expert.
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