I’m in the Military and Lied to About My Deed in Lieu of Foreclosure


Dear Steve,

I purchased a home in March 2012 while active duty military. I left military March 2013 and returned as active duty March 2013 (same month and not sure if the service member relief act can play a part in that).

Divorced November 2013 and was given home. In November 2013 contacted the mortgage company and was told about ‘deed in lieu’. Asked repeatedly if it would negatively affect my credit as I must maintain superb credit for security clearances. Was told NO, it would NOT effect it. I have tried a multitude of times with the mortgage company as well as credit agencies to get it removed and or fixed. Needless to say I keep getting the “we must report it as accurate and we are. We can’t remove it or change it. **It states on the report about deed in lieu and late payments because I was told that once I started it, that was it.** April 2014 it was finally approved and I signed paperwork….

Are they legally allowed to remove it entirely as if it never existed? Can they change all the negative status due to what was said on a phone call vs what was signed? What other options are out there? I know that what they report must be accurate, but I thought they had the ability to remove it completely. Can the SMCRA help me out in any way on this?



Dear Merrill,

It sounds like whoever said it would not be reported was making that up. The second answer you got is the correct one. The information reported must be accurate, including any late payments made.

A deed in lieu of foreclosure is a process by which you agree to give back the house so the bank does not have to foreclose. It really depends what the giveback agreement you signed, said. I’m hoping it said that any remaining balance owed would be forgiven. That way they won’t go after you for any balance.

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However, you need to be aware that forgiven debt is taxable up to the point where you become insolvent.

The SCRA you are talking about is the Servicemember Civil Relief Act. I’m wondering if any of those early documents you might have signed, waived your rights under the SCRA. Don’t know.

The Act does say, “A servicemember may waive any of the rights and protections provided by this Act. Any such waiver that applies to an action listed in subsection (b) of this section is effective only if it is in writing and is executed as an instrument separate from the obligation or liability to which it applies. In the case of a waiver that permits an action described in subsection (b), the waiver is effective only if made pursuant to a written agreement of the parties that is executed during or after the servicemember’s period of military service. The written agreement shall specify the legal instrument to which the waiver applies and, if the servicemember is not a party to that instrument, the servicemember concerned. ”

The reason I am curious about that is that it appear the deed in lieu of foreclosure process would have required a waiver. Again, according to the SCRA, “Actions requiring waivers in writing. The requirement in subsection (a) for a written waiver applies to the following:

(1) The modification, termination, or cancellation of—

(A) a contract, lease, or bailment; or

(B) an obligation secured by a mortgage, trust, deed, lien, or other security in the nature of a mortgage.”

If there is any silver lining in this process it is that you are less of a security risk with this mark than with the mortgage in default.

You have handled the matter in a legal matter, you don’t have to obligation hanging over you, and you would not be able to be manipulated because of the outstanding debt.

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Frankly, I’d talk to your security officer and be open about what happened. I don’t see this one thing being a problem.

I think you should go read “Do I Need Good Credit to Get a Top Secret Clearance? Can I Get a Security Clearance if I Go Bankrupt? – Alex.”


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