DILOF – Deed in Lieu of Foreclosure
A DILOF, or Deed in Lieu of Foreclosure, is a method by which a homeowner voluntarily transfers ownership of a home without foreclosure. As of July, 2010, Fannie Mae has made it easier to homeowners who have done a Deed in Lieu of Foreclosure to purchase another home in the future.
This rule applies to short sales also.
Previously, homeowners could not purchase another home for 4 years after a deed in lieu of foreclosure or a short sale. This policy reduces that time to 2 years. The rule does not apply to strategic foreclosures (or any other foreclosures), which have a 5-year waiting period under Fannie Mae rules. These waiting periods can drop to 3 years for a foreclosure or 2 years after a short sale in situations where the borrower can show extenuating circumstances.
FHA has its own set of waiting period rules, including requiring borrowers to wait 3 years after a foreclosure to qualify for FHA-backed housing loans.