Question: We have run into rough times. Due to a lay-off and illness we will be unable to meet our house payments. We want to give the property back to the lender. But, the property is worth less than the mortgage -- the difference is about $15,000. Can we give the house back with a deed-in-lieu-of foreclosure and offer to pay the deficit over the next five years?

Answer: Lenders are not required to accept a deed in lieu of foreclosure -- they want their money, not the house. That said, your circumstances are not caused by credit abuse, and I suspect many lenders would be willing to work with you. You may be able to get a longer loan term, a lower rate, perhaps interest-only payments for a few months, etc.

As to your offer to take back a note to make up the lender's loss, there is a terrific assertion of responsibility in such a suggestion. Given the circumstances, I think a lender would be elated with such an offer.

But, two cautions: First, it is best to have an attorney negotiate with lenders. Second, please see a tax professional to determine what taxes may be owed in the situation your propose.