| What is loss mitigation? | | | | of their monthly loan so that they can bring their |
| Loss mitigation is a general term that is used to | | | | mortgage current over a period of time. The |
| reduce or eliminate financial loss for both the lender | | | | homeowner may also qualify for forbearance, where |
| and the borrower. The goal of loss mitigation is to | | | | the monthly payments are suspended for a period of |
| prevent a property from going into foreclosure. | | | | time. This gives the homeowner time to catch up on |
| Foreclosures are the last resort for both the | | | | monthly expenses and start fresh, without paying |
| homeowner and the lender. The homeowner's credit | | | | late fees. |
| rating is devastated by foreclosure. It takes at least | | | | What happens when the homeowner cannot afford |
| three years after a foreclosure for the homeowner's | | | | to keep the home |
| credit rating to be repaired. Additionally, when a home | | | | Sometimes financial difficulties are more than short |
| goes into foreclosure, the owner, who may have | | | | term problems. In a situation where the homeowner |
| monthly payments for years, loses all of the equity | | | | finds himself unable to service the loan, and with little |
| he had in the home. | | | | to no chance of servicing the loan in the future, it |
| For the lender, foreclosure is bad business. Although | | | | may be necessary for the homeowner to give up |
| they end up with an asset, the home, banks and | | | | the home. There are a variety of programs that the |
| mortgage companies are not real estate companies. | | | | homeowner can participate in that allows him to |
| They are not set up to maintain a property and get | | | | move out of the home, eliminate his mortgage and |
| it sold. The bank, when they take ownership of a | | | | avoid foreclosure. |
| home through foreclosure, they typically attempt to | | | | A short sale is the process of selling the home for |
| re-sell it as quickly as possible, with no thought to | | | | less than the amount owed on the loan. A short sell |
| maximizing their profits. | | | | is often a good way to sell a home quickly. Because |
| With both the homeowner and the lender attempting | | | | the home is typically sold for below market price, it is |
| to avoid foreclosure, the field of loss mitigation | | | | more attractive to buyers. You cannot short sale the |
| developed. There are a variety of programs in place | | | | home without permission from your lender. Because |
| to help those who have lost their jobs, experienced a | | | | they will take over the unpaid balance of the loan, |
| medical emergency or gone through a divorce hold | | | | they determine who qualifies for a short sale. |
| onto their home and prevent foreclosure. Because | | | | A Deed-In-Lieu of Foreclosure, or DIL, allows the |
| each person's financial situation is unique, the best | | | | homeowner to hand over the deed to the home to |
| choice for one person may not make sense for | | | | the lending institution, giving the property to the |
| someone else. A real estate attorney can be a smart | | | | lender in exchange for being released from the debt. |
| investment for the person trying to hold onto their | | | | The bank may also allow an assumption of loan. This |
| home. | | | | is a process where a third party enters into a |
| Ways that the homeowner can keep the home | | | | contract to take over payments on the home. |
| If the homeowner got behind on their mortgage | | | | Do I qualify? |
| payment for some reason, but are generally able to | | | | If you have trouble making your mortgage |
| make the payments and afford the home, there are | | | | payments, the first step is to call your lender and ask |
| a variety of programs that can help. A loan | | | | to speak with the loss mitigation department. Do not |
| modification is a situation where the existing loan | | | | wait until past due statements start to show up in |
| contract is rewritten in a manner that allows the | | | | your mailbox. If you have a legitimate reason for |
| homeowner to continue to service the debt. The | | | | failing to make your payments, and have paid |
| changes to the loan are permanent, and extend after | | | | faithfully in the past, the lender may be able to make |
| the homeowner gets back on their feet financially. | | | | arrangements to suspend payments or allow you to |
| A partial claim is when the lender advances the | | | | modify the terms of your loan agreement before the |
| borrower funds to pay up the delinquent amount of | | | | mortgage becomes seriously past due. If you allow |
| the mortgage, making it current. The partial claim loan | | | | the past due notices to stack up and do not return |
| is typically interest free and is not repaid until after | | | | phone calls from your lender, you may be too far |
| the mortgage is paid off. The lender may also offer | | | | onto the path to foreclosure to stop the process |
| the borrower an opportunity to increase the amount | | | | when you finally approach them. |