Loss mitigation is the department that handles delinquent mortgage accounts. Employees of this department are known as loss mitigators. They are responsible for reviewing mortgage loans to determine which strategies should be used to help borrowers get back on track or minimize the bank’s financial losses.

The loss mitigation team does not make final decisions regarding mortgagor accounts. Instead, they act as a mediator between borrowers and banks to develop a feasible plan.

In order to achieve a successful outcome it is crucial for mortgagors to contact their lender the moment they cannot make their home loan payment. The sooner borrowers commence with communication the sooner strategies can be developed.

Loss mitigators can offer a variety of solutions. However, to determine which strategy is best suited, borrowers must submit financial records for review. Loss mitigators consider loan payment history, credit score, and the ability to make future loan payments.

Lenders might offer loan deferment or real estate forbearance agreements when borrowers are facing temporary financial setbacks. These strategies allow borrowers to suspend or reduce loan payments for a few months without permanently altering loan terms.

Loan modifications are used to permanently reduce monthly loan installments. This can be achieved by providing borrowers with a reduced rate of interest or by extending the terms. Borrowers must meet eligibility requirements to obtain a loan modification.

Mortgagors who can no longer afford to pay future payments may qualify for real estate short sales. Banks are not usually eager to grant short sale approval because it means they agree to accept less than owed on the mortgage loan. Short sales are a complex matter that usually requires legal counsel.

Deed in lieu of foreclosure is generally the last foreclosure prevention strategy offered by banks. Mortgagors are required to give their house to the lender and walk away empty-handed. Borrowers lose all money vested into the property and are not entitled to any profits if the bank sells the home for more than was owed on the mortgage note.

While most people prefer to avoid foreclosure there are instances when it cannot be prevented. Individuals who obtain short sale approval or deed in lieu of foreclosure must determine if their lender accepts the short sale or return of the property as payment in full.

Many lenders require borrowers to pay any monetary deficiency between the sale price and loan balance. If mortgagors cannot pay the deficiency in full, banks can obtain a court ordered judgment which is reflected on borrowers’ credit reports for up to 7 years after the debt is paid.

Mortgage delinquency and default are reported to the major credit reporting bureaus. Late payments can reduce credit scores by 10 to 20 points, while short sales and deed in lieu can reduce scores by 100 points or more. Restoring credit after foreclosure can take two or more years. Therefore, borrowers must commit to being proactive when facing foreclosure. Otherwise, they will experience financial fallout that can haunt them for years to come.

If you have fallen on hard economic times and struggling to maintain home loan installments contact your lender’s loss mitigation department to discuss available options. Remember, loss mitigators are often overworked and subjected to verbal abuse on a daily basis. Being prepared and polite will go a long way in finding a solution to your problem.

Author Bio: Real estate investor, Simon Volkov shares insider-secrets for working with loss mitigation to obtain short sale approval in his popular book, “Short Sale Hardship Letter eBook Course” available at www.ShortSaleHardshipLetter.com.

Category: Real Estate
Keywords: loss mitigation,loss mitigators,real estate forbearance,deed in lieu,loan modification,short sale