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Loss Mitigation: The Art Of Negotiation

Jan 9, 2008
With foreclosures at an all time high in the US today, most home owners that are facing foreclosure hear all kinds of bank terminology words like, pre-foreclosure, short sales, REO's, bank owned properties and loss mitigation are all terms that some fear. We will look a one of these terms and what it means to you.

Owners often believe that refinancing their home is an option to get away from their current lenders. Keep in mind that care needs to be taken if you are looking at refinance your home to save yourself from foreclosure. Most properties are already in default by two or more months, and paying your mortgage late will have adverse affects to your credit, thus not qualifying, so refinancing may not be an answer to your problems.

A viable option for these owners is commonly referred to as "loss mitigation", which is where the lenders may assist the borrower when they have fallen behind in payments and in danger of default on their loan. Lenders vary on policies regarding foreclosure and loss mitigation is sure to check with them for the specific details in your particular situation.

After two or more months of default, in most states, a repayment plan may be put into effect between the lender and the homeowner, the purpose of this is to correct the delinquent amount due and assist the owner in getting back on track and avoiding foreclosure of the property. This is where the loss mitigation specialist comes in to place, they will be the person that you have will deal with in coming to an agreement that satisfies both you and the lender during your time of hardship.

Lenders and homeowners can lose tens of thousands of dollars in the foreclosure process and therefore lenders will want to avoid moving forward is possible. Ultimately, the lender wants the current owner to keep up to date and avoid foreclosure proceedings they are not in the business of being landlords; they are in the business of lending money.

Homeowners that are facing foreclosure must be encouraged to keep ownership through scenarios that are in the best interest of the lender and the owner.

In many cases the owner will get cut off at the first level of help, and ultimately the first level in the loss mitigation department as we, keep in mind that these lower levels are simplified glorified collection departments, and you will need to go up the ladder to get results. Lost mitigation workup are basically a summary of what the lender stands to lose during the foreclosure process, by taking into consideration all factors of the situation.

Loss mitigation has been dubbed the "Art of Negotiating", between the borrower and the lender, therefore stopping the foreclosure process and reaching a settlement. Often times the loss mitigation department is the better of the available choices for the homeowner that is desperately tying to save their home from foreclosure.

On the other side of things, loss mitigation is not a viable solution if there are other options that are a win-win. Keeping your options open and researching them thoroughly may help you avoid foreclose, bankruptcy and the 7+ years of bad credit.
About the Author
Thomas Bladecki is the author and can provide additional information about foreclosure listings and the current real estate markets visit Home Foreclosure Help. You should also see his Foreclosure Blog for all the latest information about the real estate foreclosure market.
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