Loss mitigation programs were established by the federal government and the mortgage industry in order to stop home foreclosures.
They help foreclosure victims in default on their mortgages to find alternatives to home foreclosure.
a variety of loss mitigation options include:
1. Loan Workout - A loan workout is a broad term used in the loss mitigation arena. It is used when you negotiate with your lender any kind of plan that will benefit both you and the lender when you are delinquent or in default.
2. Loan Modification - This term is used when your lender modifies your current mortgage (same loan you have, only changes are made to the note) in order to work with you and make your mortgage more affordable. A modification to your rate, balance of loan, delinquent fees owed, term of loan etc. can be made at the "discretion" of your lender.
3. Forbearance - You are allowed to delay or reduce payments for a short period, with the understanding that another option will be used at the close of that time to bring your account to a current status.
4. Short Sale - A short sale is primarily used when all negotiations for a loan workout have failed and you are upside down on your mortgage, meaning you owe more on the mortgage than it's worth. The lender basically agrees to cooperate in the sale of your home and take a loss.
5. Deed-in-lieu - is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
These options can help borrowers stop foreclosure, stay in the home or mitigate loss.
Make sure you speak with experienced professional in these respective areas before attempting these on your own.
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