Find The Foreclosure Help You Seek Sooner Rather Than Later
December 9th, 2009 by Adam WhazzerTime is not on your side when facing potential foreclosure. Talk with a housing counselor for foreclosure help.
Loss mitigation is a phrase that describes a third party aiding a homeowner by attempting to prevent foreclosure. Normally it is a department within the bank itself or can be a separate firm.
While loss mitigation is mainly used to lessen the losses suffered by the lender, homeowners can benefit from it also. In an effort to avoid foreclosure, mortgage terms are renegotiated through this process. If a new agreement can be made, the loan will have to be modified to reflect the new terms. Modifications such as: Partial claim loans, deed in lieu of, cash for keys, short sale negotiation, short refinance or other loan options are explored.
Types of loss mitigation include:
When a homeowner and a bank come to an agreement on new terms for the mortgage, a loan modification is done. This loan can result in decreased interest rates and principal balances, adjustable rates being turned into fixed rates, longer repayment period, forbearance or combinations of several of these.
With a short sale, the homeowner pays than the principal owed on the mortgage to the bank. This option is normally for those who owe more than the home is worth. It allows them to sell the home for the market value.
A short refinance offers the homeowner a chance to refinance their home with a different lender by lowering the principal balance on the loan to meet the guidelines of the new lender.
Being released from every obligation of a mortgage is what a deed in lieu of does for the homeowner. Collateral is presented to the bank in return for being released.
A negotiation in which the homeowner is paid to vacate the property within an allotted time and be compensated is called cash-for-keys. No damage can be done to the home. This method is offered to avert foreclosure costs.
When no payments or lowered payments for an agreed amount of time are made, this is known as forbearance. In some cases the missed payments will not have to be caught up. In others, a repayment plan will be necessary.
HUD offers a program known as partial claim in which money is loaned to bring the mortgage up to date. The homeowner is not responsible for repaying the partial claim loan until the home is paid in full or they no longer own it. Interest rates do not apply on the partial claim loan and a promissory note has to be signed.
Keeping a homeowner from losing their home or getting them out from under the requirements completely is the purpose of these options. No one wants to go through the foreclosure process, including lenders. Both parties are affected by foreclosure.
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