Bank Loss Mitigation: Tips for Homeowners Facing Foreclosure

Every mortgage lender has a bank loss mitigation division. Employees working in this department are referred to as loss mitigators. The role of loss mitigators is to work with borrowers who have fallen behind in their mortgage payments and help them establish a repayment plan to avoid foreclosure.

Borrowers facing foreclosure must contact their bank loss mitigation department to obtain loan modifications or apply for short sale approval. Prior to contacting the lender, homeowners should organize financial information and develop a realistic repayment plan.

When borrowers are unable to cure mortgage arrearages they might have the option of obtaining a deed in lieu of foreclosure or short sale. If borrowers possess the financial means to make future mortgage payments, lenders might agree to offer a loan modification or forbearance agreement.

Mortgage repayment plans generally reduce the monthly payment for a specified period of time. Some lenders require borrowers to cure mortgage arrearages before modifying the terms of the home loan. Others require a partial payment, while a few lenders will roll delinquent amounts to the end of the loan; extending repayment terms.

When borrowers are financially unable to adhere to a mortgage repayment plan, lenders might offer a short sale. When lenders engage in short sales they agree to accept less than is owed on the mortgage note.

Presently, mortgage lenders accept approximately ten percent of short sale requests. The most common reason for rejected short sale requests stems from the fact that many borrowers do not provide required financial documents. Borrowers who desire short sale approval should work with real estate professionals with experience in short sales.

Realize the job of the loss mitigator is to reduce financial losses. Most lenders do not accept less than 95-percent of the current market value. Homeowners facing foreclosure will need to locate a buyer willing to pay the asking price. Most banks require borrowers to have a buyer in place before granting short sale approval. However, some lenders will grant borrowers a few months to locate a buyer.

When working with bank loss mitigation it is important to realize that loss mitigators can make or break your deal. For best results, mortgage experts advise developing a good working relationship with loss mitigators. Always be polite, provide requested documents in a timely fashion and follow directives provided.

Once the bank loss mitigation division approves a loan modification it is imperative for borrowers to remain current on payments. When short sale approval is granted, borrowers must adhere to all criteria outlined. If borrowers do not adhere to repayment plans or unable to locate a buyer the last option available is deed in lieu of foreclosure. Deed in lieu allows borrowers to return the home the bank and walk away without owing additional funds.

Borrowers facing foreclosure should take time to become educated about the various options available. Those who do not take time to explore options could end up being responsible for repayment of deficiency amounts. Home loan deficiencies often amount to several thousand dollars. Deficiency judgments remain on credit reports until fully repaid and can wreak havoc on credit ratings.