Bank Loss Mitigators: The Role They Play Foreclosure and Short Sales

Bank loss mitigators work with borrowers facing foreclosure. Most loss mitigators are bank employees. However, some are independent agents who work on the homeowner's behalf to assist in lender negotiations.

The primary role of bank loss mitigators is to assist homeowners in developing a repayment plan to prevent their home from falling into foreclosure. Borrowers are required to submit financial documents, along with a foreclosure hardship letter, so the loss mitigator can determine which options are available.

When borrowers possess the financial means to cure mortgage arrearages or remain current with future mortgage payments, bank loss mitigators typically offer a loan modification. When borrowers are facing financial setbacks which prevent them from making future payments, loss mitigators might offer the option to short sale the property.

Loan modifications alter the terms of the mortgage loan. Some lenders will temporarily suspend or reduce monthly payments to allow borrowers time to get back on track. For example, if a homeowner is delinquent by three months, the loss mitigator can assist in developing a repayment plan which allows borrowers to repay delinquent amounts over an extended period of time. Occasionally, loss mitigators can convince mortgage lenders to roll mortgage arrears to the end of the loan by extending repayment terms.

Several options exist for loan modifications. Bank loss mitigators are well-versed in available mortgage options and can provide a variety of options to both the borrower and mortgage lender.

When borrowers are unable to cure mortgage arrearages or remain current on future payments, loss mitigators can assist in negotiating a short sale agreement. When lenders enter into short sales, they agree to accept less than is owed on the home loan. Each lender establishes short sale protocol. Some accept the sale price as payment in full, while others issue deficiency judgments for the difference between the purchase price and loan balance.

Deficiency judgments remain on borrowers' credit reports until fully repaid. Deficiency amounts can amount to several thousand dollars and take years to repay. When entering into a short sale arrangement it is important to obtain a Payment in Full without Pursuit of Deficiency Judgment. Payment in full means the lender accepts the sale price and releases the borrower from further financial responsibility.

If you are facing foreclosure, realize options exist to help stop the process. The first step involves contacting your bank's loss mitigation department. If your mortgage lender is unwilling to work with you, seek out independent loss mitigators to negotiate on your behalf. If you are unable to afford independent bank loss mitigators, seek out private real estate investors who possess experience in orchestrating short sale transactions.

While foreclosure can be an intimidating and frightful experience, contacting your lender's loss mitigation department might offer relief you did not know existed. Take time to become educated about the options available by conducting research. Doing so will help you be better prepared when presenting your offer to bank loss mitigators.

Remember, most mortgage lenders prefer to work with homeowners and avoid foreclosure. Borrowers can improve their chances of a successful outcome by becoming proactive from the start.