Get The Foreclosure Help You Need While You Can
Time is not on your friend when foreclosure is involved. Talk with a housing counselor for foreclosure help.
Loss mitigation, a term used to describe the help of a third party in negotiating to stop a foreclosure. The third party is usually in a department within the bank or it can be an outside firm.
With loss mitigation, attempts are made to negotiate the mortgage terms in the hopes of preventing foreclosure. Loan modifications are normally required with the new terms. Forms of loan modification include: short sale or short refinance negotiation, deed in lieu of cash, cash-for-keys, or a partial claim loan or other loans. All of these options are meant to lessen the risk of loss to the lender.
Types of loss mitigation include:
Obtaining lower interest rates and principal balance, adjustable rates turning into fixed rates, forbearance, loan terms being lengthened or any of these done in combination results in a loan modification.
When the value of a home is not worth the amount that is owed on it, a short sale loan may be available. With a short sale loan, the principal is decreased so that the homeowner can sell it for the actual value.
To help a homeowner obtain a loan through a new lender, the current lender may offer a short refinance to bring the homeowner in line with what the new lender requires.
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.
To try to avoid the costs of foreclosure, a bank may offer money to a homeowner if the homeowner agrees to leave the home intact. It is called cash for keys.
Forbearance may be granted that will allow for no payments or reduced payments for a specified amount of time. When the period ends, a repayment plan to pay the missed payments may be setup. Sometimes the loan will just be modified.
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.
With loss mitigation, the biggest benefit is avoiding foreclosure. This form of help is meant to make it easier for the homeowner to make their payments or to release them from their obligations under the loan. Foreclosures not only affect the homeowner but the lender as well.
