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Foreclosure Loss Mitigation is Beneficial for the Lender and the Homeowner
Why go for loss mitigation
Loss mitigation functions by relieving the homeowner's mortgage obligation or creating a mortgage solution that the homeowner can sustain financially. This process is also beneficial for the lenders who incur fewer losses by mitigating than they would through foreclosing on the homeowner. For a lender, immediate foreclosure will mean a huge financial burden; loss mitigation is a better option.
The a number of types of loss mitigation There are various processes for loss mitigation.
- Loan modification: In this process, modification of a homeowner's mortgage takes place, and the homeowner and lender are bound by fresh terms. Common modifications include low interest rate, 'fixing' adjustable interest rates, decreasing principal balance, forgiving payment defaults and the fees, and increasing loan term.
- Short refinance: This process enables a lender to reduce the main balance of the homeowner's mortgage making way for the homeowner to refinance with another lender.
- Short sale: Here, a lender gets a payoff that is less than the homeowner's mortgage main balance. This lets the homeowner sell his/her home at its actual market price.
- Cash-for-keys negotiation: This process is a variation of the deed in lieu of foreclosure. Here the lender pays the homeowner for vacating the home in a specified time.
- Deed in lieu: Deed in Lieu of foreclosure (DIL) enables a mortgager to voluntarily deed collateral property for being released form all mortgage obligations.
- Partial Claim: In this option, the mortgagee advances funds on behalf of the mortgager; the amount is enough to reinstate a delinquent loan.
- Special Forbearance: this process lets you make a decreased monthly payment or no payment at all.