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The Curious Bag
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Loss mitigation is when a third party hired by the homeowner, bank division or a private company mediates a negotiation between the lender and borrower to help avoid a foreclosure. There are several types of loss mitigation.
Loan Modification
A loan modification is a form of loss mitigation in which the original mortgage is modified and the homeowner and lender are bound to a new contract.
Short Sale
A short sale is when a lender accepts the offer of a homeowner to pay less than the principal balance on the mortgage. This commonly occurs when the amount of money owed for the home is more than the home is worth.
Special Forbearance
A special forbearance is when a lender agrees to let a homeowner make no monthly payment or lets her pay a reduced monthly payment.
Deed In Lieu
Deed in lieu is when a homeowner exchanges collateral property for a release from all terms of the mortgage.
Cash For Keys Negotiation
The lender pays the homeowner to vacate the residence in a punctual manner without destroying the home. Lenders will do this to avoid paying fees associated with evicting a home owner.
Source:
Servicing and Loss Mitigation Frequently Asked Questions - HUD
Loss Mitigation Specialist Explained
General Loss Mitigation Frequently Asked Questions - HUD
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