Obtain The Foreclosure Help You Need While You Can

By Adam Whazzer

Time is not on your friend when it comes to foreclosure. Talk with a housing counselor for foreclosure help.

Loss mitigation is a phrase that describes a third party aiding a homeowner by attempting to prevent foreclosure. Normally it is a department within the bank itself or can be a separate 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.

Loss mitigation includes:

When a homeowner and a bank come to an agreement on new terms for the mortgage, a loan modification is done. This loan can result in decreased interest rates and principal balances, adjustable rates being turned into fixed rates, longer repayment period, forbearance or combinations of several of these.

With a short sale, the homeowner pays than the principal owed on the mortgage to the bank. This option is normally for those who owe more than the home is worth. It allows them to sell the home for the market value.

A short refinance offers the homeowner a chance to refinance their home with a different lender by lowering the principal balance on the loan to meet the guidelines of the new lender.

A Deed in lieu of foreclosure is an option where the homeowner voluntarily deeds collateral property in return for being released from all obligations under the loan.

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.

When no payments or lowered payments for an agreed amount of time are made, this is known as forbearance. In some cases the missed payments will not have to be caught up. In others, a repayment plan will be necessary.

Partial claims are normally done through HUD. The homeowner will be loaned a certain amount to get the mortgage current. A promissory note will have to be signed as well. Partial claims are paid back when the mortgage is paid in full or when the owner does not own the property anymore. This loan does not incur interest.

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. - 31382

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