Inside Your Lender's Loss Mitigation Department
Author: David Wathen
The Loss Mitigation Department. This is a specialized department that you will find at your Lender and/or Mortgage Servicer. If you have never been late on your mortgage, you may not even know this department existed. If you have been late on your mortgage, I'm sure you may have received phone calls directly from this deparment or may have been transferred there from customer service.
This department exists to mitigate (reduce) the loss that your bank faces during the foreclosure process. It essentially exists to keep homeowners in their home. Why? Because a foreclosure is very expensive for your bank. Your bank DOES NOT want to foreclose on your home, but they WILL if they have to. They are not in the business of buying and selling real estate. They are in the business of collecting monthly mortgage payments. Therefore, the loss mitigation department exists to work out payment solutions with troubled homeowners to prevent foreclosure from happening. What are some of these payment solutions? It could anything from a Reinstatement, Repayment plan (forbearance), Loan modification, or Short sale.
A reinstatement is simply paying back the bank what is past due on your account. For example, if you are 2 months past due and you speak to your loss mitigation department, they will encourage you to Reinstate your account (pay what you owe to bring you current). Well, what if you have reduced hours at work and you can't afford those two payments all at once? Then the loss mitigation department will look into a temporary repayment plan. Using our previous example of being 2 months past due, a temporary repayment plan would involve taking those two past due payments (and any fees) and spreading them out over several months. For illustrative purposes, let's assume that your mortgage payment is $1,000 per month. Since you are (2) months past due, you are delinquent for $2,000.
A temporary repayment plan (forbearance) would take your regular payment ($1000) and factor in those two past due payments ($2000) over a period of let's say three months. So for the next three months, your new payment would be approx $1667 per month. This includes your regular payment plus $2000 spread out over 3 months. The goal of this program is to get the homeowner current after three months.
You may be asking yourself, well what if I can't afford $1667 per month? I can't even afford my regular $1000 per month payment! In this case, a LOAN MODIFICATION may be the best solution for you. A loan modification is a permanent change to your mortgage terms. The most common modification is a permanent reduction in your interest rate. For example, permanently reducing your interest rate from 8% to 5%. As you can imagine, this is a more favorable solution for the homeowner. You get a brand new lower payment and in many instances this is for the life of the loan! Of course, the bank is reluctant to grant modifications to everyone. Therefore you must educate yourself on exactly how loan modifications work, who gets approved for modifications, and the best way to present your case.
I have created a very detailed E-book called Loan Mod Secrets www.loanmodsecrets.net that explains exactly what you need to know about how to get approved for a loan modification. Don't contact your Loss Mitigation Department until after you have read the contents of this book. This will give you all the tools, knowledge, and confidence to approach your lender and save thousands with a Loan Modification.
Article Source: http://www.articlesbase.com/mortgage-articles/inside-your-lenders-loss-mitigation-department-1164376.html
About the Author:
From 2004-2006, I worked for a major lender as a Loss Mitigation Specialist. In this role, I approved Loan Modifications, Repayment Plans, Short Sales and other workout programs with Homeowners. I negotiated directly with Real Estate agents on behalf of the bank for short sales in order to minimize Investor Losses. I also worked directly with Attorney Firms to process Foreclosure Timelines, Hault Foreclosure Sales, and negotiate payment plans. During this time, I learned a great deal about the internal workings of a major Loan Servicer. I witnessed first hand many Homeowners slipping through the cracks who desperately needed help but were denied because of "the system." With this knowledge, I decided to start my own website that would be dedicated to representing the Homeowner's Best Interests. LoanModSecrets.net is a resource that helps to level the playing field and ensure that each Homeowner is empowered when negotiating a loan modification.
