The goal of loss mitigation is to work out a mortgage loan modification solution that benefits both lender and borrower. Neither party wins when a homeowner struggles to pay their loan, so lenders have great incentive to work toward a solution. While you can represent yourself during the process, it is probably best to use a third party. The experience and understanding of the process a professional company has will prove invaluable in reaching the right solution. Neutrality in the situation puts loss mitigation specialists in a better negotiating position with the lender.

Nobody wins when a homeowner can’t pay his or her loan. The federal government and lending institutions know this and established loss mitigation as a means of working out a desirable solution for all parties involved.

Here are some  places to read more about loss mitigation options:

• Loan Modification – Permanent change to your loan details resulting in a new contract
• Short Sale – Negotiated sale of your home at a price below what you owe
• Foreclosure – Overview of foreclosure and you can do about it

The main goal is to establish a way for you to keep your home through loan modification. If keeping the home doesn’t prove viable in your situation, additional options provide an opportunity for you to get the most out of the situation with a better result than what foreclosure can offer.

Loss mitigation is a time-sensitive option and it’s important you take action today. The more time you have on your side, the better chance you have of securing a positive outcome. Of course, even if you don’t have much time, you should explore these options to the fullest.

Loan Modification

A loan modification is a permanent change in one or more of the terms of your loan creating a brand new contract between you and your lender. You or your loss mitigation company works with the lender to create a new contract that will reinstate your loan and give you a fresh start by restoring your credit status. The new terms will be shaped by your ability to pay and can include adding the delinquent balance to the loan, reduce the interest rate, extending the years due, and sometimes reducing the balance owed.

Short Sale

A short sale is a negotiated sale of your home at a price below what you owe on the mortgage. If you face an uncontrollable hardship that makes it impossible to afford your home and because of a market fluctuation you owe more then your home is worth, then working with your lender to negotiate for a short sale could be your best option. By approving a short sale, the lender can avoid a lengthy and costly foreclosure, and you can pay off the loan for less than you owe. This option is beneficial for you as it significantly lessens the impact to your credit versus foreclosure and can often be removed completely.

Forbearance

In a forbearance agreement with your lender, you generally get some sort of temporary relief on your mortgage. It is essentially an acknowledgment that you have a situation that has temporarily weakened your ability to pay what you owe every month, but will turn around as soon as the hardship you are experiencing is over. This could be something like a period of unemployment or a medical issue that gets resolved.

Deed-in-Lieu of Foreclosure

This program could be considered just short of foreclosure, but still a better resolution. The result are similar in that the bank takes over your home, but by avoiding the foreclosure process, none of the proceedings become public and you are free of any personal indebtedness meaning the lender won’t be able to sue you.

Cash For Keys

In some cases, lenders are willing to pay a certain amount of money for you to walk away from your foreclosed home without doing any damage to it. Many homeowners become disgruntled and do extensive damage costing thousands of dollars to repair. This is why lenders are willing to pay you for a peaceful exit. It may be a hollow gesture, but it’s still something for you to take away during the painful foreclosure process.

• Are Advance Fees involved? If yes, there needs to be an advance fee agreement. Many California companies have an advance fee agreement on file with the Department of Real Estate.
• Are advance fees charged? In 32 states, we only charge our clients for work performed. That means we detail the services that will be performed in your contract and then charge you only when that service is complete. This is extremely uncommon but more in line with protecting the consumer.
• Are you being promised EVERYTHING? Run fast from someone who makes promise after promise. The truth is, we are in a negotiation with your lender and the outcome is not guaranteed. We know how to present a package, we know what a good file looks like and we know what is typically going to be successful. This all helps us take on files we feel we will lead to a successful outcome, but it doesn’t guarantee it. We will be up front with you about your chances and sometimes, that means we have to turn people down.
• Is someone telling you to miss a mortgage payment? Yikes. This is dangerous territory. We will never flat-out recommend you skip a mortgage payment if you can afford it. this goes back to the fact your outcome is not guaranteed and we don’t want to see you fall deeper into a hole if it is avoidable. We might at times tell you that your lender would be more receptive if you were late so you have all the facts at your disposal, but you have to remember that you have an obligation to make that payment first and foremost.
• When you call in for updates, is anyone taking care of you? This is a little tough to know before you have signed on as a client, but it’s important nonetheless. We’ve read about situations where someone sent $4,000 to the company they hired and all of  a sudden couldn’t find anyone to talk to them.
• Do you feel comfortable? It’s probably not a good idea to send someone your money if you don’t feel comfortable with the situation and quite frankly, any good company is going to want you to be comfortable before working with you. That sounds harsh, but it’s a long process and any disconnect between a mitigation company and its clients hurts the process.

These are just a few things and there are surely other indications. Feel free to leave your comment and let us know what you think indicates a reputable loan modification company.

• Improperly documenting financial situation. You need to consider every potential expense and be up front and honest about your debts and liabilities.
• Trying to do it yourself. This one is easy to avoid. Unless you are clearly comfortable with the process, you’d be wise to pick up the phone and call a loss mitigation specialist.
• Not knowing what to do if the modification fails.There are other programs that offer better alternatives to foreclosure. If loan modification fails, we’ll know what to do next.
• Submitting an incomplete package. Our process ensures you will not miss a step and make critical mistakes.
• Poorly crafted hardship letter. Your hardship letter is an opportunity to explain to the lender why you are experiencing difficulties and can go a long way toward convincing a lender that you are a good candidate for modification.
• Talking to the wrong department. If you call your lender, there’s a good chance you’ll have a hard time connecting with the right department. Often, lenders route delinquent accounts to collections who are only interested in getting your full amount due. These are not the people to talk to and will only frustrate you into thinking you are out of options.

• Market value of the home has dropped. Most people looking at a short sale as an option have experienced a drop in home value to the point they now owe more than the home is worth.
• The mortgage is in default status or could be in the near future. With the current market being as it is, lenders are becoming more willing to consider a short sale even before the home goes into default. This helps them cut the problem off before it costs them more money.
• The seller has a hardship. With any loss mitigation program, documenting the hardship that has caused your current situation is required. Lenders might be particular about the hardship so it’s best to rely on our expertise to help you with the letter.

If you think you qualify for a short sale, contact a loss mitigation specialist to begin determining a course of action. It’s important to remember that time is not on your side in these situations and the quicker you act the better chance you have of achieving a successful short sale.

The Importance of Doing it Right

While it is possible to negotiate directly with your lender, it is generally not recommended. There are many pitfalls that can cause your modification attempts to go awry. A professional loss mitigation specialist can help you navigate through the process and ensure that you do everything right.

The reason it’s so important to strictly follow the lender’s process is that they need to make a sound business decision. As such, they are going to review everything about your financial situation and whether or not modifying the loan will actually result in you successfully making payments in the future. If something is done wrong, it can kill your chances. We know just what the lender is looking for and the process you need to follow.

So What is it That You’ll Need?

There are many different forms that you’ll need to fill out. You can get those directly from our website when you apply for loss mitigation assistance. Among these forms is an application, a financial analysis worksheet and a hardship letter.

In addition to the forms, you will need to gather various documents such as W2s, bank statements, recent pay stubs and other related information. We’ll make sure you have a complete checklist among your forms so you can keep track of everything you need to do.

Negotiating on Your behalf

The hard part is getting the lender to accept your application for a mortgage loan modification. Fortunately, you can leave that to professional negotiators who are experienced and skilled in working with mortgage lenders to reach an acceptable resolution.

What Happens After a Loan Modification?

A loan modification is permanent. A new contract is drawn up with the revised terms and you and the lender will be expected to adhere to the new conditions.

1. Each lender has different policies and approaches

Some lenders will work with you, some won’t. The process with one lender can be very different from the next. Perhaps you think you understand everything you need to do, only to find out that your specific lender has different guidelines. What happens when you take the wrong actions? It could cost you your chance at successfully negotiating new loan terms.

2. Lenders are not going to make this easy

A lender is already leery of your ability to pay your mortgage because you have missed payments. They are going to be detail-oriented when considering your application for a loan modification and will want hard proof that you will be able to handle the new terms. In other words, you’ll need to dot each ‘i’ and cross every ‘t’.  Can you say that in conducting your own negotiations that you are confident you have done everything the lender requires?

3. The negotiation takes some expertise

Say you were having car troubles and couldn’t get your vehicle to start. Would you dive in to the engine yourself and fix the problem? Probably not – more likely, you’d take it to a mechanic who is trained to fix such problems. We all have our niches of expertise and loan modification is no different. There are subtle tricks and issues that can have a huge effect on your loss mitigation success. A negotiator that has been working with lenders for years isn’t going to get tripped up by during the process. Rather, they will be able to smoothly maneuver through the process and avoid critical mistakes that could cost you dearly.

4. Time is critical and none of us have enough to spare

In case you somehow missed it, there are only 24 hours in each day. Between work, family, social responsibilities and everything else life throws at us, do you have the time required to accomplish a mortgage loan modification? Probably not. There’s no getting around it, you will have to spend some time figuring out your financial picture and discussing your situation with your negotiation specialist. But that’s it, really. The rest can be left to the professional you hire who will be charged with staying on top of the process until a solution is reached. This leaves you free to deal with the other aspects of your life while someone makes sure your home stay, well, yours.