Loss Mitigation

What is Loss Mitigation?

Loss Mitigation is a general term used to describe the various options available to a property owner experiencing difficulty with a mortgage or any other consumer transaction. Loss Mitigation is commonly associated with the term Loan Modification. A type of Loss Mitigation is known as Loan Modification. Examples of Loss Mitigation possibilities include, but are not limited to the following:

Loan Modification: The term Loan Modification would mean to adjust the terms of the mortgage from their original form.
Foreclosure Defense: Legally referred to as Affirmative Defenses and Counterclaims. The goal of a proper Foreclosure Defense would result from an in-depth study of all the documents and the specific narrative of the Client/Borrower to defend the rights of the Borrower and attack the foreclosure suit offensively if the Borrower has been a victim of any Federal, State or common law violations.
Short Sale: If the Borrower is unable to maintain the payments upon the Subject Property or if they believe they need to sell the Subject Property to avoid a deficiency judgment, it is possible that the Lender may be able to accommodate the Borrower by agreeing to a short payoff by accepting an amount less than the full payoff of the original loan. A qualified buyer is required. A qualified Attorney is absolutely needed for this process to negotiate and avoid any deficiencies by severing all future liability.
Deed In Lieu Of Foreclosure: If the Borrower is unsuccessful in selling their home and their home has been on the market (at fair market value) for usually at least 90 days, they may be eligible for a Deed In Lieu Of Foreclosure. In exchange for the Deed In Lieu Of Foreclosure, the Lender will waive all deficiency judgment rights. A qualified Attorney is absolutely needed for this process to negotiate and avoid any deficiencies by severing all future liability.
Special Forbearance: (FHA loans only) (Type I & II) If the Borrower’s loan is 90 days to 365 days past due, their Lender may consider a Special Forbearance. A Special Forbearance is designed to provide the Borrower with more relief than is possible with a regular repayment plan.
Partial Claim: (FHA Mortgages Only) (Some Freddie Mac Investor Loans) A Partial Claim is a Subordinate Mortgage (2nd Mortgage) between the Borrower and the Secretary of Housing and Urban Development. The Partial Claim Note will commence payment at the maturity date of the First Mortgage and carry no interest and will include the past due payments due on the loan. Only loans that are 120 to 365 days past due may qualify for this option.

A Short Sale, Deed In Lieu of Foreclosure, Repayment Plan, Reinstatement Plan, Foreclosure Defense, to name only a few would all be options in a Loss Mitigation conducted by The Young Law Group, PLLC. Please note these are only a summary of the solutions and options available in a Loss Mitigation Consultation. Guidelines and qualification requirements vary by lender.

What is a Loan Modification?

This is a process whereby a homeowner's mortgage is modified and both lender and homeowner are bound by the new terms. The most common modifications are lowering the interest rate, reducing the principal balance, 'fixing' adjustable interest rates, increasing the loan term, forgiveness of payment defaults & Fees, recapitalization of accrued outstanding principle, interest, and fees, or any combination of these. More information found here.

What is a Deed-In-Lieu Of Foreclosure?

A Deed In Lieu of Foreclosure is a voluntary transfer of the property to the Lender in full satisfaction of the amount owed. By accepting the Deed In Lieu of Foreclosure, the Lender releases you from personal liability on the loan also known as a deficiency judgment, deficiency amount or just deficiency. Commonly, Lenders will not accept a Deed In Lieu of Foreclosure if there are other liens on the property. In our practice, we have been able to secure Deeds In Lieu of Foreclosure by settling with the secondary Lender and other lien holders, effectively clearing title for the Lender to facilitate the transfer. It is an intricate process and requires a full review of your file to come to a conclusion if this is even a good option for you.

What is a Short Sale?

You can sell your home anytime before the Foreclosure matter is complete. The Foreclosure matter is complete at such time as the Redemption period discussed above has expired. However, once the Foreclosure has been filed the number of buyers willing to buy at retail and Lenders willing to refinance a Borrower already behind in payments all but disappear. People do not want to pay retail when they find a house in Foreclosure. Everyone wants to get the best deal possible. A Short Sale occurs when the Borrower owes more on the loan than the house is worth, and a Buyer agrees to pay an amount that is not sufficient to pay off that Borrower’s loan balance. For a Short Sale to be a Short Sale, your Bank would have to accept an amount less than the full loan payoff. A Short Sale is a settlement agreement. Because it is a settlement agreement, no two Short Sales are the same. You may be liable for taxes related to the amount of debt from your original mortgage that is forgiven, but current laws may protect you from such taxes if it is your primary residence. Your Lender may also request as part of the settlement to pay the Lender back the amount the Lender did not collect at the time of the sale of the property. If you have a great deal of equity in your property, there are a number of solutions available but they must be acted upon immediately since your equity shrinks with each passing day.

Can I refinance or sell my house?

You can refinance your home anytime before the Foreclosure matter is complete. The Foreclosure matter is complete at such time as the Redemption period discussed above has expired. However, once the Foreclosure has been filed the number of buyers willing to buy at retail and Lenders willing to lend to someone already behind in payments dwindle. Your Bank will usually not accept a short-payoff on a refinance. New Lenders do not want to take a chance on someone who has not been making their payments in regards to a refinance.

What is Foreclosure Defense?

Also known as Affirmative Defenses. The goal of a proper Foreclosure Defense would result from an in-depth study of all the documents and the specific narrative of the Client/Borrower. As the needs of every Client differ, each Foreclosure Defense must be tailored to the Client’s specific situation and goals. Sometimes the Client requires time. Time to bring back payments current; Time to refinance; Time to sell; Time to find alternate housing; Time to discover what claims to bring against the Lender or others involved in the transaction that has resulted in a foreclosure filing; Time for more favorable laws to be passed to help the Client. More information can be found here.
 

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