About Loss Mitigation

Video Transcript

"Hi my name is Stetson Lowe and in this clip we're going to be talking about loss mitigation and what is it. Loss mitigation is typically a third party division of a bank or a third part entity all together that works as kind of a liaison between the investor or the bank and the borrower or the homeowner. When a homeowner falls on hard times and can no longer make their payments on time or perform on the loan, sometimes they'll be contacted by the loss mitigation department or they will contact the loss mitigation department of the bank and try to work out terms that are more acceptable or allow them to perform on their loan and continue to stay in the home. Some of these options to help homeowners stay in the home would be to modify the terms of the note, lower the interest rate, sometimes on an adjustable rate loan the rate's gone up to a point where they can't continue to make the payments on time so they may lock them in on a lower fixed rate and just adjust the terms of the note for them. They may postpone any unpaid interest portions and penalties and add that and re-amortize the whole new loan. They may extend the term of the loan if they're on a 15 year term they may change it and modify it to a 30 year term to lower the payment so people can stay in. If it's evident that the borrower's not going to be able stay in the home, they will work out a short sale or a short payoff that will enable the person to sell the home for less than what is owes. If it becomes evident that the borrower's not going to be able to make their payment, maybe they've lost their job all together and have no way of making a monthly mortgage payment, then the loss mitigation department would then work with that borrower to try to market their home and sell it sometimes even at a loss to the lender which is called a short sale or shorting the payoff. This allows the lender to divert any risk or minimize the loss that they're going to take in selling that home or continuing to take maintain it as an asset."