Bank loss mitigators work as mediators between mortgage lenders and borrowers to devise a payment plan for delinquent mortgage payments. Their primary goal is to limit the bank's risk exposure from non-performing loans.
Most bank loss mitigators are employed by lending institutions. However some are independent agents who represent borrowers and assist with lender negotiations to stop foreclosure.
When borrowers fall behind with mortgage payments, the servicing lender assigns a loss mitigator to work with borrowers throughout the mitigation process. Borrowers can retain the services of an independent loss mitigator, but are financially responsible for wages and fees.
Mortgage financial institutions do not want to foreclose on properties unless no other option exists. A statement issued by Freddie Mac claims the average cost per foreclosure hovers between $60,000 and $80,000 and takes between 6 and 18 months to complete.
Lenders are usually willing to work with borrowers and help them remain in their home if past due payments can be cured in a timely fashion. Loss mitigators mediate between both parties to determine which course of action is best suited.
The process of loss mitigation begins by having borrowers submit financial records detailing income and expenses, along with their ability to make future mortgage payments. When borrowers possess the financial ability to cure all or part of mortgage arrears, loss mitigators might recommend mortgage refinance or loan modification. These options permanently alter the mortgage note terms. Modified and refinanced mortgages reduce monthly payments by extending repayment terms.
Bank loss mitigators assess borrowers' ability to cure mortgage arrearages and make future payments in order to determine which option to present to the lending institution. Loss mitigators do not make final decisions. Instead, they assess financial risk and present recommendations to mortgage lenders.
When borrowers are financially insolvent and unable to continue making mortgage payments, bank loss mitigators might offer a short sale. When lenders enter into short sale arrangements they agree to accept less than is owed on the mortgage note in exchange for quick sale of the property.
Short sales are complicated and typically take between four and six months to complete. Some banks accept the short sale price as payment in full toward the mortgage loan, while others hold borrowers responsible for financial deficiency between the loan balance and sale price.
Another option is deed in lieu of foreclosure which allows borrowers to return their property to the bank and walk away. Lenders can accept the return of the property as payment in full to satisfy the outstanding mortgage balance or persue borrowers for deficiency amounts when the house is sold.
It is crucial for homeowners to determine if their lender issues deficiency judgments against short sale or deed in lieu transactions. Depending on the outstanding loan balance and appraised value of the home, it might be better to let the property fall into foreclosure.
When working with bank loss mitigators for short sale approval or deed in lieu transactions, it is best to obtain consultation from a real estate attorney. Deficiency judgments can take years to pay in full and remain on credit reports up to seven years after the debt is repaid.
Borrowers facing foreclosure must be proactive and contact their bank's loss mitigation department once they realize they cannot adhere to their payment plan. Options exist to help borrowers get back on track. The sooner borrowers call their lender, the more options are available. Those who procrastinate too long may find the only option available is foreclosure.
Published At: Isnare.com
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