Different Types of Loss Mitigation and Loan Modification

If you are about to foreclose on your home because you cannot make the mortgage payments you might consider loss mitigation as an option. There are many different types of loss mitigation you might qualify for. These types of loss mitigation include loan modification, short sale, short refinance, deed in lieu, special forbearance, and more.

A loan modification is a process where the homeowner works with the bank to modify the loan and the mortgage payment into new terms. The modifications to help you avoid foreclosure usually include lowering the interest rate, reducing the principal balance, changing an adjustable interest rate to a fixed rate, and extending the loan term over many more years. This type of stop foreclosure now method works for many people and even forgives home owners for payment defaults and fees.

If you do not qualify for a loan modification through your bank to stop foreclosure now you might consider mortgage help in the form of a short sale. This option is where you will work with the bank on selling the home for approximately 20% less than what you owe on the balance of the home loan. You will claim the difference of the loan and the sale of your home on your taxes as income and be required to pay the taxes on it. This method allows the bank to not be in danger of owning a property and the homeowner to avoid foreclosure.

Another form of mortgage help that is a form of loss mitigation is called deed in lieu. When a deed in lieu occurs the owner will voluntarily deed the property back to the mortgage lender. This will release the owner from all financial obligations of the mortgage agreement. Some mortgage companies may not accept this but it is a new method to stop foreclosure now. This type of mortgage help will not look good on your credit and it will show you gave the home back to the bank.

There are many different types of loss mitigation you might consider if you are in danger of foreclosing on your home. If you want to stop foreclosure now you should talk to your lender about the different types of mortgage help you can qualify for. Foreclosure can be detrimental to your credit and you may never be able to own another home. Most lenders are willing to work with a home owner if they want to keep their home.

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