So many today are facing economic hardship due to the uncertainty in our economy. Facing a possible foreclosure adds to a stressful situation. However, there are options to avoid foreclosure. Read ahead to learn about the loss mitigation process and whether another option may exist for you.
What Is Loss Mitigation Assistance?
Loss mitigation refers to the steps lenders take with a borrower to avoid foreclosure. Loss mitigation relates to a loan servicer’s obligation to reduce the loss to an investor that may come from a foreclosure. Due to the high cost of foreclosure, loss mitigation is an advantageous option for both the investor and the borrower.
Some loss mitigation options may allow you to stay in your home. If you face a possible foreclosure on your property, contact a Chicago loss mitigation lawyer to evaluate your possible options.
Types of Loss Mitigation
There are various types of loss mitigation assistance that you may explore to prevent foreclosure. Many of these options permit you to stay in your home. However, these options require cooperation and agreement between you and your lender
Mortgage Forbearance
Mortgage forbearance refers to a temporary suspension or reduction of your monthly mortgage payments for a specific time period. This option lets you deal with your short-term financial problems by giving you time to get back on your feet and bring your mortgage current.
Mortgage Reinstatement
Mortgage reinstatement occurs when the homeowner has missed multiple payments but can make a bulk payment of all missed payments. This action brings their delinquent payments current, and mortgage reinstatement occurs.
Mortgage Repayment Plans
In mortgage repayment, the lender provides the homeowner with a repayment plan. Due to hardship, the homeowner may have missed mortgage payments. However, if the homeowner’s hardship has ended, they may be able to resume payments. The lender and homeowner may reach an agreement for the homeowner to continue paying the mortgage plus an extra sum each month until the missed payments are made up.
Payment Deferral
Payment deferral adds missed payments to the end of a mortgage loan term. These deferred payments are non-interest bearing. The balances are due upon maturity of the mortgage term, a sale of the property, or payoff of the interest-bearing portion of the loan. The homeowner and lender must reach an agreement about how many months of payments will be deferred. Once those months pass, the homeowner continues making payments on the mortgage.
Loan Modification
A loan modification changes the original terms of the mortgage. This may include changes to the term, payment amount, or interest rate.
Disaster Recovery
In the event of a disaster, mortgage forbearance plans may exist while the homeowner rebuilds and recovers. Mortgage forbearance plans last up to 12 months.
Alternatives to Loss Mitigation
If your loss mitigation falls through or you cannot qualify for loss mitigation, there are other options. The following options do affect your credit score but may not be as detrimental as a foreclosure.
Mortgage Release
A mortgage release also refers to a deed in lieu of foreclosure. By agreement between the homeowner and lender, a mortgage release returns the property to the lender. The homeowner is relieved of any debts owed, and the homeowner no longer holds any equity in the property.
Short Sale
A short sale allows the borrower to sell their home for less than the balance remaining on the mortgage, avoiding foreclosure. To allow the sale to go forward, the lender agrees to release the mortgage. Although this doesn’t necessarily relieve you of any remaining balance owed on the mortgage, it does alleviate some financial pressure. Some lenders may forgive the remaining balance, but others may attempt to collect a judgment against you.
How Do You Qualify for Loss Mitigation?
When considering applying for loss mitigation services, apply early. Starting the process early avoids difficulty negotiating your way out of a foreclosure sale and avoids potential foreclosure costs and expenses. Additionally, it’s best to start these discussions before your lender has hired a foreclosure attorney.
Contact your mortgage servicer to begin the discussions of qualifying for loss mitigation. Your mortgage servicer will provide you with a loss mitigation package. This package contains the documents needed to complete the loss modification process with your mortgage servicer.
A loss modification package typically requires the following:
- A completed application form, including your personal information, mortgage information, property information, and so forth;
- Copies of your latest pay stubs or a most recent profit and loss statement is self-employed;
- Copies of bank statements;
- Your recent tax returns;
- An income/expense financial worksheet; and
- A hardship statement or affidavit explaining your financial situation.
You must send in your loss mitigation package at least 37 days before foreclosure sale proceedings begin freezes the foreclosure process. The foreclosure process cannot continue unless your loss mitigation application fails, that is, if you reject all loss mitigation offers or fail to satisfy a loss mitigation agreement requirement.
While loss mitigation options affect your credit score negatively, they are typically not as damaging as a foreclosure. Additionally, many loss mitigation options may allow you to keep your home, instead of losing your ownership rights.
Consult a Chicago Loss Mitigation Attorney Today
If you are facing financial difficulties and fear foreclosure, you should consider any loss mitigation options available to you. The loss mitigation process is complex and challenging to understand. Consulting with a Chicago loss mitigation attorney will ease the process’s complexity and protect your rights throughout the process. The attorneys at Vantage Group Legal Services are prepared to represent homeowners through the stressful process. We can negotiate with lenders and mortgage servicers to find solutions to your financial hardship. We pride ourselves on affordable and superior legal representation for all clients. Contact us for a free consultation to determine how Vantage Group Legal Services can help you through this difficult time. Don’t wait for foreclosure. Consider other options and contact our firm today.