Loss mitigation is a strategy used by homeowners and lenders who want to avoid foreclosure. This article explains what it is, how homeowners and lenders end up having to make use of it and how it benefits both parties.

Going into foreclosure is stressful and a financially threatening ordeal, so homeowners should promptly find a solution because usually time isn't on their side.

Homeowners who took out a mortgage to finance the purchase of their home may find themselves unable to keep up with their monthly payments. Sometimes they will be delinquent for several months. This could be due to several reasons, but whatever was the cause, it's something emotionally and financially devastating.

To avoid further losses, the mortgage lender will start the foreclosure process or the events that may lead to the auction sale of the property to try to satisfy all the late and unpaid mortgage payments by the homeowner, plus expenses.

Both the bank or mortgage lender and the homeowner or borrower wants to prevent a foreclosure for his or her own reasons.

The homeowner may want to keep the property so his or her family has a place to live. If they let the foreclosure proceed, it may stay on their credit records for years making it difficult for them in the near future to qualify for anything requiring good credit.

Lenders or banks would rather not foreclose property. The costs to foreclose a property can reach a sum of $30,000. They prefer not to take back the property because buying and selling real estate is not their business.

There are various ways to prevent foreclosure. One of those ways is to put up the property for sale with a real estate agent, but some believe that solution is not as easy as it sounds.

Loss mitigation, on the other hand, may be the solution to saving the homeowner's property and allowing the lender to minimize losses. It's the process of using a third party to help negotiate a payment plan suitable for both parties.

The loss mitigation go-between will ask the lender to consider lowering your rate, changing the terms and devising an affordable repayment plan

Using a third party to get foreclosure help is ideal because homeowners may be too emotional to think straight for themselves and lenders may prefer dealing with someone who knows industry practices.

Regardless of which method a homeowners chooses to stop a foreclosure, taking the necessary steps as soon as possible is critical. Proposing and negotiating a way to pay off the home loan with the lender is also one of those things that homeowners shouldn't delay.

Life may seem to be at a standstill when someone is experiencing financial turmoil, especially when it may cause him or her to lose a home. However, hope comes when the homeowner takes immediately action and contacts his or her lender to arrange negotiations with a loss mitigation expert who will see that both parties arrive at a win-win solution for all.

Copyright © 2008 by Jackson Chan, All Rights Reserved

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