A loss mitigator is an integral part of pre-foreclosure, foreclosure and short sale transactions. Loss mitigators are specifically trained to mediate with lenders to help homeowners facing foreclosure. Although a loss mitigator is oftentimes employed by banks and lending institutions, they can also be independent agents who work on behalf of either the lender or homeowner.
The job of a loss mitigator is to help Borrower's determine if they are financially able to reinstate their mortgage note and maintain their financial obligation. If the Borrower has the financial means to pay regular mortgage payments, the loss mitigator will usually offer a loan modification or special forbearance.
Loan modifications result in a permanent change in the Borrower's mortgage loan terms. This might include temporarily reducing or suspending payments. Loan modifications or forbearance agreements can be arranged to suit the needs of the Borrower and satisfy the Lender. Therefore, not all loan modifications will be the same for each homeowner who applies for one.
If the Borrower does not have the financial means to pay regular mortgage payments and become current on delinquent amounts, a loss mitigator might offer a process known as Deed in Lieu of Foreclosure. Although this arrangement does not allow the homeowner to retain their property, it is less detrimental to their credit than foreclosure.
The Deed in Lieu process requires Borrower's to sign two legal documents. The first is the Agreement in Lieu of Foreclosure, which outlines the terms and conditions of the real estate transaction. The second document is a Warranty deed, quit claim or grant deed, which transfers legal ownership of the property to the lender.
When ownership is transferred to the bank, the lender will attempt to sell the property. Generally, this is done through auction or may take place directly through the bank. If the property sells for less than is owed on the mortgage note, the lender may file a deficiency judgment against the homeowner to collect the difference in the amount due on the note and the amount the property sold for.
A skilled loss mitigator will negotiate with lenders to waive the deficiency judgment and not pursue the homeowner for any balance due. However, it is imperative that homeowner's fully understand the potential ramifications of Deed in Lieu of Foreclosure prior to signing any contracts.
Loss mitigators can assist in the negotiation of short sales. In this type of real estate transaction, banks allow Borrower's to sell their property for a lesser amount than owed on the mortgage note. Short sales are generally offered as a last resort and after all other options have been exhausted.
The professional loss mitigator possesses finely honed-negotiation skills to help all parties involved reach a fair and equitable agreement. They can present a variety of options to both banks and homeowners to develop a win-win situation for all.
Although a bank loss mitigator is not authorized to accept or deny loan modification plans, deed in lieu of foreclosure or short sale agreements, they can guide homeowners down the right path that best suits their needs. Keep in mind a loss mitigator can be your best friend or worst enemy, so always treat them with respect and provide them with accurate information in a timely fashion.