Definition
Loss mitigation is the process where a lender works with a borrower who is having trouble making mortgage payments. This can include options like loan modifications, forbearance, or deferment to help the borrower avoid foreclosure.
Understanding Loss Mitigation
Loss mitigation typically appears when a homeowner faces financial difficulties and struggles to make mortgage payments. It involves various strategies to help borrowers avoid foreclosure. In simple terms, it might include loan modification or repayment plans. Example: If a homeowner owes $1,200 monthly but can only pay $800, a lender might modify the loan terms to lower the payment. It's not a guaranteed fix; rather, it's a cooperative effort between the borrower and lender to find a workable solution. It's important to note that loss mitigation doesn't erase debt but aims to make payments more manageable.
