What is loss mitigation

Loss mitigation is a term used to describe a third party helping a homeowner, a division within a bank that mitigates the loss of the bank, or a firm that handles the process of negotiation between a homeowner and the homeowner’s lender.  The term ”mitigation” seemly means to control or manage a   certain loss amount.  Loss mitigation works to negotiate mortgage terms for the homeowner that will prevent foreclosure. 

Lenders have a department typically called “loss mitigation” that processes potential short sale transactions.  Again, a short sale is a process whereby a lender accepts a payoff that is less than the principal balance of a homeowner’s mortgage, in order to permit the homeowner to sell the home for market value.  This specifically applies to homeowners that owe more on their mortgage then the property is worth.  Without  such a principal reduction the homeowner would not be able to sell the home.

1st Choice Loss Mitigation is a firm that handles the process of negotiating with the homeowner’s lender.  There are several benefits for using a loss mitigation company.  The most common benefit to the homeowner is the prevention of foreclosure because loss mitigation works to either relieve the homeowner of the mortgage obligation or create a mortgage resolution that is financially sustainable for the homeowner.  Lenders have a loss mitigationteam also which negotiates on their behalf.  It’s ideal for a homeowner to use a third party to get pre-foreclosure help because homeowners may be too emotional to think straight for themselves and lenders may prefer dealing with someone who knows the industry practices.  Obtaining a third party also puts the homeowner in a better negotiating position.  From experience, if you are negotiating with the bank as the seller or buyer, the bank will eat you alive and I wouldn’t recommend it to anyone.

The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction.  This is why unfortunately, short sale deals have a high failure rate and often do not close on time to save homeowners from foreclosure when they are not handled by a knowledgeable and experienced professional such as a loss mitigation specialists.