Loss Mitigation is when a third party assists a homeowner or division within a bank to negotiate mortgage terms so that foreclosure is avoided. The new terms arise from a loan modification, short sale, short refinance, deed-in-lieu of foreclosure, cash-for-keys negotiation partial claim loan or other loan work-out. All of the routes achieve the same purpose which is to stabilize the risk of loss for both the borrower and lender. The homeowner avoids a foreclosure and the detrimental effects to their credit score as well as the benefit of receiving more affordable mortgage payments. Lenders benefit by mitigating their losses compared to what would incur in a foreclosure.
Loan Modification: In a loan modification, the terms of the mortgage are modified. The most common way to achieve a loan modification are through lowering the interest rate and extending the term length. In some occasions, a principal reduction is done where the principal balance is decreased but this is a rare occurrence.
Short Sale: In a short sale, the lender will accept a payoff for less than the remaining balance of the loan so the borrower can sell the home at near market value and both parties avoid the hassle and expense of a foreclosure. This is often done when a homeowner owes more than the property is worth and would otherwise be unable to sell the home. Through a short sale, the homeowner is relieved of all debt on the mortgage and the lender receives more of their investment back than they would through a foreclosure.
Short Refinance: In a short refinance, the lender reduces the principal loan balance of the mortgage so the homeowner can refinance with a new lender. The reduction meets the loan-to-value guidelines of the new lender which makes refinancing possible.
Deed-in-Lieu: A Deed-in-Lieu of Foreclosure (DIL) is when the borrower voluntarily transfers the deed, and thus ownership, of their property in exchange for release of the obligations in the mortgage agreement. This is not a viable option for mortgage borrowers who can afford their payments.
Cash-for-Keys Negotiation: In cash-for-keys the lender will pay the homeowner to vacate the property following a foreclosure in a timely fashion without causing any damage to the property. This gives the homeowners money to aid in their relocation and the lender avoids the expense and hassle of evicting tenants or repairing damage caused by resentful and vengeful tenants.
Special Forbearance: A special forbearance is when the monthly mortgage payments are temporarily suspended or reduced to give the borrower time so they can afford payments. This is done in cases of temporary financial hardship and typically after the forbearance period is completed, the borrower will have to pay back what they missed or modify the loan.
Partial Claim: In a partial claim, the lender will advance funds on behalf of the borrower in the amount needed to reinstate a delinquent loan. It cannot exceed the equivalent of 12 months and the borrower will execute a promissory note and subordinate mortgage payable to the U.S. Department of Housing and Urban Development (HUD) and incur no interest and payments are not due until the first mortgage is payed off or the borrower no longer owns the property.
Here, at IMAX Premier, we have the vast knowledge and expertise to help you determine which option best suits your personal financial situation. The Loss Mitigation Services at IMAX Premier ensure that our clients sell their properties at the premium rates, reaping high marginal profits. Our highly-skilled asset managers establish specific eviction strategies for each case of loss mitigation and come up with a win-win solution for our client and investors. Foreclosure may seem a bit scary but with IMAX Premier helping you with loss mitigation, there is nothing to fear. We find solutions that offer the best-case scenario.