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Loss mitigation: What is it? Who does it benefit?

Since the 2008 housing market crash, the US has seen a tremendous surge in home foreclosures. People could no longer afford their homes for a variety of reasons, often through no fault of their own. While some people had simply gotten in over their heads with their mortgages, others experienced financial hardship due job loss, medical expenses, or other personal disasters.

Losing a home is a traumatic experience for any individual or family. With the rise in foreclosures, a process known as loss mitigation has become more commonly known and a term more frequently used.

What is loss mitigation?

Loss mitigation is a lender's attempt to minimize the amount of money they stand to lose if a borrower defaults on a loan.

If you are significantly behind on your mortgage payments, you have probably experienced the barrage of letters, emails, and phone calls from your mortgage servicing company. This is the company's effort to prevent your home from going into foreclosure. People working in the loss mitigation department are specially trained in a variety of tactics designed to help the company's bottom line, not yours.

What are my options?

Today, the most common loss mitigation tactic is loan modification. This can take several forms: your lender may lower your interest rate, temporarily lower your monthly payments, and in some cases, may even reduce the principle if it is higher than the home's current market value.

Another option is short sale, which means you sell the home for less than the amount you still owe on it, but the lender has agreed to forgive all or part of the remainder.

How do I know if I need an attorney?

If you have fallen behind on your home loan payments and have started to receive correspondence from your lender, it's time to consider consulting with a professional.

The representative from your mortgage company will try to negotiate with you, often suggesting loan modification, federal programs, short sale or demanding full payment. It's easy to be confused or misled by the jargon, and if you don't fully understand what you're agreeing to, you may set yourself up for more financial trouble in the future.

How can an attorney help me?

The loss mitigation process is often confusing, and most people going through this type of financial crisis have little or no experience in dealing with the logistics of preventing foreclosure.

A law firm with attorneys who specialize in areas including bankruptcy and foreclosure is your greatest ally in this situation. At Ozment Law, PA, we have vast experience in handling cases involving mortgages, real estate and foreclosure. We understand the complex language of financial laws and regulations.

Your mortgage servicing company, by nature of the business, is looking out for its own best interests. You need a seasoned professional to look out for yours.

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