Loss mitigation is a negotiation process with the holder of your mortgage. The purpose of such negotiation is to reach new terms for your mortgage. All this can be reached and done through different kinds of processes including loan modifications, short sale negotiations, short refinancing negotiations, giving your deed in lieu of foreclosure and even accepting cash from the lender in exchange for your home.

Step 1.

The first thing you should do immediately that you are behind in your monthly mortgage payments, is to contact the department of loss mitigation of your mortgage company. Actually, if you let your mortgage lender know beforehand that you may be falling behind, they will be more helpful. So, the earlier you can anticipate when you will fall behind in your mortgage payments, the better it will be for you.

Talk to them and let them know the reason why you are behind in your payments. Of course the reason for this should not seem as if you have been spending recklessly. The reasons that mortgage companies would usually accept is temporary hardship, loss of employment, death of a loved one in the family who was the bread winner, or sickness.

You may find that your mortgage lender is easy to work with but you may also discover that they are not. If your mortgage lender is easy to work with, you will be required to submit some information about your current income an expenses to structure a workout for your circumstances. If they are unable to help you, ask them the contact information to your local HUD office. You will be able to find it yourself though. The HUD office may be able to help negotiate a new mortgage term for you.

Step 2.

For mortgage lenders who are not that easy to work with you, you will have no choice than to hire somebody to represent your interest and to negotiate for you. The person that should be able to represent you are loss mitigation specialists. You can find them advertising everywhere. Be very careful though to find only the legit ones and those who don’t charge you a too huge fee. Once you agree to work with them, you will have to sign a letter that gives the loss mitigation permission to  represent you regarding this matter. Make sure you understand the fee that you will have to pay first before hiring such services.

The loss mitigation specialist will get back to you to inform you the result of the negotiation. Give them some time between 10 days and 1 month. The time it takes for the specialist to negotiate depends on how busy your mortgage lender is. So be patient and just wait for them to call you back.

Step 4

The moment you receive the result of the negotiation, you can either accept the offer or reject it. What is usually reached in loss mitigation negotiation is to make a slightly higher monthly payment for the next 2-3 years in order to make up for the missed payments and fees. Another common result is that the late fees will be attached to the back of your loan while you continue to make your current monthly payments.

Step 5

If from the very beginning you know that you won’t be able to make any higher monthly payment in case the result of the negotiation is to pay higher payments for a few years, then your option is to just directly go to your local HUD office instead of a loss mitigation specialist. There, work with a counselor. They may be able to create a government guaranteed 30-year fixed rate FHA mortgage loan for you to replace your current mortgage. What they will do is conduct a new FHA Appraisal of your home, create a mortgage and eliminate any subordinate loans. The advantage of this is that it does not have any prepayment penalties.

For more information, you can call Hope Alliance (1-888-995-HOPE) or directly call HUD at 1-800It also eliminates any subordinate loans (like your current loan) and has no prepayment penalties. You can call your local HUD Office for more information at the Hope Alliance (1-888-995-HOPE), or call HUD directly at 1-800-CALL-FHA. Below are the qualifications for the HUD-FHA Secureloans program:

- being a homeowner occupant,
- having a mortgage that was created before January 1, 2008,
- having a mortgage debt-to-income ratio of at least 31%,
- not being able to afford your current mortgage payment,
- having a legitimate reason for missing your current mortgage payments,
- not owning a second home.

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