What is Loss Mitigation / Asset Management
Loss Mitigation is used to refer to the term Asset Management. It is the process of alleviating (mitigating) losses to the lender and the Homeowner.
The objective in the loss mitigation process is to:
Decrease Financial Losses for the Lender
2. Keep the Homeowners in their homes, or to relocate or work with
the Homeowner to sell the property and retain any equity.
A mortgage workout is an alternative action to foreclosure and benefits the Loan Servicer, Loan Insurer, the Mortgage Loan Investor and the Homeowner. Workout programs are designed to address situations where the HomeownerÂ’s ability, or desire, to continue making timely mortgage payments has been affected.
Option 1: Pre-Foreclosure Sale
The Servicer allows the Homeowner to sell the house within a 2 to 4 month time frame. During this time, the house must be actively marketed.
EXAMPLE: Natalie Gunther lived and worked in
. Her mother became ill and had no one to care for her. Ms. Gunther chose to move to
to care for her aging mother. She thought she would only be gone for 2 months, but soon 2 months became 6 months and she was 3 months behind on her mortgage in
. The lender suggested she sell her house. Working with a real estate rofessional, Ms. Gunther's home sold.
Option 2: Short-Sale
A short-sale requires that prior to the sale, the Servicer agrees that the sales proceeds from the sale of the Homeowner's home will satisfy the debt, even if that amount is less than what the Homeowner owes on the loan. Although the lender considers the loan satisfied, the IRS looks upon any forgiven debt as income and requires an IRS Form 1099 to be issued. The Homeowner is responsible for taxes on the forgiven debt.
and his family decided to take a new job in
Salt Lake City
. He puts his house in
, on the market for $250,000. He still owes $240,000. After three months the only offer was for $235,000. Mr.
is two months behind on his mortgage. The lender agrees to the $235,000 and considers Mr. MunsterÂ’s debt satisfied. Mr.
and his family are able to settle into their new life in
Salt Lake City
Require Short Sale Documents:
Hardship Letter explaining the reason why the Homeowner fell behind.
Completed Financial Form with a list of liabilities and assets
Two Most Recent Pay Stubs and Bank Statements. If you are not working must explain your situation in Hardship Letter
Two Years Tax Returns and W-2’s. Must explain if did not file.
Seller Net Proceeds/Estimated Seller Proceeds/Preliminary Hud1
The lender wants to see how much the offer is and what the closing costs are to determine the amount they request from the Title Company or Attorney at closing.
This gives your agent the ability to speak with the Lender directly, and negotiate with the lender on your behalf. You can download this form off of our site.
Estimated Time Lines
3 to 6 weeks for an approval on a contract from the lender (short sale)
A short sale must be actively marketed on a continuous basis. If the Seller refuses to provide proof of income for a short sale, a deal cannot and will not be made.