What Is Loss Mitigation Mortgage

When Should You Contact Us

If your borrower has a Genworth insured loan they can take advantage of our Hardship Program.

We are here to help no matter what the situation is, whether someone has lost their job, is earning less money, has over-committed themselves, had their business fail, are sick or injured, have been affected by a relationship breakdown or a natural disaster.

If you are in any doubt just contact our team at

Our team of specialists will work in partnership with you to match the type of assistance to the need of your borrower. We will aim to ensure all genuine hardship requests receive the best solution to assist your borrower to stay in their home.

Requests for hardship are to be completed using the hardship application form and submitting to the team at

For further details, please contact your Genworth Corporate Partnership Manager or our Loss Management Leader at

Common types of assistance we support include:

• capitalisation of arrears
• conversion of loan to interest-only
• loan term extension
• time to seek financial counselling advice
• time to sell .

How Does A Loss Mitigation Application Work

You can request a loss mitigation application through your loan servicer whether youre delinquent, in default, or facing foreclosure or bankruptcy. Servicers have 30 days to review all loss mitigation options based on your eligibility. Youre not required to request a specific option, but you can if you want to. For instance, if youd like to request a Flex Modification to resolve your delinquency and keep your home if your loan is owned by Fannie Mae or Freddie Mac or a forbearance plan, you may.

Be mindful about pending foreclosure sales. The timeline matters to your application. Keep these time frames in mind:

• If you submit your application at least 37 days before a scheduled foreclosure, your loan servicer is required to delay the foreclosure long enough to complete the loan mitigation review.
• As long as a foreclosure isnt scheduled within 45 days, your loan servicer must acknowledge in writing within five days that it received your application as well as let you know if the company needs any other documents to process it.
• If your application was received 90 days before a scheduled foreclosure, you can appeal a denied loan modification.

There might be some costs associated with filing a loss mitigation application, including modification, handling, and late fees. Some charges might be waived to make the loss mitigation process easier, so try to request fee waivers during the loss mitigation process, if needed.

The Loss Mitigation Package Includes:

• Hardship letter/personal statement about financial situation that caused delinquency
• Copies of personal Tax Returns for the past 2 years with W-2s
• Copies of business tax returns for past 2 years for self-employed individuals
• For self-employed individuals, a year to date balance sheet and income statement
• 2 months of the most recent bank statements
• Proof of Income
• Paycheck stubs for the past 60 days
• Child Support Income
• Name and contact details of borrower’s current employer
• Recent utility bills electrical, cable, water and telephone
• Financial Status Form
• Debts not included on credit report with substantiating evidence
• Power of attorney if applicable
• Copy of complete divorce decree or legal separation agreement if applicable.
• Social Security and valid picture identification for each borrower.

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How Do You Qualify For Loss Mitigation

When considering applying for loss mitigation services, apply early. Starting the process early avoids difficulty negotiating your way out of a foreclosure sale and avoids potential foreclosure costs and expenses. Additionally, its best to start these discussions before your lender has hired a foreclosure attorney.

Contact your mortgage servicer to begin the discussions of qualifying for loss mitigation. Your mortgage servicer will provide you with a loss mitigation package. This package contains the documents needed to complete the loss modification process with your mortgage servicer.

A loss modification package typically requires the following:

• A completed application form, including your personal information, mortgage information, property information, and so forth
• Copies of your latest pay stubs or a most recent profit and loss statement is self-employed
• Copies of bank statements
• An income/expense financial worksheet and
• A hardship statement or affidavit explaining your financial situation.

You must send in your loss mitigation package at least 37 days before foreclosure sale proceedings begin freezes the foreclosure process. The foreclosure process cannot continue unless your loss mitigation application fails, that is, if you reject all loss mitigation offers or fail to satisfy a loss mitigation agreement requirement.

What If Im Not Approved

Maintaining a good relationship with your mortgage lender is always a best practice. While its always in their best interest to help a borrower, servicers are more likely to extend loss mitigation options to homeowners with a consistent payment history and no previous complications. Ultimately, it is the servicers choice to offer loss mitigation assistance or not.

If, for some reason you dont receive approval for a loss mitigation program, foreclosure isnt the only option that remains. There are still a couple of other ways to get out of a mortgage, although they both result in a loss of the home.

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How To Apply For Loss Mitigation

To apply for loss mitigation, contact your loan servicer, not the owner of your mortgage loan. Someone in the loss mitigation department can tell you what options are available, what documents you need to provide, send you an application, and give you details about how the application process works.

You should apply for loss mitigation as soon as possible, either shortly after you fall behind in payments or, as soon as you know youll have trouble making them . By applying and hopefully getting approved for a loss mitigation option early on, you can avoid having foreclosure fees and costs, which can be substantial, added to your total debt. Also, its usually easier to work out a loss mitigation option before you get too far behind in payments and before the servicer has referred your loan to a lawyer for foreclosure.

If youre thinking about filing for bankruptcy, you should generally submit your loss mitigation application first . After you file, your servicer might say they cant talk to you or help you during a bankruptcy, even though its untrue.

Loss Mitigation: Help With Paying Your Mortgage In An Emergency

This is part of our ongoing series on mortgage relief options and how to handle your loan in a crisis.

Struggling with your mortgage? Theres no need to feel ashamed. Financial setbacks can happen to anyone for various reasons, including illness, the death of a loved one, or a crisis like the Coronavirus outbreak.

Let us first say that were truly sorry for anything that youre going through. We care deeply and are here to help during this tough time. On the bright side, just because youre experiencing hardship doesnt mean your house will immediately go into foreclosure. You have some time and a number of preventative steps to take.

Mortgage relief options such as forbearance, repayment plans, and loan modifications are available to help borrowers catch up on their mortgage payments or avoid falling further behind. Loan servicers will determine whether a borrowers financial hardship is short- or long-term and will offer options accordingly.

Quick note: Throughout this post, we use the term bring your mortgage current. Put simply, this means paying any past-due amounts, including missed payments and fees that were charged to make your mortgage up-to-date on payments.

Well explain your loss mitigation options below, but first:

Background on loan servicers

Why do we say servicer instead of lender? In todays market, its common for lenders to sell the rights to collect and manage your loan payments to third-party servicers.

DIY catch-up

Forbearance

Repayment plan

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Who Is A Loss Mitigation Application Best For

You may want to complete a loss mitigation application if:

• Your mortgage is past due, delinquent, or in default.
• Youre facing foreclosure on your home.
• Youve lost your job or become disabled, preventing you from working.
• Youre facing costly medical bills for yourself or a family member that are preventing you from making mortgage payments.
• Theres been a death in your family and you face expensive costs associated with the loss.
• Youre going through a divorce or other circumstances beyond your control.

Not everyone is eligible or will be approved for loss mitigation. The sooner you contact your servicer, the sooner youll be able to work out a plan that best fits your situation.

The Governments Role In The Housing Market

The housing market plays a large role in the financial stability or instability of economies and may draw on or face heavy government intervention. Since theres a correlation between financial crises and difficulties in the real estate sector, the government has a strong interest in promoting and preserving homeownership. The federal government is involved in the housing market in myriad ways, including homeownership incentives and housing finance.

In recent years, the 2008 financial crisis showed that the mortgage servicing industry was ill-equipped to sufficiently respond to the needs of homeowners who were financially struggling. Therefore, the federal government took the initiative to create stronger guidelines for mortgage servicers as well as regulations for protecting all parties involved in the housing market.

After the 2008 Recession, the Federal Housing Finance Agency was established by the Housing and Economic Recovery Act of 2008. The FHFA became responsible for the supervision, regulations and the housing mission oversight of the Federal Home Loan Bank system as well as Fannie Mae and Freddie Mac. FHFA studied ways to avoid resolving delinquencies with a goal of keeping struggling homeowners in their homes whenever possible while also minimizing losses for lenders and investors, who often purchase mortgages after inception.

With these principles in mind, the loss mitigation strategies were developed.

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Watch Out For Dual Tracking

If a foreclosure sale is looming, you need to be vigilant to ensure the servicer doesnt dual track your loan. While its typical for the servicer to go forward with the foreclosure process even after you request loss mitigation, federal law and sometimes state law restricts certain actions, like moving for a foreclosure judgment or order of sale, or conducting a foreclosure sale after you submit a complete loss mitigation application, under specific circumstances.

Federal mortgage servicing laws require servicers to tell borrowers about different loss mitigation programs. Federal laws also protect homeowners in the loss mitigation process. Some states, like California and New York, for example, also have laws that require servicers to help borrowers with loss mitigation.

The servicer generally doesn’t have to review more than one loss mitigation application from you. But if you bring the loan current after submitting an application, the servicer has to consider it. Also, you can ask for a delay of the foreclosure sale so that the servicer can review you for loss mitigation, even if the law doesnt require it. If the servicer agrees to delay the sale, be sure to get it in writing and if your foreclosure is judicial, notify the court. You need to verify that the sale is actually canceled, dont just take the servicers word for it.

Fees You Might Have To Pay

Under some program guidelines, the servicer cant charge you a fee for giving you a modification. But other workout options might require fees. You can always ask the servicer to waive any fees, along with any late charges. The servicer, however, probably wont waive its out-of-pocket costs, like an appraisal fee when modifying a loan. Youll also have to pay any foreclosure fees and costs. Fees and costs can sometimes be added to the loan balance.

If you’re able to work out an alternative to foreclosure, review any fees youre charged to make sure theyre reasonable and customary. If you think a fee is incorrect or you want to learn more about it, you can send the servicer a notice of error or request for information under the federal Real Estate Settlement Procedures Act .

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When Mitigation Loss Fails

Sometimes, despite your best efforts, the strategy may still fail. If the lender isnt willing to allow you to stop paying on your mortgage indefinitely, theyll try one of the following strategies:

• Short sales occur when you sell your home for equal to or less than the amount thats due on your mortgage. You may still have to pay any outstanding balance on your loan that isnt covered by the sale.
• Deed-in-lieu-of-foreclosure is when the homeowner signs the deed over to the lender to be released from the mortgage.

Servicers Have To Help Delinquent Borrowers With Loss Mitigation

Under federal mortgage servicing laws, in most cases, by the time a mortgage payment is 45 days’ delinquent, the servicer must appoint personnel to help the borrower with loss mitigation. Servicers also have to inform borrowers about available loss mitigation options in writing and over the phone, if possible and appropriate.

Specifically, the servicer must assign a single person or a team that’s accessible to the borrower by phone, who can respond to inquiries and work with the borrower through the loss mitigation process. The appointed personnel must be able to advise the borrower about:

• available loss mitigation programs
• how to submit a complete loss mitigation application
• the status of a submitted loss mitigation application
• how to make an appeal , and
• the circumstances when the servicer may refer the account to foreclosure.

With some loss mitigation options, like a short-term repayment plan, your servicer might be able to evaluate you over the phone and provide an immediate approval. For a more long-term solution, like a loan modification, you’ll need to fill out and submit a loss mitigation application to the servicer.

How to Apply for Loss Mitigation Even Earlier

To apply for loss mitigation, contact your loan servicer. You can usually find the contact information for the loss mitigation department on your monthly mortgage statement or on the servicer’s web page.

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Deed In Lieu Of Foreclosures

Deed in lieu of foreclosure refers to an official document that transfers the homeowners title to the lender. Essentially, the borrower gives the home to the bank in exchange for a clean break. The lender allows the borrower to get out of the mortgage with their credit intact while they assume ownership of the home to resell it. As in the case of a short sale, the borrower does not get to keep the house.

Ai And Automation In Loan Servicing And Loss Mitigation

• AI and Automation in Mortgage Further Reading

Loan servicing is when the mortgage lender collects the principal, interest, and escrow payments from the borrower. The mortgage lender can either collect interest by holding the loan in its own portfolio or sell the loan off to another entity in the secondary market. The terms of the loan do not change. The only modification is where payments are made.

Loss mitigation is the ability for the mortgage lender to decrease any losses resulting from a borrowers default on the loan. Some options may include forbearance, a repayment plan, a short sale, or even a loan modification. Federal regulators have strict rules as to when and how the servicer may interact with a delinquent borrower, but anytime the servicer must do so, the company loses money. This process takes a lot of time, paperwork, and also includes costs associated with a possible foreclosure.

Mortgage lenders stand to gain much from AI and automation in loan servicing and loss mitigation. Replacing repetitive, time-consuming, and rules-based manual processes with intelligent automation means lenders can improve loan quality and the customer experience at the same time without increasing employment costs.

Customer Service

• Appointment setting
• Servicing questions

Forbearance

Default

Intelligent automation can review multiple data sources to predict whether a borrower is at risk of defaulting and allow mortgage lenders more time to respond proactively.

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Get The Agreement In Writing

Be sure to get the terms of your deal in writing. The loan owner will need to sign the agreement, and in some cases, record it in the county records. Also, dont sign a release or similar document that says youre giving up any legal claims against the loan owner until after you finalize the loss mitigation agreement.

Types Of Loss Mitigation

For years, loss mitigation has been used by various mortgage companies to help people remain in their homes. But, ever since the latest recession, the housing crisis of 2008, as well as the ever-rising rate of foreclosures in the United States, state government agencies are ramping up on mortgage aid programs encouraging lenders and servicers to use loss mitigation options that would allow borrowers to better afford their mortgages. In extreme cases, where borrowers cannot afford to pay reasonable mortgage payments, loss mitigation options can often help further soften negative effects arising from the headache and heartbreaks of a foreclosure.

So, if you happen to be one of those borrowers who have fallen behind on monthly payments, make sure to be well versed on the different types of mortgage loss mitigation options designed to aid a potentially worse situation.

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Use Of Incomplete Application For Loss Mitigation Analysis

Currently, servicers cannot make a loss mitigation offer to a borrower based on an incomplete application unless permitted by the exceptions set forth in Regulation X. In the summer of 2020, the CFPB enacted Section 1024.41 to allow for limited review of incomplete applications as it relates to the deferral of forborne payments. The CFPB now proposes to add another exception that authorizes servicers to issue loan modifications based on incomplete applications where the borrower meets the following criteria:

the loan modification extends the term of the loan no more than 480 months and does not cause an increase in the required principal and interest payment

any amounts that are deferred until refinance, sale, or maturity do not accrue interest the servicer does not charge a fee for the modification and the servicer waives all late charges, penalties, stop payment fees, or similar charges upon acceptance of the modification

the loan modification is made available to borrowers experiencing a COVID-19-related hardship and

either the borrowers acceptance of the loan modification or acceptance of the loan modification through satisfaction of a trial plan must resolve any preexisting delinquency.17