Tough Times? A Loss Mitigation Solution Could Provide the Relief You Need

No one takes out a mortgage with the intention of not paying. But life happens, and sometimes, for a variety of reasons, we struggle to make timely payments on loans, including our home mortgage. One way to alleviate the problem is known as a “loss mitigation solution.”

While it can’t solve your financial issues, it can provide some breathing room, providing the financial space to get through a difficult time.

Loss Mitigation Solution

Loss mitigation solutions come in many different forms. But essentially, it is a foreclosure alternative that helps borrowers who may be struggling to make payments. Loss mitigations became common during the COVID-19 pandemic, and they remain a viable solution for anyone who is experiencing temporary problems with their finances.

What are the Common Options?

As we mentioned, there are various forms of loss mitigation solutions. Each one can be applied to a different variety of problems,

Loan Forbearance

Forbearance is simply a temporary pause or reduction in payments. Similar to loan deferral, the payments are essentially put aside for a certain period, allowing borrowers to establish a financial footing. In many cases, interest will continue to accrue, but borrowers are allowed to maintain their financial flexibility.

Loan forbearance is a good choice if you are less than 90 days delinquent, expect financial issues in the near future, but also expect a return to normal shortly thereafter. For example, if you have good reason to believe that you will be temporarily laid off soon, you may discuss loan forbearance with your lending agent.

Loan Modification

If you expect longterm financial issues, it may be best to use a loan modification, which can adjust the interest rate, loan terms, or other factors that make the monthly payments more affordable. For example, you may be able to refinance (essentially) from a loan with 20 years remaining into a fresh 30-year mortgage. This would take the remaining balance and, instead of requiring repayment over 20 years, spread it over 30 years, creating lower monthly payments.

If you are over three months delinquent on payments, can no longer afford the monthly bills, and don’t foresee any relief in the near future, loan modification may be the best option.

Deed in Lieu of Foreclosure

If you need to, or don’t mind, moving out of the property, you may be able to use a process called “deed in lieu of foreclosure.” With this option, you essentially transfer ownership of the property to the lender or bank and walk away. The lender releases the mortgage loan and remaining balance. Often called “cash for keys”, this option may allow you to be compensated in exchange for the deed, but this depends on your overall equity in the property.

This is an option only if you have no liens on the property that would disrupt your ability to transfer the property to another owner. This is, admittedly, a major step that is used only by those in serious trouble of foreclosure.

Short Sale

This is another solution that can be used if you are not interested in keeping the property. With a short sale, you sell the property for less than the balance owed, usually at an amount approved by the borrower. If you want to move out and move into a more affordable property, and you have no other option, a short sale can be useful.

For most borrowers, this is the best solution when they owe more than the property is worth.

When to Use Loss Mitigation?

There are countless reasons that someone could have financial issues that create a problem paying a mortgage bill. That said, there are some common reasons that good, hard-working, reliable individuals are unable to make their mortgage payments.


Divorce can tear families apart and create rifts that lasts for decades. Even divorces that go well, with both parties treating each other with care, can result in significant financial problems. Legal bills and court fees can accrue, creating long-term financial problems and making it hard to pay even the smallest bills, let alone the mortgage.

Healthcare Bills

The cost of healthcare is massive. Even routine checkups can range into the thousands of dollars, and longterm care for injuries or surgery can create bills that many people can’t afford. Even with health insurance, many people are unable to pay their bills and may have to use a loss mitigation solution.


Layoffs occurred long before the COVID-19 pandemic and resulting financial crisis. Long after COVID has passed from the national consciousness, layoffs from work, either temporary or permanent, will remain, impacting people in both blue-collar and white-collar work. Layoffs and job loss are common reasons that people use loss mitigation solutions. 

Vehicle accidents can cause large bills, leading to the need for a loss mitigation solution.

Vehicle Expenses

Whether your vehicle breaks down or it’s simply time to upgrade to a more spacious family vehicle, it’s not uncommon for these issues to create financial difficulty. Vehicles can be expensive, and unexpected repairs could create a large financial burden, harming your ability to pay the mortgage.

Home Repairs

When a roof is damaged or a foundation is leaking, it needs to be fixed immediately. Unfortunately, these repairs can create bills well over $10,000. Many homeowners simply don’t have this cash available in savings, so they may have to choose between paying the mortgage or fixing the home.

There are many other problems that can create the need for a loss mitigation solution. From family issues to unexpected repairs to long-term medical bills, you never know what life could have in store. Fortunately, in severe situations a loss mitigation solution could provide the the relief you need.

Helping You Find Through any Mortgage Situation

If you are experiencing financial problems and need relief from your mortgage, contact our experienced team today. Even if your mortgage was not underwritten by our staff, we can provide sound advice and support to help through these tough times. If needed, we may also be able to guide you through a loss mitigation solution that fits your specific needs!