What Is Loss Mitigation?
Loss mitigation refers to the options a struggling borrower and a lender use to avoid foreclosure. Instead of losing the home, the borrower works with the loan servicer to find an alternative that reduces the lender's loss and keeps the borrower in the home — or lets them exit gracefully. It is both a process and a set of programs.
Common Loss-Mitigation Options
- Loan modification — permanently changing the interest rate, term, or balance to lower the payment
- Repayment plan — spreading missed payments over time
- Forbearance — temporarily reducing or pausing payments
- Short sale — selling for less than the balance with the lender's approval
- Deed in lieu of foreclosure — voluntarily transferring the home to the lender
Loss Mitigation in Florida Foreclosures
Because Florida is a judicial foreclosure state, a lender must sue to foreclose, and federal servicing rules require the servicer to evaluate a complete, timely loss-mitigation application before moving forward. Many Florida courts also encourage or require mediation between borrower and lender. Pursuing loss mitigation early — with complete documentation — gives a homeowner the best chance to keep the home or limit the damage.
Related Terms
- Foreclosure — What loss mitigation seeks to avoid
- Mortgage — The loan being worked out
- Default — The condition loss mitigation addresses
Barnes Walker Real Estate
Barnes Walker's attorneys help Florida homeowners and lenders with foreclosure defense, loss mitigation, and workout options. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC