Struggling homeowners facing the possibility of payment default and foreclosure have options that could save their home. Every lender has a department that is responsible for working with borrowers who are facing payment difficulties. This department may have different names, but it’s main purpose is called “loss mitigation”. If you are trying to get a loan modification, then you will be dealing with this department. It is important to understand just what your bank’s motivation and goals are before you contact them for help. You will have a much better chance of a successful outcome if your know why your bank would be willing to modify your loan.

Simply put, loss mitigation is a process where the bank tries to lower the amount of damage, or loss-typically caused by a mortgage default. During this process, your bank will analyze all of the facts, calculate the impact of different workout options as opposed to foreclosing on the property, and then make a decision on how to proceed. As the homeowner, your goal is to convince the bank that keeping you in the home is the most cost effective solution for everyone.

Loss mitigation counselors have a duty to their employer-the bank-to find the solution that saves the lender the most money. They will consider the current market value of the home as opposed to the current mortgage balance. If the property has lost a lot of equity, then it may be more cost effective to keep you in the home with modified terms that offer an affordable payment. If you can present your case for a loan workout and prove to the bank that you will be able to afford to pay and maintain the new lower mortgage payment, you will increase your chances of approval.

Obama’s stimulus plan also helps you because the loss mitigation department will factor in the subsidized incentive payments they get from the Treasury Department to modify your loan using the Home Affordable Plan. This is a government loan modification program that actually pays the bank for each loan workout they complete, so if you qualify for that plan, your bank will be more likely to modify rather than foreclose.

Do not contact your bank’s loss mitigation department until you are prepared-remember their job is to save the bank money. Your job is to show them that a loan modification is the best solution. You can do this by working on your application ahead of time and fine tuning your budget and financial statement so that you are sure it meets the approval guidelines. Another good tip is to ask your local real estate agent to prepare a Comprehensive Market Analysis. This will show your lender the market current value of your home-and if it is substantially less than your loan balance-your chances for approval are much better.

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You can get the help you need to apply and qualify for a loan modification by ordering the best selling handbook for homeowners, The Complete Loan Modification Guide. This is a low cost, easy to read, home edition loan mod kit that will provide you with everything you need to prepare a professional and acceptable loan modification application. You are provided with all of the necessary forms and given detailed directions on how to complete them properly. The Complete Loan Modification Guide will take you step by step through calculating your debt ratio, completing the financial statements, writing your hardship letter and then putting it all together to submit to your lender.

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