How Ohio Homeowners Can Use Loss Mitigation Tools Beyond Loan Modifications

When a homeowner is unable to pay their mortgage, they often believe that the only solution is a loan modification to avoid foreclosure. While loan modifications are beneficial in some situations, they are not the only solution and, in some cases, not the best solution available. Homeowners in Ohio have access to a variety of loss mitigation tools that are available to alleviate the situation, protect their equity, or further prevent financial damage in the future when the threat of foreclosure is present. 

What is loss mitigation? 

“Loss mitigation” refers to strategies that minimize the loss for the lender while providing options for the homeowner that are different from foreclosure. In some cases, the lender is obligated to assess the homeowner for loss mitigation options before proceeding with the foreclosure process.

It is imperative that the homeowner takes an active part in the process; otherwise, they may not be taking advantage of the options that are available to them. 

Forbearance agreements 

Forbearance enables the homeowner to temporarily stop or reduce mortgage payments when faced with financial difficulties such as job loss, illness, or other unforeseen circumstances. Unlike loan modification, forbearance does not change the terms of the mortgage. Instead, the homeowner makes reduced or no payments and addresses them later.

Forbearance can come in handy when the homeowner faces financial difficulties that are likely to come to an end in the near future. 

Repayment plans 

A repayment plan involves spreading out missed payments over a specified period of time, while the homeowner continues to make regular monthly payments. The best candidates for a repayment plan are those who have financially recovered but need to catch up on their payments. Repayment plans can halt foreclosure proceedings. 

Deed in lieu of foreclosure 

A deed in lieu of foreclosure allows the homeowners to voluntarily give up ownership of the property to the lender in exchange for forgiveness of the mortgage debt. This could potentially help homeowners avoid the time-consuming and costly process of foreclosure. Yet, there are still possible tax implications and credit implications, and lenders are not required to accept this option.

It’s imperative that homeowners have their deed reviewed by an attorney before proceeding with this option, as the lender must waive any remaining liability. 

Short sales 

In a short sale, the lender agrees to accept less than the total mortgage amount by agreeing to allow the home to be sold at market value. Short sales may be able to protect one’s credit score more successfully than foreclosure and allow one to move forward without any deficiency judgments. However, it may be time-consuming to obtain approval, and documentation must be precise. 

Talk to a Columbus, OH, Foreclosure Defense Attorney 

Kohl & Cook Law Firm, LLC, represents the interests of Columbus and Dayton residents who are facing foreclosure. You may have more options than you realize. Call our Columbus foreclosure defense lawyers today to schedule an appointment, and we can begin discussing your best path forward right away.