There has recently been a change in the standard process a bank would take to help a homeowner who was struggling with their mortgage payment.

Traditionally, in the past, a lender would only offer assistance to a borrower when their mortgage loan was in default, failure to pay their monthly loan payment for three or more consecutive months.

In a typical scenario like this, borrowers might be eligible for traditional loss mitigation methods if they’re lucky.

To clear up some terminology, let’s define loss mitigation as the process of working to stop or reduce any loss to the lender and borrower, in effect damage control.

Under traditional foreclosure prevention guidelines, in order to receive assistance from a lender, a borrower would have to meet a few requirements.

One of the most important requirements is that non-traditional methods offer some additional flexibility for struggling homeowners.

Under non-traditional methods, a homeowner does not have to default on their loan before they can receive help.

In the past, lenders told homeowners that they couldn’t offer any help until their loan was actually in default.

Another significant difference is the actual difficulty that caused the owner to be delayed. Under the traditional method, the borrower would have to go back to work or have enough family income to receive assistance.

Under non-traditional foreclosure prevention methods, borrowers may receive a temporary grace period in the event they are not restored to full employment.

Many lenders have realized that certain occupations have a high probability of employment even though the borrower may be currently unemployed.

Of course, if there is always a drawback.

The big problem with loose guidelines is this…

Homeowners who are already in default on mortgage loans have priority over borrowers who are not in default. This results in a large number of both types of borrowers being left out.