Loss mitigation refers to options to avoid foreclosure. Loss mitigation may mean that you keep your home. But, loss mitigation may also mean that you came to an agreement with the mortgage company to give up your home. Working in good faith with your mortgage company is extremely important in preventing foreclosure.
In order to apply for loss mitigation options, you should request documents from your mortgage servicer. You can usually get these documents on the mortgage servicer's website.
A foreclosure cannot be filed against you unless it has been more than 120 days since you stopped paying your mortgage.
If you submit a complete application for loss mitigation before a foreclosure lawsuit is filed, then the mortgage servicer cannot file foreclosure. This is true unless:
- You are told you are not eligible for any loss mitigation option;
- You rejected all loss mitigation options; or
- You were given a loss mitigation option but then didn't follow it.
A complete application is an application with all the information that the mortgage servicer needs from you. Completing the application in its entirety is very important. The mortgage servicer can and will request additional documents and information from you in order to complete the loss mitigation application. You should fully cooperate with the mortgage servicer's requests. You should contact a HUD-Certified Housing Counselor for assistance with the application.
45 days before a Sheriff's sale
If you submit a loss mitigation application 45 days or more before a Sheriff's sale, then your mortgage servicer must, within 5 business days of receiving your application, notify you that it received your application. This notification from your mortgage servicer must also:
- Tell you whether your application is complete or not;
- If your application is not complete, specifically tell you what additional documents or information you must submit in order to make your application complete; and
- Give you a specific date to provide the needed information.
37 days before a Sheriff's sale
If you submit a complete loss mitigation application after the foreclosure lawsuit is filed, but at least 37 days before a sheriff's sale, the mortgage servicer is not allowed to ask for a foreclosure judgment against you. The mortgage servicer is also not allowed to conduct the Sheriff's sale.
The mortgage servicer is required to:
- Evaluate you for all loss mitigation options available to you; and
- Tell you which mitigation options, if any, it will offer you.
If a judgment is entered or judicial sale conducted in violation of these rules, you may be able to vacate or set aside the judgment and sale.
90 days before the Sheriff's sale
If you submit a complete loss mitigation application at least 90 days before the Sheriff's sale, but you are denied a trial period plan or a permanent loan modification, the mortgage servicer must allow you at least 14 days to appeal your denial.
If your mortgage company breaks the rules about loss mitigation
You may submit complaints about the loss mitigation process on the Consumer Financial Protection Bureaue website.
After submitting a complaint, the CFPB forwards the complaint to the company and works to get a response.
Stopping a judgment of foreclosure
If you filed an Appearance in the foreclosure lawsuit, the mortgage company can not receive a judgment for foreclosure unless it first files a proper Loss Mitigation Affidavit in its Motion for Summary Judgment package. The affidavit must list:
- Any type of loss mitigation option which applies to your loan;
- What steps were taken to offer loss mitigation options to you; and
- The status of any loss mitigation efforts.
You can argue that the judge should not enter a judgment of foreclosure if you believe the mortgage company did not properly offer and/or evaluate you for all available loss mitigation options.
Updated: May 2018