House & Apartment

Note: There are new options to avoid foreclosure for some homeowners who have been financially harmed by the COVID-19 crisis. These options may have different or streamlined application requirements. This article only covers traditional loss mitigation rights and processes. 

Loss mitigation refers to options to avoid foreclosure, both within and outside the foreclosure court process. Loss mitigation may mean that you keep your home. It may mean that you agreed with the mortgage company to give up your home. Working in good faith with your mortgage company is important in preventing foreclosure.

To apply for loss mitigation options, you generally need to submit a loss mitigation application and other documents to your mortgage servicer. Your mortgage servicer is the company that takes your mortgage payments. You can get information about how to apply for loss mitigation from your servicer's website. 

A foreclosure cannot be filed against you unless it has been more than 120 days since you stopped paying your mortgage.

You might submit a complete application for loss mitigation before a foreclosure lawsuit is filed. Then the mortgage servicer cannot file foreclosure. This is true unless:

• Your servicer reviewed your application and told you in writing that you are not eligible for any loss mitigation option;
• You rejected all loss mitigation options; or
• You were terminated from loss mitigation because you didn't follow the requirements, for example, you didn't make trial payments. 

A complete application has all the information that the mortgage servicer needs from you. Generally, you will need to submit an application and other documents that prove your income and hardship. Your servicer should let you know exactly what is needed in the application. Completing the application in its entirety is very important. The mortgage servicer will request any additional documents and information from you and give you additional time to complete the loss mitigation application. You should cooperate with the mortgage servicer's requests and you should keep a copy of all documents you send the servicer. You can contact a HUD-Certified Housing Counselor for free assistance with the application. 

45 days before a [no-lexicon]Sheriff's[/no-lexicon] sale

You may submit a loss mitigation application 45 days or more before a Sheriff's sale. Your mortgage servicer must notify you in 5 days it received your application. This notification from your mortgage servicer must also:

• Tell you whether your application is complete or not;
• If it is not complete, tell you what additional documents or information you must submit to make your application complete; and
• Give you a specific date to provide the needed information.

37 days before a Sheriff's sale

You might submit a complete loss mitigation application after the foreclosure lawsuit is filed. If this is done 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 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

You may submit a complete loss mitigation application at least 90 days before the Sheriff's sale. If you are then denied a trial period plan or a permanent loan modification, the mortgage servicer must allow 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 Bureau website.

After submitting a complaint, the CFPB forwards the complaint to the company. Then it works to get a [no-lexicon]response[/no-lexicon].

Stopping a judgment of foreclosure

If you filed an Appearance in the foreclosure lawsuit, the mortgage company must take certain steps. It must file a proper Loss Mitigation Affidavit in its Motion for Summary Judgment package. Otherwise, it cannot receive a judgment for foreclosure. 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. You would want to argue this if you believe the mortgage company:

• Did not properly offer all loss mitigation options available to you,
• Did not properly evaluate you for all such options, or
• Both.