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Traditional Vs Non Traditional Foreclosure Prevention Methods

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

Traditionally in the past a lender would only offer any assistance to a borrower when their mortgage loan went into default, non payment of the monthly loan payment for three or more consecutive months.

Under a typical scenario such as this borrowers could possibly be eligible for Traditional Loss Mitigation methods if they were lucky.

To clear up some terminology, lets define loss mitigation as the process of working towards stopping or reducing any losses for the lender and borrower, in effect damage control.

Under traditional foreclosure prevention guidelines to receive any assistance from a lender, a borrower would have to satisfy some requirements.

One of the most important requirements is one in which non traditional methods offer some added flexibility for homeowners in distress.

Under non traditional methods, a homeowner doesn’t have to have their loan go into default for non payment before they can receive any help.

In the past lenders would tell homeowners that they couldn’t offer any assistance until their loan was actually in default.

Another significant difference is the actual hardship that caused a homeowner to fall behind. Under the traditional method, the borrower would need to either be back at work or have sufficient household income for assistance.

Under non traditional methods of foreclosure prevention borrowers may receive a temporary grace period in the event that they are not back to full employment.

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

Of course if there’s always a downside.

The big problem with the relaxed guidelines is this…

Homeowners already in mortgage loan default take priority over borrowers not in default. This results in a huge amount of both types of borrowers being left out in the cold.

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