WHAT ARE THE LOSS MITIGATION RULES, AND WHY SHOULD I CARE? ~ BRAD’S STORY

NO HELP

Brad came in recently to tell us about his mortgage woes. It was a story we’ve heard dozens, if not hundreds of times before. He lost his job and went without work for an extended period of time. He kept up with his mortgage payments and other bills as best he could, but eventually fell behind. He definitely wanted to keep his home, so he reached out to his bank and advised it of his situation and asked what relief programs it had available. He received no advice on options to save his home and was only told that he had to make his payments or lose it to foreclosure.

THE LOSS MITIGATION RULES

The term; “loss mitigation” is used in banking circles to refer to processes in place to assist homeowners out of mortgage difficulties so that they can avoid foreclosure. Five years ago, the federal government passed rigorous rules which banks must follow with respect to loss mitigation. The government recognized that banks often don’t care whether you pay on your loan or not because insurance will cover the loss if foreclosure ensues. The rules require that banks act proactively to engage financial distressed homeowners to advise them of their options and work with them to avoid losing their home. Unfortunately, this basic principle is not well known among the public.

MAKING THE RULES WORK FOR YOU

The loss mitigation rules grant rights to aggrieved homeowners, but also put the responsibility for enforcing them on the consumer. In Brad’s case, his bank clearly violated the rules by not advising him of his loss mitigation options. However, it is up to Brad to take the appropriate steps to make the rules work for him. Specifically, we will write a detailed letter, citing the Statute violated, and indicating the potential damages which he could recover if the bank didn’t change its ways. This puts the ball in the bank’s court to explain why it didn’t violate the law, or more likely, to offer to work with Brad now. Brad’s case is a recurring example of bank misconduct, which largely goes unredressed because homeowners are unaware of their rights.

Note from the author: If you have questions or comments- regarding this or any Real Estate Story article or should you like more information on any real estate question, please visit www.mcgookeylaw.com,  follow us on Facebook, LinkedIn, Twitter and Instagram or call 419-502-7223.

Kathryn Eyster contributed to this article.