Loss Mitigation: Can You Keep Your Home? 

The financial impact of the coronavirus pandemic will be long-lasting. Despite government intervention, many people lost their homes.

Even fortunate homeowners who managed to keep their homes during the pandemic are still in danger. As per the United States Census, slightly over 30 percent of American households self-reported as "likely to face eviction or foreclosure" in December 2021.

If you are having trouble making mortgage payments, consider taking action before it's too late. Several options are available to help you keep your home, including loss mitigation.

What Is Loss Mitigation? 

Loss mitigation refers to the duty that mortgage lenders have to lessen the losses of a homeowner who defaults on their loan agreement. 

The housing market is an extremely important part of the overall stability of the national economy. After the housing market collapsed in 2008, the United States government created the Federal Housing Finance Agency (FHFA). 

The primary responsibility of the FHFA is to regulate the housing market and the mortgages that are used to purchase homes. The agency has studied various ways to help resolve mortgage delinquencies and prevent struggling homeowners from experiencing foreclosure. 

In 2016, the FHFA joined forces with the United States Department of the Treasury and the United States Department of Housing and Urban Development to further research even more effective strategies. 

The coalition of agencies created five key principles that were intended to be the focus of future loss mitigation:

  • Accessibility. Create a simple process that can help homeowners in need of help.
  • Accountability. Take steps to ensure that there is an appropriate amount of oversight.
  • Affordability. Allow for modifications to be made to mortgages in order to provide relief.
  • Sustainability. Ensure that solutions for long-term delinquency are feasible.
  • Transparency. Make sure that the process for loss mitigation is clear and understandable.

What Are the Different Strategies For Loss Mitigation? 

There are a few different strategies for loss mitigation, but they are all intended to help provide mortgage relief. The most effective strategy will depend on your specific financial situation. 

These are a few of the options that might be able to help you catch up on your mortgage:


Mortgage forbearances were extremely common during the early parts of the coronavirus pandemic. Forbearance is an agreement between a mortgage lender and homeowner that will allow the homeowner to miss a specified amount of payments without penalty. 

During the forbearance period, some or all of the monthly mortgage payments will be suspended. The lender won’t take any actions to foreclose on the property, nor will they report the delinquencies to any credit bureaus. 

Eventually, the forbearance period will end. After that, the total sum of the missed payments will come due. It’s not uncommon for a mortgage lender to apply an interest charge to a forbearance debt. Since the total debt will usually end up being several thousand dollars, there are a few options for repayment. 

Some people might have been able to save up enough to pay off the debt in one lump sum. Others might require a payment plan that will add extra money to each mortgage payment until the debt is repaid.


A deferment is pretty similar to a forbearance, but they vary significantly in terms of repayment. Instead of having the total sum of missed payments come due all at once, a deferment will push the debt to the end of your mortgage term

Let’s say that you had 20 years left of your mortgage before you entered a forbearance period of six months. With a deferment, you would not have 20 years and six months remaining on your mortgage. 

In some cases, a lender might prefer that you keep the same term length of your mortgage. They would require a one-time balloon payment instead of stretching out the payments over time. Even though this might be a little more difficult, you would still have the entire remaining time left on your mortgage to prepare for the payment. 


Making a few adjustments to the terms of your mortgage is the equivalent of light refinancing. Instead of taking out an entirely new mortgage, you would simply tweak a few of the details to make it more accommodating

There are two key terms involved with mortgage modification: interest rates and time left on the mortgage. 

If you have a better credit score now than when you took out the mortgage, you might be able to lower the interest rate of your mortgage. A half of a percent might not sound like a big deal, but it can add up to a lot of money over the course of 30 years. 

Much easier than lowering your interest rate is extending the years left on your mortgage. Adding another five years onto your mortgage will mean you’ll make 60 more payments overall. While that might sound counterproductive, it can significantly lower your monthly payment. 

For example, if you owe $150,000 on your mortgage and have 10 years left, then your monthly payment would be $1,250. Adding an extra five years would reduce your payment down to $833.33 a month. 

It’s important to note that while your monthly payments would be lower, the extra time might end up costing you more in interest payments. You should only add time to your mortgage if you’re struggling to maintain your mortgage payments. 

What Can You Do If Loss Mitigation Doesn’t Work? 

The loss mitigation opportunities listed above have helped to save millions of homeowners from foreclosure. However, they aren’t available to everyone, and they might not be enough to prevent you from losing your home. 

If you are struggling to maintain your monthly payments and don’t qualify for the loss mitigation programs listed above, these are a few other options:


Entering into a co-investment with Balance Homes could be a great way to access cash from your home's equity and get caught up.

In exchange, you and Balance both share in the home's expenses and future value. Balance will pay off the remaining amount of money left on your old mortgage. 

From that point, you would make your monthly payments to Balance. As a partner, Balance would kick in their share of operating expenses such as taxes, insurance, and HOA fees. 

What really makes Balance special is the flexibility they provide. For example, Balance has no minimum credit score and qualifies mainly on a homeowner's income and equity. Balance also provides resources to help homeowners long term financial success. Balance co-owners have ongoing access to a portion of their home equity to avoid setbacks while their credit recovers. Meaning you can submit a request to access additional cash if necessary to avoid missing payments or taking on high interest debt.

By maintaining your home equity and taking these proactive steps, Balance believes we can help you rebuild your credit and financial health — and create your path back to traditional homeownership.


Refinancing your mortgage means that you are taking out a new loan in order to pay off your current one. While that might sound like an exercise in redundancy, it can actually help to save you some money. 

Refinancing and modification are basically the same notion. The difference is that refinancing can sometimes require you to shop around to multiple different lenders. 

There are a few downsides to refinancing. For example, each potential lender will make a hard inquiry into your credit that can impact your score. Plus, it will probably take a few months to get a response. 

You should only try to refinance if you have the time to compare rates and can afford a hit to your credit.

Short Sale 

A short sale occurs when you have to sell your home for equal or less to the total amount remaining on the mortgage. The proceeds of the sale will go directly to the lender to cover your mortgage obligation. 

Depending on the laws of your state, you could be on the hook for paying off the balance if the short sale doesn’t cover the total mortgage. A short sale will mean that you’ll need to find a new home, but you won’t experience a foreclosure. 

Deed In Lieu Of Foreclosure 

Offering your mortgage a deed in lieu of foreclosure means that you willingly transfer the title of your property to your lender. In exchange, they will relieve you from the obligations and terms of your mortgage. 

The upside is that you’ll no longer be on the hook for any mortgage payments. The downside is that you’ll have to vacate the property and find a new home. 

Additionally, the deed in lieu of foreclosure will be attached to your credit report for four years. You might not be able to get a new mortgage as long as it stays on your credit. Still, it’s much better than a foreclosure that will impact your credit even more and stay on your credit for seven years.

Staying Home 

Loss mitigation programs have helped to prevent millions of Americans from losing their homes. It’s possible that they can help you to get back on track with your mortgage payments as well. 

There are certain qualifications and requirements that might prevent you from gaining access to these programs. In that case, you would need to consider other options for mortgage relief. 

Entering into a partnership with Balance Homes might be just the thing that you need to walk on financially stable grounds once again. Request your free proposal from Balance today and see if a co-investment opportunity is the right fit for you.


Deed in Lieu of Foreclosure | Investopedia

What is a mortgage loan modification? | Consumer Financial Protection Bureau

Payment Deferral | Know Your Options

What Is Forbearance? | The Balance

Guiding Principles for the Future of Loss Mitigation: | United States Treasury

Short Sale (Real Estate) | Investopedia

Loss Mitigation | US Department of Housing and Urban Development

Household Pulse Survey | Census

Refinance Definition | Investopedia