Loss mitigation is a process in which lenders work with borrowers who are at risk of foreclosure to resolve outstanding mortgage payments, according to findwell. Different types of loss mitigation include loan modifications, preforeclosure sales, deed-in-lieu negotiations and special forbearance agreements, notes the U.S. Department of Housing and Urban Development.
Loss mitigation is typically pursued by lenders to reduce the potential losses of a delinquent borrower, states findwell. In a preforeclosure sale, borrowers sell their homes for less than the amount owed and use the proceeds to satisfy their debt, according to the Department of Housing and Urban Development. Likewise, in a deed-in-lieu negotiation, borrowers deed their property to the lender in exchange for a release from the obligations of their mortgage.