Although our company has been handling loan modifications for the last few months for our client family through an attorney we've partnered with, I recently decided to switch to another attorney in large part based on the approach he takes. Instead of just doing loan modifications, they practice loss mitigation. Here's the difference:

Loan modification - when a lender agrees to change (modify) the terms on a mortgage. For example, let's say I'm currently paying 6.5% on a 5-year fixed loan but I can't afford those payments. The bank may agree to lower the rate to 3% for the next 5 years, and 5% for 25 years after that, so I can afford the payments.

Loss mitigation - the process begins with a loan modification but doesn't stop there. If the lender is unwilling to agree to a modification or they can't come down far enough for the borrower, the attorney will then arrange a short sale or short-pay refinance so the client can avoid foreclosure. As a last-ditch effort, the attorney will also negotiate a "deed in lieu of foreclosure", effectively handing the keys back to the lender and saving them the time and expense of foreclosure while at the same time saving that black stain on the borrower's credit.

We're very excited about adding this product to the toolkit we use to help clients. In times like these, a lot of times it comes down to limiting the damage done and making sure our clients are positioned as well as possible to jump back on the horse when the time is right. Loss mitigation can be a lifesaver!!