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

Traditionally, in the past, a lender would only offer assistance to a borrower when their home loan became delinquent, a failure to pay the monthly loan payment for three or more consecutive months.

In a typical scenario like this, borrowers might be eligible for traditional loss mitigation methods if they’re lucky.

To clear up some terminology, let’s define loss mitigation as the process of working to stop or reduce any loss to the lender and borrower, in effect, damage control.

Under traditional foreclosure prevention guidelines, in order to receive assistance from a lender, a borrower would have to meet certain requirements.

One of the most important requirements is one where non-traditional methods offer some additional flexibility for struggling homeowners.

Under non-traditional methods, a homeowner does not have to default on their loan before they can receive assistance.

In the past, lenders told homeowners that they couldn’t offer any help until their loan was actually delinquent.

Another significant difference is the actual difficulty that caused the owner to be late. Under the traditional method, the borrower would have to return to work or have sufficient family income to receive assistance.

Under non-traditional foreclosure prevention methods, borrowers may receive a temporary grace period in the event they do not regain full employment.

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

Of course, if there is always a downside.

The big problem with the relaxed guidelines is this…

Homeowners who are already in default on mortgage loans have priority over borrowers who are not in default. This results in a large number of both types of borrowers being left behind.