Loss Mitigation

Definition of Loss Mitigation


Loss Mitigation are actions designed to reduce the cost of damages from one person against another person. When a borrower is in default on their loan payments, the lender wants to work with them to avoid foreclosure, as foreclosure would likely result in a loss of funds for the lender. The lender first determines the value of the asset by ordering a BPO on the property. This helps them determine their potential losses. Next, they attempt to set up a workout plan with the borrower, to bring the loan back into good standing. One example is when the borrower pays the overdue balance over a specified number of months along with the regular monthly payments.