loss mitigation

Definition

Strategies employed by lenders to avoid foreclosure when borrowers can't make payments, including loan modifications, short sales, or forbearance. The bank's damage control department.

Example Usage

The loss mitigation department approved a three-month forbearance while she searched for new employment.

Origin

Formalized during the mortgage crisis of 2008-2009 when foreclosures overwhelmed lenders

Fun Fact

Banks often lose 20-40% of a loan's value through foreclosure, so loss mitigation is genuinely cheaper than seizing properties.

Source: Mortgage servicing and banking terminology

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