In the United States, mortgage retention is most often associated with loan modifications or permanent interest rate reductions because of a temporary financial hardship. Mortgage retention allows owners to remain in their homes, with assistance from their loan servicer.
Mortgage retention is also referred to as loss mitigation. Loss mitigation options are specific to the type of financing a borrower has; FHA, VA or conventional loans being the most popular financing options in the U.S..
Loan servicers have their own guidelines in place concerning borrowers being able to qualify for mortgage assistance and loss mitigation. Depending on how long the impact of a financial hardship is anticipated to last, a homeowner may not qualify for mortgage retention with the servicer. In this case, they can opt for a short sale, a deed in lieu of foreclosure or foreclosure.
The most common option for loan retention is the lender providing the borrower with a short-term modification on the loan. This option adds a small amount on to the normal monthly mortgage payment until the loan is brought current. This duration is normally between six to 12 months. The loan is also reamortized to account for the amount in arrears. While other options are available, this is often the most widely used by lenders and borrowers in the U.S..