What is the scope of loss mitigation procedures?

The scope of loss mitigation procedures specifically applies to mortgages secured by the borrower's primary residence. This focus arises from regulations and guidelines designed to protect homeowners facing financial difficulties, recognizing the unique situation of individuals who live in the property they are trying to protect. Loss mitigation procedures are aimed at preventing foreclosure and providing options, such as loan modifications, repayment plans, or forbearance, which are often critical for homeowners.

This targeted approach reflects the importance of homeownership and the desire to help borrowers retain their primary residences, where they have emotional, financial, and social investments. By focusing on this category, regulations prioritize support for individuals who may be more vulnerable during economic hardships and have fewer alternate housing options compared to those with investment properties or second homes, which do not receive the same level of consumer protection.