Loss mitigation typically means when a third party handles the process of negotiation between a homeowner and the homeowner’s Lender.  Loss mitigation works to negotiate mortgage terms for the homeowners that will prevent foreclosure.  These new terms are typically obtained through a loan modification, short sale negotiation, or deed in lieu of foreclosure.

The mortgage lender will try to reduce their loss as much as possible. Loss mitigation is the attempt to recoup as much of the loan value as they can… The Lender will suffer a loss but smaller than if the loan went into foreclosure.

A loss mitigation department works to negotiate terms with the homeowner so as to prevent foreclosure.