Loss mitigation is a process used by mortgage lenders to work with buyers who are delinquent on their home loans. Through the loss mitigation process, a lender may modify the terms of a home loan, allowing the homeowner to sell the property for less than is owed, or transfer the deed back to the lender.

The goals of loss mitigation are to reduce the potential loss being incurred by a lender when the borrower is delinquent. At the same time, loss mitigation helps borrowers to obtain a financially sustainable solution to remain in their home and avoid foreclosure.

Loss mitigation is both the process of working with delinquent home buyers and the department within a bank that processes these sorts of requests.