Foreclosure Dictionary

 

Assumable Mortgage

A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer, the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.

 

Bankruptcy

Federal law whereby a person’s assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

 

Borrower (mortgagor)

Person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

 

Broker price opinion (BPO)

Agents estimate the value of a property based on condition, location, size, market trend, etc. The BPO is compared with an appraisal for the best estimate on the value of  the property

 

Cash for keys

An agent offers the soon-to-be evicted occupant cash to leave before the scheduled vacate date.

 

Credit history           

History of an individual’s debt payment; lenders use this information to gauge a potential borrower’s ability to repay a loan.

 

Credit Report

Record that lists all past and present debts and the timeliness of their repayment; it documents an individual’s credit history.

 

Credit bureau score

Number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

 

Cured default

Correction of a borrower’s failure to make payments or meet the terms of a loan to the lender’s satisfaction

 

Debt-to-income ratio

Comparison of gross income to housing and nonhousing expenses; per FHA, the monthly mortgage payment should be no more than 31 percent of monthly gross income (before taxes), and the mortgage payment combined with nonhousing debts should not exceed 43 percent of income

 

Deed

A document that transfers ownership of a property.

 

Deed in Lieu

To avoid foreclosure (“in lieu” of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the cost, time, and effort associated with foreclosure.

 

Deed in Lieu of foreclosure

Transfer of title to the mortgagee upon foreclosure.

 

Default

Inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms; nonperformance of a duty, failure to meet obligations of the loan.

 

Deferred payment mortgage

Mortgage that allows the borrower to make payments with delays when the borrower’s income is low during the initial period.

 

Deficiency Judgment

If the sales proceeds of the security of a loan is les than the loan balance, the borrower is requested to pay the lender the difference between the mortgage balance and the proceeds of the foreclosure sale.

 

 Delinquency

State of affairs when payments on a note or other loan obligation are past due.

 

Equity

Owner’s financial interest in a property; calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.

 

Eviction

Legal procedure to have a tenant forcibly removed from a dwelling.

 

Fair Market Value

Value a buyer is willing and capable to pay for a property. An appraisal based on comparisons of similar properties in the neighborhood; the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation

 

Fannie Mae

Federal National Mortgage Association (FNMA) that buys and sells mortgages in the secondary market; a government-chartered but privately owned corporation that buys mortgages from mortgage companies.

 

Financial Statement

Current financial assessment of income and expenses.

 

Forbearance

Written repayment agreement between a lender and a mortgagor that contains a plan to reinstate a loan that is three months due and unpaid. A lender voluntarily accepts payments that are lower than originally agreed in the loan documents for a limited period of time in order to allow the borrower to recover financially. The borrower must eventually repay the missing or reduced payments, as well as all other remaining payments on the loan.

 

Foreclosure

Legal process in which mortgaged property is sold to pay the loan of the defaulting borrower; the forced sale of a piece of real estate to repay debt.

 

Freddie Mac

Federal Home Loan Mortgage Corporation (FHLMC) that insures loans by the full faith and credit of the U.S. government; a government-chartered but privately owned corporation that buys mortgages from S&Ls.

 

Grace Period

Period  between the due date and the overdue date during which no late payment penalty applies; additional time allowed to perform an act or make a payment before a default occurs.

 

Home inspection

Examination of the structure and mechanical systems to determine safety of a home and to disclose necessary repairs to potential home buyers.

 

Housing counseling agency

Counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buyer.

 

HUD

U.S. Department of Housing and Urban Development.

 

Investor

Lender that can be a commercial bank, savings bank, credit union, or any other entity licensed to lend money.

 

Judgment

Legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor’s claim by providing a collateral source.

 

Late fees

Amount imposed on a delinquent property after the grace period.

 

Lender

See Investor

 

Lien

Legal claim on the real estate property for payment of debt.

 

Lien waiver

Removal of any obligations on a homeowner to pay of debts.

 

Loan

Money borrowed that is usually repaid with interest.

 

Loan modification

Loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments a procedure in which a loan’s terms – such as the interest rate, monthly payment, or term – are altered.

 

Loan resolution

See deed in lieu, short sale.

 

Loan workout programs

Process by which a borrower comes to a mutually acceptable financial arrangement with a lender in order to avoid an impending foreclosure.

 

Lockout

In the case that an evictee is not in compliance with the regulations as determined per the lender, locks are changed and the occupant is locked out. The agent must be present for a lockout, as he is the eyes and ears for the asset manager.

 

Loss mitigation

Process to avoid foreclosure; the lender tries to help the borrower who has been unable to make loan payments and is in danger of defaulting on his loan.

 

Monthly status report

This report is submitted by the agent to the asset manager and contains information such as comparable listings in the same area of the selling property, marketing trends, and other factors that would assist in being able to determine what has prevented the property from being purchased.

 

Moratorium

Temporary suspension of debt repayments.

 

Mortgage

Lien on the property that secures the promise to repay a loan.

 

Nonjudicial foreclosure

Right to sell a property without a court decree as allowed in some states; foreclosure on a mortgage without filing a lawsuit or obtaining a court order. Generally such sales occur because the borrower has signed a document, such as a deed of trust, giving a trustee preauthorization to sell the real estate to pay off the debt.

 

Notice of default

Letter sent to a defaulting party as a reminder of the default. It may state a grace period and the penalties for failing to cute the default.

 

Partial Claim

Loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUG to bring the mortgage payments up to date.

 

Preforeclosure sale

Allows a defaulting borrower to sell the mortgaged  property to satisfy the loan and avoid foreclosure.

 

Quitclaim deed

Deed indicating that the owner gave up his interest/claim in the property

 

Ratification

Signing of agreement by both parties.

 

Real estate agent

Individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

 

Real estate owned (REO)

Real estate owned (REO) property by lender/investor through foreclosure; property acquired by a lender through foreclosure and held in inventory.

 

Realtor

Real estate agent or broker who is a member of the National Association of Realtors and its local and state associations.

 

Redemption

Right of defaulted previous owner to re-own the property by curing the default. See Right of redemption

 

Refinancing

Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms like a lower interest rate.

 

 

Re-key

The point in the eviction process when locks are changed on the door; different from a lockout, as this is done after the previous occupant has been evicted.

 

Repossession

Retaking of a defaulted property for nonpayment.

 

Resolution

Result of a workout effort between a borrower and a lender/investor.

 

Right of redemption

Right granted, in some states, to the owner to recover property sold after a foreclosure with a certain period of time after the foreclosure sale.

 

Secondary market

Mortgage buying-selling market where large investors, including Fannie Mae and Freddie Mac play the largest role.

 

Short sale

When a third party purchases the property, allowing the borrower to pay the mortgage note in full and avoid foreclosure; a workout procedure in which the lender accepts less than the full balance due on the loan as part of a deal in which the borrower cooperates with the lender to obtain a quick sale. The lender skips foreclosure, which would take time, cost money, and expose the house to vandalism, further declines in market value, and marketing costs for resale.

 

Skip tracing

Arduous process of locating borrowers by name, address, phone, etcs

 

Statute of limitations

Period of time during which certain actions must be brought to court.

 

Special forbearance

Loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

 

Trash out

When a previous occupant has been evicted, the agent must hire a vendor for removal of all trash, debris, hazardous waste, etc. An agent is also typically asked to include before and after pictures of all areas that apply.

 

Waiver

Giving up any right.

 

Winterization

In cold states and during winter, properties that are on the market need to have hot water running through pipes periodically to prevent the pipes from bursting and flooding the inside of the property. Property winterization is to be completed by an agent-assigned vendor, and approval must be granted by the asset manager.