A glossary of real estate, mortgage and foreclosure terms.
A B C D E F G H I J L M N O P Q R S T U V W
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A
Abstract of Title The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.
Acceleration Clause The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant.
Addendum An addition or change to a contract in place.
Adjustable Rate Mortgage (ARM) A loan with an interest rate that fluctuates based on a specified financial index.
Amortization The repayment schedule of a debt in installments until the debt is paid in full.
Appraisal A valuation or an estimation of value of property by disinterested persons of suitable qualifications; the process of ascertaining a value of an asset or liability that involves expert opinion rather than explicit market transactions.
Assessor A municipal employee or elected official who estimates the value of properties for the purpose of taxes.
Assignment The method by which a right or contract is transferred from one person (the assignor) to another (the assignee).
Automatic Stay- A bankruptcy case automatically prevents continuation of creditor collection activity. Filing bankruptcy is the only way to get this specific protection. Mortgagees may petition the Court to "lift" the stay and permission to resume collection activity if the terms of the bankruptcy are not met.
B
Balloon Payment A lump sum payment of a mortgage loan that is considerably larger than the installment payments as the loan amount was not fully amortized.
Bankruptcy A proceeding in federal bankruptcy court where debtors seek to reorganize or discharge credit obligations due to insolvency.
Beneficiary A person entitled to receive money or assets from a trust or an estate. A lender is a beneficiary with a deed of trust or a note as a security for a loan.
Buy-Down mortgage A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.
C
Certificate of Sale A certificate issued at a judicial sale that entitles the buyer to receive a deed after confirmation of court for the purchase of the property.
Chain of Title A succession of conveyances that comprises the title record history to a specific parcel of real property.
Chattel Mortgage A mortgage which is secured by personal property.
Cloud on Title Any outstanding claim that contradicts the title record, if valid, would impair the owner's title.
Co-signer A co-signer signs a promissory note and takes responsibility for the debt.
Collection Obtain payment or liquidation of a debt or claim, either by personal solicitation or legal proceedings.
Condemnation A judicial or administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use and compensates the owner.
D
Decree of Foreclosure A court order to set out the outstanding amount on a delinquent mortgage in order to sell the property to pay the mortgagee.
Deed in lieu of foreclosure A process whereby the owner, with the approval of the lender, deeds the property to the lender to avoid foreclosure. Lenders are generally reluctant to accept a "deed in lieu" unless the title is free and clear of any other encumbrances junior to theirs and the owners execute an estoppel affidavit acknowledging that they are acting voluntarily with informed consent.
Default Failure to make payments as agreed in the loan agreement.
Deficiency judgment A personal judgment against a debtor for the amount remaining due after a judicial foreclosure of a mortgage.
Delinquency A loan payment that is past due. Usually after 90-120 days of delinquency, the lender will initiate foreclosure proceedings against the loan.
Demand Letter Also known as a Breach Letter or Notice of Intent to Foreclose. Notice to the borrower that he/she is in "breach" of the terms of the Note and advising of the right to "cure" the default.
Discharge A legal document that ends a debtor's legally enforceable obligation to pay a debt.
Due-on-Sale Clause A clause in a mortgage which requires that the mortgage be paid out in full upon the sale of the property.
Due Diligence Such a measure of prudence, activity, or assiduity, as is properly to be expected from a reasonable and prudent man under the particular circumstance.
E
Encumbrance Anything, such as a mortgage, tax or judgment lien, an easement, a restriction on the use of the land or an outstanding dower right that may diminish the value or use and enjoyment of a property.
Equity Current value of a property minus existing liens against the property.
Eviction The act of depriving a person of the possession of land or rental property that he has held or leased.
F
Fair Market Value The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.
Fannie Mae The Federal National Mortgage Association, one of the largest secondary-market investors in residential mortgages that resells them as securities on the secondary mortgage market.
FHA Loans A loan program from the Federal Housing Administration offering low-rate mortgages to buyers who are can make a down payment as small as 3 percent.
First Mortgage A mortgage that is in first position and has priority as a lien over all other mortgages.
Forbearance Agreement- A formal agreement between a borrower and a lender to postpone an ongoing foreclosure.
Foreclosure A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.
G
Garnishment A creditor's seizure, to satisfy a debt, of property belonging to the debtor that is in possession of a third party. An example would be the seizure of money from your bank account, or your wages.
Grace Period A period of days during which a debtor may cure a delinquency without penalty (before triggering a late charge, a foreclosure or an acceleration of the balance due).
H
Home Equity Line of Credit A loan that is secured by the owner's property which can be repaid and drawn on again based on existing equity in the home.
HUD 1 Uniform Settlement Statement A closing statement or settlement sheet that outlines all closing costs and details on a real estate transaction.
I
Instrument A legal written document.
Interest The cost of using borrowed money.
Involuntary lien A lien issued against a property without the owner's approval.
J
Judgment The final decision of the court resolving the dispute and determining the rights and obligations of the parties.
Judgment Lien A general lien created by a court ordering a debtor to pay a certain amount of money to the judgment creditor. The lien will bind to the debtor's real property once an abstract of the judgment is recorded. Thereafter the debtor won't be able to resell, refinance or buy any other property in the county without paying off the lien.
Judicial Foreclosure A foreclosure process which is executed via a court action.
L
Lien A claim or charge on a property for payment of some debt, obligation or duty.
Lis pendens A term meaning "legal action pending" that gives notice of an action or proceeding affecting the title of the property.
Loss Mitigation Department The lender's department which helps homeowners avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan
Lot Book Report A title record report given by a title company which announces any encumbrances recorded against the property.
M
Marketable Title A title with no claims or defects that could otherwise hinder a property being sold.
Mechanic's lien A claim created by state statutes for the purpose of securing priority of payment of the price or value of work performed and materials furnished in erecting or repairing a building or other structure, and as such, attaches to the land as well as buildings and improvements erected thereon.
Modification A change of the terms of the loan agreement.
Mortgagee The entity, usually a bank or financial institution, who lends money to a borrower.
Mortgagor The person who borrows the money from a lender to purchase a property.
N
Notice of Default (NOD) A notice that is sent out by the lender when a mortgage payment is late in an attempt to cure or make the loan current.
Notice of Rescission A legal document used when the defaulting party has cured or corrected the default
Notice of Sale The notice of an impending foreclosure sale required by the state. It recites the legal description of the property being foreclosed upon and gives the time, date and place of the pending sale.
O
Offer to Purchase A contract expressing of a person's willingness to purchase a certain property on terms expressed in the offer.
P
Power of Sale A clause commonly inserted in mortgages and deeds of trust that are in default, giving the mortgagee (or trustee) the right and power to advertise and sell the mortgaged property at public auction to satisfy the debt.
Pre-Foreclosure Term used to discuss delinquent properties before they go to the foreclosure auction.
Prepayment Penalty A fee charged by a lender if a loan is paid off earlier than outlined in the Loan documents.
Private Mortgage Insurance (PMI) Insurance against a loss by a lender, due to a default in payments from a borrower. This is often required when a buyer is paying a small down payment (less than 20% of the appraised value of the secured property.)
Q
Quiet Title An action at law to remove an adverse claim or cloud from the title of property.
Quit Claim Deed A deed of conveyance that releases any title, interest, or claim, which the grantor may have in the premises.
R
Real Estate Owned (REO) Property acquired back by the lender after it has gone to auction.
Redemption Period The time allotted to the mortgagor to reclaim his/her property after it has been sold at an auction. Not all states have a redemption period.
Reinstatement The process of remedying a default so that the lender will treat you as if you had never fallen behind. This brings the loan current immediately.
Relief from Automatic Stay An order from the bankruptcy court allowing a lender to proceed with his default remedies against a debtor.
Repayment Plan When a borrower falls behind in mortgage payments, a lender may negotiate a repayment plan rather than initiate foreclosure proceedings.
Repossession The action taken when property is taken back by the lender holding the mortgage.
S
Sheriff's Sale The sale of a foreclosed property by a local sheriff's department as directed by the court to satisfy a debt or judgment.
Short Sale A sale where the lender will agree to accept less than the full amount of the mortgage. This allows you to sell the house to an investor or other buyer while the lender recovers the bulk of the amount due without having to pursue foreclosure proceedings. In a short sale, the amount of the original loan forgiven by the lender is considered taxable income to the seller.
Subject To The transfer of rights to pay a debt from one party to another, with the original party remaining liable for the debt if the second party defaults.
T
Tax Deed A type of deed used to convey title after real property is sold at auction by public authority for non-payment of taxes.
Tax Lien A lien on real estate in favor of a state or local government that may be foreclosed on for the non-payment of taxes.
Tenant A person in possession of real property with the owner's permission.
Tenant at sufferance A person who after rightfully being in possession of a rented premises continues to live in that premises after his right has terminated.
Tenant at will One who holds possession of premises with the owner's permission.
Title Report A report which sets out the current state of title to a property.
Torrens Title A torrens title contains a listing of all legal instruments (mortgages, judgments, liens) that have been recorded on the property from its origin.
Trust Account A special account used by a broker or escrow agent to safeguard funds for a buyer or seller.
Trustee's Deed A deed given to the successful high bidder after a foreclosure auction.
Trustee's Sale An auction where a trustee may sell a property that has defaulted in effort to pay the outstanding debt that is owed.
U
UCC Uniform Commercial Code; uniform laws drafted by the National Conference of Commissioners on Uniform - State Laws governing commercial transactions.
Upset price The opening bid amount that begins the auction bidding during a foreclosure sale.
V
VA Loans A program that allows the purchase of a house without a down payment to most veterans.
Vacate To make vacant or empty.
W
Without Recourse Giving the lender no right to seek payment or seize assets in the event of nonpayment from anyone other than the party specified in the debt contract.
Wraparound Mortgage The financing technique in which the payment of the existing mortgage is continued by the seller and a new, higher interest loan, which is larger than the existing mortgage, is paid by the borrower.