Foreclosure and Short Sale Terms
Learn about the key terms and definitions associated with the foreclosure and short sale process.
Advertising / Publishing - A copy of the Notice of Trustee Sale must be published once a week for three weeks.
Affidavit - A written statement made on oath before a notary public or other person authorized to administer an oath.
Amortize - To reduce (an amount) gradually; to pay off (as a loan) gradually usually by periodic payments of principal and interest or payments to a sinking fund.
Answer - Submission of a court recognized response to a claim.
Arrearage - An outstanding balance incurred due to a debt obligation, usually as a result of the accrual of interest.
Bankruptcy - Chapter 7 - Straight bankruptcy. Liquidation of all non-exempt by the bankruptcy trustee, who in turn distributes the proceeds to qualified creditors. All dischargeable debts are discharged.
Bankruptcy - Chapter 13 - Debt reorganization. A Chapter 13 Bankruptcy is generally appropriate for those individuals who have non-exempt property they wish to retain and who have enough income to pay the reorganized debt after covering living expenses.
Beneficiary - The beneficiary in a trustee relationship is the mortgage lender.
Comparative Market Analysis (CMA) - A market comparison of real property done for the purpose of establishing a market value assessment.
Complaint - A pleading setting forth a plaintiff's case or cause of action (reason for filing a lawsuit); a formal charge or accusation.
Credit Counseling - Under the new bankruptcy law of October of 2005, those who wish to file bankruptcy must complete an approved credit counseling course within the six (6) months prior to filing.
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Defendant - A person sued or accused and opposed to a plaintiff.
Deed of Trust - The Deed of Trust is the document held by the lender as evidence that a loan has been made. Borrowers also sign a Promissory Note. The Deed of Trust and the Promissory Note contain the terms of your loan. There may be more than one Deed of Trust for a property.
Deficiency Judgment - The money award by a court against a borrower for the balance that remains after the collateral that secures a debt has been liquidated and applied to the total loan amount.
Discontinuance - The stopping of or termination of a legal action (a lawsuit), usually prior to the completion of a court trial.
Deed in Lieu of Foreclosure - The voluntary surrender of property by an owner/borrower to a lien holder that eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non Acceptance with the County Recorder.
Discounted Payoff - The payoff of a mortgage loan where the lender accepts an amount less than the actual amount owed to payoff the loan.
Equity - The residual value of a property beyond any mortgages or liens.
Equity Deficient - A property is Equity Deficient when the sales proceeds would not fully pay off existing mortgage debt.
Escrow - The escrow process generates the needed documents and complies with the escrow instructions prior to "closing" and before funds can be disbursed. Upon closing, funds and title are transferred between the principals. An escrow, for the sale of property is a transaction involving a seller and a buyer, who have a binding contract with each other, and an escrow holder who is a neutral stakeholder, who holds, the other parties' money, written instrument, or property to be delivered upon the performance of prescribed conditions.
Execution - Legally sanctioned action that is taken by the plaintiff subsequent to the award of a judgment against the defendant for the purpose of effecting collection of the subject award - i.e. levying of a bank account, garnishment of property, etc.
Extension - The consent by one party at the request of another for a specified amount of additional time before action continues in a legal proceeding.
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Forbearance Agreement - An agreement between a mortgage holder and a borrower that lays out a specific loan payment plan and puts a stop on the foreclosure action so long as the borrower meets the terms of the agreement. The lender may agree to a temporary reduction or suspension of the borrower's payments. The delinquent amount will be repaid over a specified period of time or added to the back end of your mortgage. A borrower may qualify for this if you have can show a temporary hardship, such as a job loss. The borrower must furnish information to the lender to show that they would be able to meet the requirements of the new payment plan.
Judgment - A legal decision, decree or sentence given by a judge or a court of law.
Judicial Foreclosure - A foreclosure action conducted through the courts instead of through a foreclosure trustee. Judicial Foreclosures are very uncommon in California, particularly on residential properties. Should a lender elect to pursue a deficiency judgment, it would be through a Judicial Foreclosure.
Junior Liens - A lien, usually a mortgage loan, that is subordinate to a Senior Lien, usually a first mortgage. Lien priority is generally established by order of recordation.
Lis Pendens - A notice to a public at large and filed by the court of jurisdiction that court action is pending regarding a specified property.
Loss Mitigation - Lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through their Loss Mitigation Departments.
Mailing - A copy of the Notice of Trustee's Sale must be mailed (certified and first class) at least 20 days before the foreclosure sale to the borrower and to anyone who was entitled to receive a copy of the Notice of Default and Secretary of State and IRS, if applicable.
NOD - Notice Of Default.
Notice of Default - An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.
Notice of Trustee Sale - An official notice that is posted, mailed, published/advertised and recorded by trustee at the direction of lender indicating lender's intention to sell the property at public auction. The notice includes a specific date, time and location.
Plaintiff - A person who brings a suit into a court of law; complainant.
Principal Balance - The face value of a loan payoff amount before calculation of applicable interest, arrearage, late charges, or other additional costs.
Posting - A copy of the notice of sale must be posted in a conspicuous place on the property to be sold at least twenty days before the sale. Also, a copy of the notice must be posted at one public place in the city where the property is to be sold at least twenty days before the sale.
Postponement - Trustee Sales may be postponed by the first at the direction of the lien holder. Notice may be given in advance or at the time and location specified for the intended sale.
Private Mortgage Insurance (PMI) - A policy of insurance paid for by the borrower to protect the lender in the event the borrower defaults on the mortgage. Typically PMI is required by the mortgage holder when the down payment is less than 20% of the purchase price.
Qualifying Funds - In order to bid at a Trustee Sale bidder must have qualifying funds available at the sale. Qualifying funds are cash or a cashiers check(s) drawn by a State or National Bank, a check(s) drawn by a State or Federal Credit Union or check drawn by a State or Federal Savings and Loan Association, savings association or savings bank specified in section 5102 or the Financial Code and authorized to do business in the State of California.
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REO - Short for Real Estate Owned. When a mortgage lender acquires a property, typically through foreclosure, it becomes real estate owned - or REO.
Reinstatement - To bring the loan current. Borrower may reinstate up to five (5) business days before foreclosure sale.
Reinstatement and Payoff Totals - A summary statement, usually itemized, that reflects the combined total of arrearages, late fees and other costs as required to effect a current payments status.
Short Sale - A short sale occurs when the owners sell their property for less than the
balance owed. The lender accepts the sale proceeds as full satisfaction of the
loan.
Subordinate Lien - A lien position that is satisfied subject to satisfaction of another lien, usually filed subsequent to a lien held in a priority position.
Summons - Constitutes the commencement of legal action and is an order to appear, attend or respond to a specific charge.
1099-C - IRS Form 1099-C is issued by those canceling all of part of a debt to the person receiving debt relief. Note: The cancelled debt may not need to be reported as income due to the Mortgage Forgiveness Debt Relief Act of 2007 or for reasons of insolvency. For more on a 1099-C, contact your tax adviser. If you do not have a tax advisor, contact us today and we can recommend one to you.
Trustee (Foreclosure Trustee) - A Foreclosure Trustee is appointed by the mortgage company when a mortgage reaches the default status for the purpose of processing the foreclosure.
Trustee Deed - The deed given to the highest bidder at auction or the foreclosing lender upon completion of the foreclosure.
Trustee Sale - Conducted by the Trustee. The property is sold at auction to the highest bidder, or taken back by a foreclosing lender.
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