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Foreclosure Glossary Abstract of Judgment: A short summary of the public record of a court judgment that is used to record a lien against a property for failure to pay a debt or obligation. Abstract of Title: A short summary of the history of the title of a real property. It will include deeds and titles of prior owners and any encumbrances and conveyances. Abstract Plant: A repository of information relating to title of specific properties. Companies whose business is to facilitate the search to clear title. Acceleration Clause: A due on demand clause in the mortgage that demands full payment of the debt if the holder of the mortgage does not make timely payments and in effect, defaults on the payments. Agent: A licensed representative of the state trained to conduct real estate insurance or securities transactions. Agreement of Sale: A contractual agreement between buyer and seller that spells out the terms of the sale of real property and retains title until it is paid in full. Alienation: When property is transferred from one owner to another. This may be for money as in a sale or as a gift or by eminent domain when a government entity takes possession for the good of the community. All-Inclusive Deed of Trust: See wrap-around deed of trust Amortization: Repayment of a mortgage loan through monthly installments of principal and interest. A payment schedule that will pay down the mortgage by a specific time period (15 or 30 or even 40 years) Appraisal: A report estimating a property's fair market value. An appraisal report is generally required by a lender. Appraiser: An individual trained to asses the value of a property based on experience and market knowledge of comparable nearby property's. Appreciation: The amount of value a real property has increased. Assignee: An owner may transfer some or all of his interest in a real property to another individual (the assignee). Assignment: A transfer of property or a claim or right to another. Assignment of Rent: When a owner gives the right to collect rents to another as security in the event of a default. Assignor: The person transferring a property or a claim or a right to another. Assessment Roll: The Assessed value of all property that is the basis of the tax rate. 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. Assumption Clause: A clause allowing a buyer to take on an existing loan and all its obligations. Balloon Mortgage: A mortgage that typically offers low payments for a period of time ( 5, 7, or 10) years after that, the full balance of the loan is immediately payable at once. Bankruptcy: A declaration made someone owes more than they have the ability to repay. A legal process entered into whereby a person's assets are turned over to a trustee and used to pay off outstanding debts Beneficiary: A lender under a deed of trust or note. Bid: The offer to buy for some consideration. Bill of Sale: A written document that is used to transfer ownership from one party to another for some consideration. Blanket Deed of Trust: More than one parcel or property covered by one deed of trust. Book Sale: A sale of property to the state when property taxes are owed by the owner. This is a change of title and a sale in name only. Book Value: The initial cost plus improvement minus depreciation. Borrower: A person who has been approved to receive a loan. Breach: The failure to perform a contractual obligation or condition and can void the contract. Broker: A licensed individual trained to transact real estate, insurance or securities for the benefit of the client. Buyers Market: The supply demand equation is in favor of the buyer and prices are often lower when the market has fewer buyers than sellers. Capital Gain: The profit created from ownership, management or capital improvements. Certificate of Sale: A legal document issued at a judicial sale enabling the buyer to receive a deed to a property at the purchase price. Certificate of title: A document showing that a property legally belongs to the current owner. It is often issued by a title company before the title is transferred. Chain of Title: The complete record of deeds and conveyances creating a chronological history of a specific property. Closing or Settlement: That point when the property is transferred to the buyer who now takes on the loan obligation, pays all closing costs, and receives title from the seller. Closing Costs: Costs typical to the transfer of ownership that vary by geographic location. Each state will have a general understanding as to which costs are allocated to the seller and which are the buyers responsibility. Who pays a particular closing fee is often negotiable. Cloud on Title: Any claims against title, conveyances or encumbrances not in the title chain that would confuse true ownership. Co-signer: A signor of a note or contract that assumes responsibility for debt or obligations. Collateral: Assets offered as security for a debt. Collection: To receive payment of an obligation. Comparables: Like properties used to help determine the fair market value of a similar property. MLS: Listings of all properties and their descriptions for sale. This is used by real estate agents to aid in establishing a price for a property coming to market. Condemnation: The right of government to take a property for the public good. Also known as eminent domain. Fair market value is paid to the owner. Contingency: Conditions set out and agreed to that must be fulfilled before a contract is signed or before it becomes binding. Conventional loan: A private sector loan, generally a bank or mortgage company, not insured by the government. Conveyance: A transfer of title to real property from one person to another. Credit report: Issued by large repositories that gather information on individuals and companies. They issue a report indicating timely payments of credit cards and other loans. Late payments and non payments are recorded along with derogatory public records. Debt-to-income ratio: A comparison of gross income to expenses. FHA, requires monthly mortgage payment should be no more than 29% of monthly gross income and the mortgage payment plus non-housing debts should not exceed 41% of income. Decree of Foreclosure: A court order orders the property sold to pay the lender or mortgagee. Deed: The document that transfers ownership of a property. Deed-in-lieu: To avoid foreclosure, a deed is given to the lender to complete the obligation of the debt. It is often used to save time and avoid the cost of foreclosure. Deed of Reconveyance: A legal document that states that the mortgage has been paid in full. The owner now owns the property outright. Deed of Trust: A legal document conveying the legal title to real property as security for the repayment of a loan. Trustor: the owner is the trustor. Trustee: the neutral third party who holds bare legal title is the trustee. Beneficiary: the lender is the beneficiary. Default: The failure to make mortgage payments or meet some other terms of the mortgage contract. Defeasance Clause: A clause in a mortgage contract that cancels the mortgage when all mortgage payments have been made. It gives the borrower the right to redeem title to the property when the mortgage is paid in full. Deficiency judgment: Legal action sought by a lender who wants to recover losses on a foreclosure when the property is sold for less than the amount due on the loan. Delinquency: The failure to make payments on time but not yet in default Demand Letter: A letter to the borrower of intent to foreclose and that the borrower is in breach of the terms of the loan. Department of Housing and Urban Development (HUD): A federal department that focuses on programs regarding expanding homeownership, affordable housing, fighting housing discrimination. Department of Veterans Affairs: A federal agency which oversees loan and mortgage programs for military veterans. Disclosure Statement: The document that discloses the terms of the loan. Due-on-Sale Clause: A clause in the mortgage contract which demands the mortgage loan balance be paid immediately upon the sale of the property. Due Diligence: The actions taken by a reasonably prudent man before entering in an agreement or transaction with another party . Earnest money: Money put down by a potential buyer to show serious intention to complete an offer to purchase. Easement: The right to use the anothers land for a specific purpose. Encroachment: An illegal and permanent placement of property on an adjoining owners land. A building for example, that extends onto anothers property without permission. Encumbrance: A restriction placed on the property such as a mortgage or other lien or a non money restriction such as an easement. Equity: The fair market value of a property less the mortgage balance. Escrow account: A separate account held for the buyer to pay property taxes, homeowners insurance, mortgage insurance, closing fees. Estate: The total value of all accumulated assets of an individual or legal entity at the time of death. Estoppal Certificate: A document in which a borrower certifies the amount owed on a mortgage loan and the rate of interest. The purpose is to stop a future claim that the amount owed or that the interest rate is different than the contracted rate. Eviction: A court action a landlord must use to remove a tenant for a breach of the lease. Fair market value: 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: A federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential home buyers. FHA: Federal Housing Administration: Established in 1934 to advance homeownership opportunities for all Americans; assists home buyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages. Loans: The FHA is a quasi public institution that can make loans to buyers under more favorable terms than conventional loans. Fair Market Value: 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. Foreclosure: A judicial process whereby mortgaged property is sold. Typically a forced sale of the property to pay off debt. Garnishment: A judicial process whereby some portion of a debtors property or earnings is applied to the pay a debt. Good faith estimate: An estimate of all closing fees that must be given to the borrower within three days after a loan application has been submitted. Grace Period: The period of time a borrower can be late without incurring a late charge or some other penalty. Grantee: A person, usually a buyer that has been granted title to a real property Grantor: The seller who grants or conveys title to another individual, usually a buyer as the new legal owner Home Equity Line of Credit: Also known as a revolving loan, an owner can borrow against a property, pay off the loan and borrow again. Home Equity Loan: Borrowing against the gain in a real property. HUD1 Statement: Also known as the "settlement sheet," it itemizes all closing costs. Hypothecate: To pledge an asset as collateral to secure a loan or deal but retaining possession of that asset. Indemnify: To hold harmless and/or to compensate someone for a loss. Involuntary lien: A lien issued against a property without the approval of the owner. Joint Ownership: When two share title in a property. Judgment: A legal decision requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source. Judicial Foreclosure: When a court order initiates foreclosure proceedings. Land Contract: An agreement between a buyer and a seller for the sale of property. Ownership of the property does not transfer until all the payments have been made. Lease: An agreement allowing possession (a tenancy) of real estate for a specific period of time in return for payment (rent). Lease Option: A lease agreement containing a clause offering the leaseholder the right to purchase for a specific price over a specific period of time. Lease purchase: Allows home buyers in purchasing a home to lease with an option to buy. Rent is made up of the monthly rental payment plus an additional amount credited towards a down payment. Lien: A legal claim against property by for the payment of a debt or obligation. Life Estate: Life estates offer an individual the opportunity to enjoy property for the duration of their life or the life of some other, such as the owner. Lis pendens: A recorded notice indicating legal action is pending and will affect title of the property. Lot Book Report: Within the title report of a title company that reports any encumbrances against a property. Marketable Title: A clear title that can be transferred or sold without problems Mechanic's lien: A mechanic's lien is a claim against your property by an unpaid contractor or supplier. Mortgage: A lien on the property that secures the Promise to repay a loan. Mortgages can be provided by banks, Mortgage companies, brokers or private individuals. Mortgagee: The individual or company that makes the loan or offers a mortgage to a borrower or buyer of real property. Second Mortgage: An another loan made against the property second to the first mortgage. Junior lien: A property can have more than one lien against it. Junior liens are paid only after the senior liens have been paid in full. Mortgagor: The individual or buyer that borrows money to purchase a real property Non-Recourse loan: The lender agrees to forgive any rights to seek redress from anyone other than the individual specified in the loan contract. Notice of Default: A notice sent to a property owner when the mortgage payment is late Notice of Rescission: When a party has defaulted, made payments and is now current. The notice indicates the defaulting party has cured or corrected the default Notice of Sale: Required by law it is a notice indicating that a property is being foreclosed and is going to be sold. Offer: Proposal by a potential buyer of a willingness to purchase a home at a specific price. Origination: The process of preparing, submitting, and evaluating a loan application including a credit check, verification of employment, and a property appraisal. Origination Fee: The charge for originating a loan; is usually expressed as points and paid at closing. Owner Financing: An owner can offer to help finance the the sale of his or her property by accepting a personal debt against the property from the buyer. In this case, the seller is also acting as a mortgagee. Power of Attorney: A signed document between two or more parties giving one party legal authority to act on behalf of another. Power of Sale: A clause in mortgages that gives the lender the right to sell a property at a public auction to satisfy the debt. Pre-foreclosure sale: Allows a defaulting borrower to sell the mortgaged property and pay the loan and avoid foreclosure. Quiet Title: A lawsuit initiated by the title holder to establish clear title. If the court determines that the title holder holds a clear title, a quiet title judgment will be granted and the judgment becomes "good title." Quit Claim Deed: A person transfers all interests to someone else without guarantees about the title Real Estate Owned: When a property has defaulted and the lender chooses to buy back the property. Recorder: A public official who is responsible for recording or keeping the records of all real estate transactions. Redemption Period: Many states will allow an owner whose property has been sold due to a default, a period of time after the sale to buy back the property. RESPA: Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process requiring lenders to disclose all settlement costs, practices, and relationships Sales Contract: A contractual agreement between buyer and seller that spells out the terms of the sale. Sellers Market: Generally when property is in short supply and high demand. There is an abundance of buyers willing to buy and often prices are bid up. Settlement: Another name for closing . Sheriff's Sale: When a judgment has been issued and a property is sold to pay debts. Simultaneous Closing: Creative financing. Both the buyer and seller close at the same time to avoid a gap. Special Forbearance: The lender arranges a new payment plan for the borrower that may include a temporary reduction or suspension of loan payments rather than go into the costs of foreclosure or court proceedings. . Subject To: When debts or rights are transferred to another party but original party agrees to remain liable for any debts or obligations if new party defaults. Survey: When a surveyor maps and measures a parcel of land or a property to set the boundaries. Tax Deed: When a property is foreclosed for non payment of taxes, the buyer receives a tax deed of trust indicating that the property was sold for non payment of taxes. Tax Lien: A lien placed by a government entity due to a failure to pay property taxes Title: Evidence of ownership. Title Company: Title Companies perform due diligence to ensure that current title is clear of all clouds, encumbrances and conveyances. The buyer of a property can be reasonably assured that the seller is the true owner and that all encumbrances are as described. These companies will often also act as escrow agents and issue title insurance. Title 1: An FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien. Title insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for home buyers. Title Search: A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property. Title Report: Generally issued by a Title company that describes current legal title to property or raw land. Trust Account: A bank account required by law where real estate agents and escrow agents deposit funds for the buyer or seller. Down payments and good faith monies must be held in a trust account. Trust Deed: A legal document conveying the legal title to real property as security for the repayment of a loan. Trustor: the owner is the trustor. Trustee: the neutral third party who holds bare legal title is the trustee. Beneficiary: the lender is the beneficiary. Trustee: A person or entity that has been empowered to control or manage the assets placed within a trust often for the protection of the beneficiaries. Trustee's Deed: A conveyance of title specifically used when a property has been auctioned due to a foreclosure Trustee's Sale: When there is outstanding debt, a real property may be sold by the trustee to cure a default by using the proceeds of the sale. UCC: Uniform State Laws governing commercial transactions. Undivded Interest: Property owned by joint tenants under one deed. Unsecured debt: A debt that has not been backed by any collateral. VA Loans: Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default. Warranty Deed: A deed in which the owner warranties clear tile Wrap-around Mortgage: A new mortgage that includes other existing mortgages at a new higher rate The new mortgage is assumed by the buyer and includes payments of the other existing mortgage of the seller. Zoning: Government regulations that control the use of land by establishing a set of rules or code that guides the use of land or property on the land.
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