Foreclosure Glossary

Absolute Auction – Auction where there is no minimum bid amount. The bidder that bids the highest gets the property.
Acceleration Clause – A provision in the mortgage that allows a lender to call the entire balance of the mortgage loan due when the borrower defaults in their installment payments.
Adjustable Rate Mortgage (ARM) – A mortgage loan with an adjustable interest rate (periodically adjusted every six months or a year). The rates start at below-market rates to keep the monthly installments low during the initial periods and become higher later.
Ad Valorem Tax – A real estate tax based on the assessed value of the property.
Affidavit – A written statement sworn before an authorized official or notary.
AIDT - All inclusive trust deed
AIM - All inclusive mortgage
Alienation - Transfer of interest in or title to home to another person or entity.
Amortized Loan – A loan that is paid back in installments for its principal and interest.
Annual Percentage Rate (APR) – The actual annual interest rate covering the interest and other costs. The Truth in Lending Act requires announcement of APR by lenders.
Appraisal – Evaluation of real estate property.

APR – Annual Percentage Rate.

ARM – Adjustable Rate Mortgage.

Arrears -behind in the payments called for under a mortgage agreement
Assignor - Party transferring the property.

Assignee – Party to who a property is transferred.
Assumption – Taking over an existing mortgage by the new buyer. Most mortgage loans are not assumable.

Balloon Payment – Final mortgage payment at end of term of loan which pays off the loan in full. 

Bankruptcy -Legal proceeding in which an individual who cannot pay their bills files an action in court asking the court to discharge their debts so they can get a fresh financial start.

Broker – An independent agent between the lender and the borrower or between the buyer and the seller of a real estate property. Many states require that real estate agents work under a real estate broker.
Buy Down – Buying a loan below its original cost (interest or payment). Temporary buy down is for reducing the installments during the first few years.
Cap - Limit placed on ARM for annual increase in interest rate.

Chain of Title - Listing of all previous owners of the property in chronological order.
Clear Title - Title which has no defects or encumbrances.
Closing – Closing the transaction. Day the sale closes. Accounting of costs of buyer and seller in a real estate sale.
Closing Costs – All costs, excluding down payment incurred in buying a real estate property or obtaining a loan. HUD 1 is usually prepared reflecting the costs.

Closing Instructions – Instructions given to the closing agent.
Cloud – Gap in the chain of ownership, lien, unpaid taxes, etc. affecting ownership.
Collateral – Any value used as security until the loan is paid off. Real estate is the collateral for a mortgage loan.
CMA – Comparative Market Analysis compares prices of similar recently sold homes, active and under contract in terms of location, style, and amenities.
COE - Close of Escrow
Combination Loan – Conversion of a construction loan into a permanent loan.
Commission - Fee paid to real estate agent/broker in selling and finding a property. Commissions are typically 6 percent of the property value divided equally between listing and buyer’s agent.
Commitment Fee – A percentage of a new loan charged by the lender to make the funds available for a certain period.
Common Area – Jointly owned areas of a property owned by more than one owner.
Comparables – Properties in the same neighborhood that are equivalent or very similar to the property in question.
Compensating Factor – A favorable factor that helps borrower who has insufficient points in other areas in loan application.
Compound Interest – Interest is calculated on the principal plus previously accrued interest.
Conforming – A loan that is in compliance with the guidelines created by Fannie Mae or Freddie Mac. The lenders can easily sell such loans to these institutions in the secondary market.
Consideration – Money, value, something in kind, benefit, interest, good, real estate, service, anything that has a value. Consideration does not have to be cash.
Contingency – A contract clause requiring a certain act to be done or a certain event to occur before the contract becomes binding.

Conventional Loan – Loan extended without a government agency insurance, guarantee, or funding.
Conveyance – A document transferring title to real property.
Creditor – Lender that can be a commercial bank, savings bank, credit union, or any other entity licensed to lend money.
Credit Score – Numerical rating of a borrower’s credit, also called credit rating.
C.R.V. – Certificate of Reasonable Value (see above).
Debt Service – Making installment payments.
Deed – Document that shows ownership and is used to transfer ownership to a real estate property.
Deed In Lieu of Foreclosure – A transfer of title to the mortgagee upon foreclosure.
Deed of Trust – A mortgage securing a note related to a real estate where a third party acts as a trustee. A written instrument in place of mortgage in some states.
Default – Nonperformance of a duty, failure to meet obligations of the loan.
Deferred Payment Mortgage – A mortgage that allows the borrower to make payments with delays when the borrower’s income is low during the initial period. See balloon payment.
Deficiency Judgment – If the sales proceeds of the security of a loan less 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 – An overdue loan within grace period.
Depreciation – Decrease in the value. Depreciation in taxation language is reducing the value of the property over the years.
Discounted Mortgage – Selling a mortgage at a lower value.
Discount Points – See points.
Due-on-Sale – Lender has the right to request repayment in full upon sale or conveyance of a property.
Earnest Money – Money given with the offer to purchase a property showing buyer's serious intent in consideration on a binding contract.
Encumbrance – Mortgage, lien, tax, or any restriction on the use of land.
Equal Credit Opportunity Act (ECOA) – A federal law that requires extension of loan to all creditworthy customer without regard to race, color, religion, national origin, age, and sex or marital status.
Equity – Value in a property that exceeds owner’s indebtedness, that is, the value of the property minus debts owed on it. Important factor determining amount of loan that you can get.
Equity Build-Up – Repayment amounts that reduce the principal balance.
Equity Line Of Credit - Rotating loan extended up to a certain limit. Interest is paid only on the portion of the loan actually used.
Escrow – Deposit with a third party (broker, title company, bank, or attorney) for performance or future claims under a contract.
Escrow Agent – A third party holding money, check, etc. to secure real estate transaction. Typically it is a listing (selling) broker.
Equity – Value of the property owned by the homeowner = buying price + appreciation in value + improvement made – mortgage.
Execution – Signing and delivery of an instrument.
Eviction – Removing a nonpaying tenant from the property.
Fair Market Value (FMV) – The value a buyer is willing and capable to pay for a property. An appraisal based on comparisons of similar properties in the neighborhood.
Fannie Mae – Federal National Mortgage Association (FNMA) that buys and sells mortgages in the secondary market.
Farmers Home Administration (FmHA) – A federal government agency under the U.S. Department of Agriculture providing loans to farmers and rural residents and communities.
Fee Simple – Very common term used to indicate complete and highest form of legal ownership of a property.
FHA – Federal Housing Administration under U.S. Department of Housing and Urban Development (HUD).
First Mortgage – A first lien on real estate property having priority over other mortgages on the same property.
Fixed Rate Mortgage (FRM) – A mortgage loan with an interest rate fixed for the life of the loan.
Floating Rate – An interest rate that is adjusted periodically by adding a certain percentage to a pre-determined index.

Forbearance – Forgiveness of debt by the lender.
Foreclosure – Legal action taken by the lender when the borrower fails to pay monthly installments.

Foreclosure Sale – Public sale of property to recover a debt.
Forfeiture – Cashing the deposit upon failure to perform under a contract.
Fraud – Deception intended to cause a person to give up property or a lawful right. Freddie Mac - Federal Home Loan  Mortgage Corporation (FHLMC) that insures loans by the full faith and credit of the U.S. government.
Front End Zero – Including the upfront of first year’s insurance premium in the loan.
Ginnie Mae – Government National Mortgage Association (GNMA) that guarantees, buys, and sells homes.
Good Faith Estimate – The lender is required by law to give you an estimate of fees that you will be asked to pay at closing.
Grace Period – A period between the due and the overdue date during which no late payment penalty applies.
Graduated Mortgage Payment (GMP) – A loan that has lower installments in the beginning and increasing in amount after the initial period..
Growing Equity Mortgage (GEM) – A loan with increasing amortization for early repayment of the principal.
Guarantee – Any person receiving (such as buyer) any interest in real estate.
Guarantor – Person giving (such as seller) any interest in real estate..
Homeowner's Association (HOA) - Entity providing maintenance services in common areas of a housing community.
Homestead – Land owned and occupied as the family home to give the owner some protection against judgment up to a certain amount.
HUD – U.S. Department of Housing and Urban Development.
Hypothecate – Pledge a property as a security for a loan without giving up possession.
Impound – Same as escrow.
Improvement – Privately owned structure (building, fence, etc.) on a site to enhance the value of the property.
Interest - Cost of funds charged by lenders.
Interest Averaging – The interest rate that is the average of all interest rates of loans on multiple properties.
Interim Financing – Temporary financing when property is under construction or repair for sale.
Internal Rate of Return (IRR) – A discount rate that gives a zero net present value.
Judicial Foreclosure – Foreclosure action that must be approved by the court and which is under the court’s jurisdiction.

Jumbo Loan – Nonconforming loan exceeding the limits set forth by FNMA and FHLMC.
Junior Lien - Lien established after the first lien.
Leniency Clause – A provision allowing the lender to adjust loan repayments temporarily to accommodate a borrower experiencing financial problems.
Lien – A claim (mortgage) on the real estate property for payment of debt.
Lien Waiver – Removal of any obligations on a homeowner to pay off debts.
Lis Pendens – Pending lawsuit action.  
Loan-To-Value (LTV) – Ratio of a loan to the property value.
Lock-In – Interest rate and points, if there is any, guaranteed by the lender for a specified period of time.
Margin – Percentage point interest added to a pre-determined index to adjust the interest rate usually used in ARM.
Market Value - Price that a ready, willing and able buyer will pay for a property.
Maturity – Due date of a debt or loan.
Mechanic's or Materialmen’s Lien – Lien created by statute on property by suppliers of labor or material.
Moratorium – Temporary suspension of debt repayment.
Mortgage – Use of real estate as security.
Mortgagee – Holder of a mortgage loan.
Mortgagor – Borrower of a mortgage loan.
Mortgage Broker – An intermediary who acts on behalf of lenders.
Mortgage Insurance – Insurance on a mortgage for the protection of the lender against default by the borrower..
Multiple Listing Service (MLS) – An online database of properties listed for sale.
Negative Amortization – Addition of unpaid interest to the principal of the loan increasing the amount of the principal.
New Basis – Adjusted cost basis by taking into account your old property when you transfer to a new property.
Nominal Interest Rate – Rates written in the loan agreement.
Nonconforming – Loan that does not conform to the guidelines set forth by Fannie Mae or Freddie Mac.
No-Neg Loan - Loan with no negative amortization
Nonjudicial Foreclosure – Right to sell a property without a court decree as allowed in some states.

Notice of Default- Notice sent by the lender to the borrower and other interested parties when the borrower is in default on their mortgage payments.

Notice of Trustee’s Sale – Notice announcing the public sale of a property to recover a debt mailed to parties affected by the sale of a property, advertised in local publications and recorded in public records. The notice will provide the date, time and location of the sale.
Origination Fee – Application fee (one percent, in general) for processing (originating and closing) a loan.
Petition - Formal written request to court or a public agency to do something.
PITI – Principal, Interest, Taxes, and Insurance.
Points – Charge by the lender in extending a loan. One point equals one percent of the loan amount and is additional to other charges and interest.
Postponement- Foreclosure sale is postponed.

Power of Sale Clause - Clause in a mortgage or deed of trust where the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event the homeowner defaults.  The lender or their representative, the trustee, may execute the power given to the lender to sell the property.  The trustee must record a notice of sale in the office of the recorder of the county where the property is located and publish it in a newspaper of general circulation in the county where the property is located.

Pre-Foreclosure Sale – Property sold has a value which is less than what is owed on the mortgage. See short sale.

Prelimimary Commitment –Agreement with a title company regarding title coverage.

Preliminary Title – Report reflecting the title and any liens or restrictions on the property

Prepaid Items of Expenses – The expenses paid in advance are prorated and credited to the seller at closing.
Prepayment Penalty – Fee charged to borrower who pays off the loan ahead of schedule.
Primary Security Instruments – Deed of Trust or Mortgage.

Prime Rate – Best interest rate applied by banks to their favorite customers.
Principal – The amount of the loan, excluding interest.
Private Mortgage Insurance (PMI) – An insurance requested by the lender when your down payment is less than 20 percent of the loan.
Promissory Note - Legal document stating debt and its terms with or without a lien.
Quitclaim Deed – Deed indicating that owner gave up his/her interest/claim in the property.
Quite Title – Removal of a cloud on the title by a court action.
Ratification – Signing of agreement by both parties.
Real Estate – Land, all attachments above and below the ground.
Realtor® – Sales agent who is a member of the National Association of Realtors subscribing to its ethical standards.
Recordation - Filing sales information with an official agency for public record.
Redemption – Right of defaulted previous owner to re-own his/her property by curing the default.
Refinance – Paying off an existing loan by obtaining a new loan.
Reinstatement – Loan is reinstated

REO – Real Estate Owned. Owned by the lender. Property that the lender took back because it did not sell at the foreclosure auction.
Reserves – Funds set aside to meet future repairs and expenses for the property.
RESPA – Real Estate Settlement Procedures Act. It requires that all lenders (except private parties) give you an estimate of lending fees.
Right of Redemption – Right granted, in some states, to the owner to recover property sold after a foreclosure within a certain period of time after the foreclosure sale.
Secondary Market – The mortgage buying-selling market where large investors, including Fannie Mae and Freddie Mac play the largest role.
Self-Liquidating Loan – A loan with decreasing interest portion and increasing principal repayments.
Senior Liens –First lien on the property that has priority over other liens.

Sheriff’s Deed – A deed issued by a court authorizing the Sheriff’s office to conduct the sale in satisfaction of a judgment.

Short Sale – Value of property is less than what is owed on the mortgage. Lender agrees to take the lesser amount and write off the rest of the loan balance.
Soldier's And Sailor's Relief Act - Protection for certain military people to keep their homes free from foreclosure during their active military service duties.
Special Assessment – A charge imposed on a property by the government to recover the cost of improvements (sewerage systems, pavements, etc.) in the area where the property is located.
Statute of Fraud – Laws stating that all real estate-related contracts must be in writing and properly signed to have a legal effect.
Statute of Limitations – Period of time during which certain actions must be brought to court.
Subordinate Loan – A second mortgage subordinated to a first mortgage.
Survey – Physical examination of a property with all measurements.
Tax-Deferred Exchange – Exchanging real estate properties to defer payment (sometimes indefinitely) capital gains tax (IRS Tax Code 1031).
Tenancy by the Entirety – The joint ownership by husband and wife where surviving spouse becomes the sole owner.
Tenancy in Common – Both owners hold a sole ownership without the right of survivorship but right of inheritance.
Tenant - Person renting or leasing the property.
Time of the Essence – Automatic termination of an agreement or a contract after a pre-determined date.
Title – A deed evidencing ownership to a property.
Title Insurance – It is used to ensure ownership where abstracts are not used. It insures against any defects.
Title Search – An examination of recorded information to determine the legal ownership to the property.
Trust Account – A separate account kept by a third party (real estate broker, attorney, or a settlement agency) to disburse expenses upon closing.
Underwriter – Another party approving a loan. FHA underwrites a loan extended by a lender. Underwriter is a direct endorsement underwriter that is pre-approved by the underwriter.
Unlawful Detainer Action – Eviction of a tenant maintaining illegal possession of the real estate property.
Usury – Charging interest at a rate higher than what is allowed by state law.
Vendee – Buyer
Vendor - Seller
Veterans Administration (VA) – Federal agency handling VA guarantee programs.
Waiver - Giving up any right.
Warranty Deed – A deed which protects a buyer against any defects.
Wraparound Mortgage – A mortgage covering all current mortgages (first and second) under one large loan, also called inclusive deed of trust.
Yield – The total revenue from a property expressed in an annual percentage.
Zoning Ordinance – Regulating the use of property by public agency.