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Foreclosure Glossary

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Foreclosure Glossary

 

 

Adjustable Rate Mortgage (ARM)
Loan with an interest rate that can vary up or down at certain intervals (periods) and within certain limits (caps); loan is secured by house on which lender will foreclose if loan is not paid.
 

Auction
Process of selling property at public sale to highest bidder.
 

Bankruptcy
Action filed in federal bankruptcy court that allows creditor to reorganize or discharge credit obligations due to insolvency; property owner may restrain foreclosure action by filing bankruptcy.
       

Deed in Lieu of Foreclosure
Borrower deeds property, usually to lender, instead of waiting for lender to force sale of house in foreclosure.
       

Deficiency
Money that a borrower who has lost real estate in foreclosure still owes to the lender because the foreclosure sale failed to generate enough money to pay off the loan. Frequently lenders acquire title to real estate at foreclosures and often only credit fair market value of property against balance due on the loan; any unpaid balance on loan after all just credits are applied generally is amount of deficiency. Many states limit or restrict deficiencies.
 

Deficiency Judgment
A court judgment that the defaulting borrower owes a deficiency.

Forbearance
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 the other remaining payments on the loan.
 

Foreclosure
The forced sale of a piece of real estate to repay a debt.

Negative or No Equity
A house that is worth less than what is owed on the mortgage.
 

Non-judicial Foreclosure
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 pre-authorization to sell the real estate to pay off the debt.
 

Redemption
The right of a mortgagor to redeem property by paying a debt before sale at foreclosure; the right of an owner to reclaim his or her property after it has been sold to settle claims for unpaid taxes.

Short Sale
The “Short Sale” is a strategy used by the lenders to sell their properties at a discount in order to keep from having to go through the long, expensive foreclosure process. It can be very beneficial to a homeowner that is experiencing a hardship as well. By providing the proper documentation and locating a qualified buyer, the lender may authorize the sale of the home at a discount - for less than what is owed on the mortgage, and forgive the difference. If the discount is substantial enough, it becomes more attractive for the potential buyer to buy your home.    

 

Short Sales are really a Win-Win-Win. The lenders get their money, the homeowner typically gets to save their credit, and the buyers typically get a home that is “Move -In” condition along with a substantial discount.


Upside Down Home
A house that is worth less than what is owed on the mortgage.

 

 

 

Please consult with a tax professional regarding the potential tax consequences for your particular situation. Our goal is to provide you with sufficient information to help you choose the right option based on your current situation. Nothing is represented as tax advise as every situation may result in different tax consequences.
 

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