Glossary of Terms  

FAQ

What is a foreclosure?

A foreclosure is a property that has been forfeited by the owner for reasons of non-payment of the mortgage.  Bank owned properties are typically foreclosures.  The term REO property refers to Real Estate Owned by the Lender.

What is a short sale?

A short sale is a situation where a homeowner has negotiated with their lender to allow them to sell their home for a price below what they owe on it.  Typically time is short, and buyers who get involved in short sale situations may have to make quick decisions in order to secure a deal.  All offers are subject to lender approval, and the process can be difficult to maneuver.  Be sure to consult with a Certified Distressed Property Expert.

The Foreclosure Process

The foreclosure process can take several months.  Once a home owner stops making payments, they are given what banks assume to be sufficient time to pay the money owed.  When that does not occur, the property goes into foreclosure. The home is posted for sale the 1^st Tuesday of each month on the courthouse steps and the homeowner is evicted.  This offers opportunities for investors and buyers who are looking for property, often below market value.

Facing Foreclosure

      Default Dictionary  

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.

Bankruptcy

Federal law whereby a person’s assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Borrower (mortgagor)

Person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Broker price opinion (BPO)

Agents estimate the value of a property based on condition, location, size, market trend, etc. The BPO is compared with an appraisal for the best estimate on the value of  the property

Cash for keys

An agent offers the soon-to-be evicted occupant cash to leave before the scheduled vacate date.

Credit history           

History of an individual’s debt payment; lenders use this information to gauge a potential borrower’s ability to repay a loan.

Credit Report

Record that lists all past and present debts and the timeliness of their repayment; it documents an individual’s credit history.

Credit bureau score

Number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

Cured default

Correction of a borrower’s failure to make payments or meet the terms of a loan to the lender’s satisfaction.

Debt-to-income ratio

Comparison of gross income to housing and nonhousing expenses; per FHA, the monthly mortgage payment should be no more than 31 percent of monthly gross income (before taxes), and the mortgage payment combined with nonhousing debts should not exceed 43 percent of income.

Deed

A document that transfers ownership of a property.

Deed in Lieu

To avoid foreclosure (“in lieu” of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the cost, time, and effort associated with foreclosure.

Deed in Lieu of foreclosure

Transfer of title to the mortgagee upon foreclosure.

Default

Inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms; nonperformance of a duty, failure to meet obligations of the loan.

Deferred payment mortgage

Mortgage that allows the borrower to make payments with delays when the borrower’s income is low during the initial period.