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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.
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