Common Foreclosure Terms
The Cliff’s Notes answer: In a short sale, the owner sells the home for a price that’s less than the underlying debt. In a foreclosure, the owner loses the home and it goes to public sale.
Terradigm is the free information, no-doubletalk zone when it comes to the foreclosure process. Most people want to avoid it. Others want to deal with it as best as they can. But when confronted with the language of loss mitigation, loan servicers, trustees, loan modifications, deficiency judgments, deed-in-lieu, HAMP, HAFA, and all the other jargon, people’s eyes can just glaze over.
SAMPLE DEFINITIONS
Deficiency judgment–A deficiency occurs when a lender receives less than the full loan amount when the loan is paid off. It becomes a deficiency judgment when the lender goes to court and gets a judgment against the borrower for the amount of the deficiency.
Loan servicer–This is the company that collects mortgage payments and disburses the proceeds–the principal, interest, taxes and insurance. The big lenders–Wells Fargo, Chase, Bank of America, etc.–are also among the biggest loan servicing companies and usually don’t own the first mortgages they collect payments on.
Trustee (in a foreclosure action)–This is the entity who does the actual administration of the foreclosure process. When a borrower gets a mortgage and signs a note and trust deed, the trust deed contains features of the note (due on sale, interest rate adjustment, etc.). One of these provisions is for a trustee to administer foreclosure.
Mortgage bondholder–The entity who owns the mortgage. In most cases, the lender initiating the loan immediately sold it off to entities such as Fannie Mae or Freddie Mac. But some mortgages were purchased by investors, such as pension funds, hedge funds and even foreign banks and other investors. Some mortgages were even fractionalized, with the different parts going to different investors.
Notice of Default–The first step in the foreclosure process, where the servicer, through the trustee, notifes the borrower that the delinquent loan must be paid, or the property will go to public auction. In Oregon, the sale date is 120 days from the date on the Notice of Default, although the lender can stay the foreclosure action.
For owners behind on their mortgage payments, many options are available, and they really do need to understand some of the language before making a decision. Contact us for help. It’s free, and we’ll do what we can to help borrowers understand the geography and come up with a new road map.
Comments or questions are welcome.
Powered by Fast Secure Contact Form
