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Accelerate
An
option given to lenders through an "acceleration" clause
in the mortgage or deed of trust requiring the borrower
to pay the entire balance of the loan all at once if their
loan is in default.
Addendum
An addition or change to a contract.
Adjustable-Rate
Mortgage (ARM)
A loan with an interest rate that is periodically adjusted
to reflect changes in a specified financial index.
Affidavit
A sworn statement in writing usually given while under
oath or in the presence of a notary.
Annual
Percentage Rate (APR)
The cost of the loan expressed as a yearly rate on the
balance of the loan.
Appraisal
The process in which a licensed or authorized person gives
an estimate of property value.
Appreciation
Assignment
The transfer of property to be held in trust or to be
used for the benefit of the creditors (lenders).
Balloon
Payment
The final lump sum payment due at the end of a balloon
mortgage.
Balloon
Payment Mortgage
A mortgage in which monthly installments are not large
enough to repay the loan by the end of the term. As a
result, the final payment due is the lump sum of the remaining
principal. It is common for these loans to be rather short
terms, less than 10 years.
Bankruptcy
A proceeding in Federal Court in which an insolvent debtor
can obtain relief from payment of certain obligations.
Bankruptcies remain on a credit record for 7-10 years
and can severely limit a person's ability to borrow. See
Codes
Bid
The offered amount for a property for sale at auction.
Certificate
of Sale
A document given to the winning bidder at a foreclosure
sale stating their rights to the property once the borrower's
redemption period has expired.
Clause
A distinct part of a document, it may be a simple sentence
or a paragraph, or as complex as several pages.
Clear
Title
A title that is not burdened with defects such as liens.
Clouded
Title
A title or deed that has liens filed upon it, preventing
clear and smooth transfers of property.
Credit
Bid
A bid on behalf of the lender at a foreclosure sale. The
bid amount must be less than or equal to the balance of
the loan in default.
Credit
History
A record of an individual's current and past debt payments.
Credit
Rating - Score
The degree of credit worthiness assigned to a person based
on credit history and financial status.
Creditor
An individual or institution to whom a debt is owed.
Decree
A judicial decision.
Deed
A signed document that transfers ownership from one party
to another.
Deed-in-Lieu
of Foreclosure
An instance where borrowers voluntarily convey (transfer)
their rights in a property to the lender in order to prevent
foreclosure on their credit history.
Deed of
Trust
A three party security instrument conveying the legal
title to real property as security for the repayment of
a loan. The three parties included in a deed of trust
are the borrower, lender, and trustee.
Default
A mortgage or deed of trust is said to be in default when
the borrower fails to make the payments as agreed to in
the original promissory note.
Deficiency
Judgment
A personal judgment against the borrower for the remaining
balance on the loan after a foreclosure and sale.
Delinquent
An account which is past due and has not had any repayment
arrangements made.
Discretionary
Income
The money remaining from net income after essential living
expenses.
Equitable
Title
The present right to possession with the right to acquire
legal title once a preceding condition has been met.
Escrow
A neutral third party holds the documents and money involved
in a real estate transaction and ensures that all conditions
of a sale are met. Escrow also refers to a special account
that a lender establishes to hold monthly installments
from the borrower to cover property taxes and insurance.
Et al
A Latin term meaning "And others"
Et ux
A Latin term meaning "And wife"
Fair Credit
Reporting Act
A federal law passed in 1971 that regulates the activity
of credit bureaus. It is designed to prevent inaccurate
or obsolete information from staying in a consumer's credit
file and requires credit bureaus to have reasonable procedures
for gathering, maintaining and disseminating credit information.
The act also requires credit bureaus to show a consumer
their credit file if the consumer presents proper identification,
although the bureau reserves the right to charge a fee
for doing so.
Fair Debt
Collection Practices Act
A federal law passed in 1977 which outlaws debtor harassment
and other types of collection practices. The act regulates
collection agencies, original creditors who set up a separate
office to collect debts, and lawyers hired by the creditor
to help collect overdue bills. An original creditor--the
company or individual that originally granted the credit--is
not covered by the act, but may be covered by similar
measures approved by state governments.
Fair Market
Value
The price a property would sell for on the open market.
Fannie
Mae
The official name of the Federal National Mortgage Association
(FNMA), it is a congressionally chartered, shareholder-owned
company that buys mortgages from lenders and resells them
as securities on the secondary mortgage market.
Farmer's
Home Administration
A U.S. Department of Agriculture agency that provides
credit to farmers and rural residents.
FHA -
Federal Housing Administration
A government agency that insures residential mortgages.
They impose certain structural and qualifying standards,
but the interest rate is set by Congress.
Fixed-Rate
Mortgage
A home loan with an interest rate that will remain at
a specific rate for the term of the loan. About 75 percent
of all home mortgages have fixed rates.
Federal
National Mortgage Association
See Fannie Mae.
First
Mortgage
The primary mortgage on a property that has priority over
all other voluntary liens.
Foreclosure
The forced sale of property pledged as security for a
debt that is in default.
Freddie
Mac
The common name for the Federal Home Loan Mortgage Corporation,
a congressionally chartered institution that buys mortgages
from lenders and resells them as securities on the secondary
mortgage market.
Free &
Clear
Ownership of property free of all indebtedness.
FSBO
Pronounced "Fizbo" - For Sale By Owner
Guarantee
Mortgage
A loan guaranteed by a third party, such as a government
institution.
Housing
and Urban Development (HUD)
A federal agency that oversees the Federal Housing Administration
(FHA) and a variety of housing and community development
programs.
HUD-1
Uniform Settlement Statement
A closing statement or settlement sheet that outlines
all closing costs on a real estate transaction or refinancing.
Judgment
The decision of a court or law. If a court decides that
a person must repay a debt, a lien may be placed against
that person's property.
Judicial
Foreclosure
A foreclosure that is processed by a court action (always
used in ILLINOIS).
Lien
A legal claim upon real or personal property for the satisfaction
of a debt, usually placed upon the title to a property
to cloud the title.
Legal
Description
A formal description of real property sufficient to locate
it by reference to government surveys or approved recorded
maps.
Lender
A person or company who lends money for temporary use
on condition of repayment with interest (i.e., the bank,
mortgage company, etc).
Lis Pendens
A recorded notice of pending lawsuit.
Loan to
Value (LTV)
The total amount of loans or liens currently against (or
that will be allowed against) the property compared to
the value of the property. To figure your LTV, divide
your total liens by the value of your home. Here's an
example, $85,000.00 in loans divided by $100,000.00 house
value equals 0.85 or 85% LTV.
Loan Term
The amount of a time set by the lender for a buyer to
pay a mortgage. Most conventional loans have 30-year or
15-year terms.
Mediator
An outside party who attempts to convince two contending
parties (the lender and the homeowner) to adjust or settle
their dispute.
Modification
A change in any of the terms of the loan agreement.
Mortgage
A written pledge of property that is used as security
for the repayment of a loan.
Mortgagee
A lender
Mortgagor
A borrower
Net Income
Gross income minus allowable expenses, equal net income.
Non-Judicial
Foreclosure
The non-judicial process of foreclosure is used when a
"power of sale" clause exists in a mortgage or deed of
trust. A "power of sale" clause is the clause in a deed
of trust or mortgage, in which the borrower pre-authorizes
the sale of property to pay off the balance on a loan
in the event of their default.
Note
The legal document that requires a borrower to repay a
mortgage at a certain interest rate over a specified period
of time.
Notice
of Acceleration
A notice giving specific information about the loan in
default and the proceedings about to take place. This
notice must be recorded on the deed in where the county
where property is located and advertised as stated in
the security document or as dictated by state law.
Notice
of Default
A lender's initial action when a mortgage payment is late
and attempts to reconcile the issue out of court have
failed. This is typically mailed to the borrower by registered
mail so the lender has proof of delivery, and if the borrower
refuses the delivery, proof of attempted delivery.
Per-Diem
Interest
Interest charged or accrued daily.
Personal
Property
Property other than real property (real estate) consisting
of things temporary or movable (examples: appliances,
lawn mowers).
PITI
Principal-Interest-Taxes-Insurance: When a buyer applies
for a loan, the lender will calculate the principal, interest,
taxes and insurance. The figure is designed to represent
the borrower's actual total monthly mortgage-related expenses.
Posting
To publish, announce or advertise by physically attaching
a notice to an object.
Postponement
To put off to a later time. In the case of a foreclosure
sale, this is generally done by announcement at the original
sale or by posting notices establishing the new date and
time the foreclosure sale will take place.
Private
Mortgage Insurance (PMI)
A special type of loan insurance that many lenders require
borrowers to purchase if the borrower's down payment is
less than 20 percent of the home's purchase price.
Qualifying
Ratios
Lenders compute qualifying financial ratios to determine
how much a potential borrower can qualify for (such as
LTV).
Quit-Claim
Deed
A document that releases a party from any interest in
a piece of real estate. This also can be used to add or
subtract a spouse or other party to or from a deed. It
also can be sued to transfer ownership between two parties.
Real Estate
Owned (REO)
Homeowner has lost the property and has no right of redemption.
Redemption
Period
This is the period of time that the homeowner has, according
to the state law, to reacquire title to property lost
through judicial foreclosure. In Illinois, the redemption
period ends 90 days after the Judgment of Foreclosure
is entered into the Court record. If the Court declares
the property to be abandoned, the redemption period can
be as short as 30 days. In other states, the redemption
period can extend beyond the foreclosure sale.
Refinancing
The process of replacing an older loan with a new mortgage
that has better terms.
Request
for Notice
A recorded document requiring a trustee send a copy of
a Notice of Default or Notice of Sale concerning a specific
deed of trust in foreclosure to the person who filed the
document.
Repayment
Plan
When a borrower falls behind in mortgage payments, a plan
that is negotiated to prevent a foreclosure.
Right
of Redemption
A borrowers right to reacquire property lost due to a
foreclosure. Varies by state.
Second
Mortgage
A mortgage placed upon a piece of property. This lien
is recorded behind the first mortgage.
Sheriff's
Sale
An auction of real property conducted by the county Sheriff
in accordance with state law.
Short
Sale
The lender who foreclosed upon the property decides to
sell the property at a dollar amount below the balance
owed on the loan.
Tax Lien
An impediment placed against a property, such as back
taxes.
Tax Sale
The public sale of a property by the government for nonpayment
of taxes.
Title
The instrument (document) that is evidence of a person's
right in real property (i.e., a deed).
Trustee
A third party who advertises the foreclosure property
for sale and conducts the auction to sell said property
to the highest bidder. This party holds the property in
trust for another to secure the performance of an obligation.
This party in the foreclosure world is typically an attorney,
although there are some situations where it is an individual,
or a bank.
Trustee
Sale
An auction of real property conducted by a trustee. Also
known as a Sheriff's Sale.
Truth
in Lending Act
A federal law that protects consumers in a variety of
ways. One of its key provisions allows a consumer to cancel
a home-improvement loan, second mortgage or other loan
if the home was pledged as security (except for a first
mortgage or first trust deed) until midnight of the third
business day after the contract was sign.
Underwriting
The process that lenders go through to evaluate the risks
posed by a particular borrower and to set appropriate
conditions for the loan.
Upset
Bid
A recorded bid placed after a foreclosure sale has ended
that is higher than the highest bid received at the actual
foreclosure sale.
Veteran’s
Administration (VA)
A department of the U.S. Government that Guarantees home
loans for veterans of the U.S. armed Forces.
Variable
Rate Mortgage
A loan that has an interest rate that varies according
to changes in the index to which it is tied. These mortgages
typically hold a certain rate for a certain term (example,
6 months), and then adjust to what the index margin in
the mortgage designates. There is always a floor and a
ceiling rate that the loan can not go above or below.
Writ
An
order or mandatory process in writing issued in the name
of a court or judicial officer commanding the person to
whom it is directed to perform or refrain from performing
a specified act.
Variable
Interest Rate
A loan rate that moves up and down based on factors including
changes in the rate paid on bank certificates of deposit
or Treasury bills.
Wraparound
Mortgage
A loan to a buyer for the remaining balance on a seller's
first mortgage and an additional amount requested by the
seller. Payments on both loans are made to the lender
who holds the wraparound loan. These are not legal in
all states. |