Foreclosure Terminology
Acceleration Clause: A clause in the mortgage that makes the total
amount of the mortgage plus any additional fees due if payments are delinquent.
Adjustable Rate Mortgage: A mortgage loan with an interest rate
adjusted periodically—every six months or a year. The rates start at below market
rates to keep the monthly installments low during the initial periods.
Appraisal: A document that gives an estimate of a property's fair
market value by comparing it to recent sales in the area. It’s an evaluation of
real estate property which is generally required by a lender before loan approval
to ensure that the mortgage loan amount is not more than the value of the property.
Bankruptcy: A legal recourse that allows a person to clear any
debt obligations by reorganizing the payment amount and payment schedule of those
debt obligations.
Collections: The process of contacting the homeowner for and receiving
delinquent amounts which are owed.
Delinquency: Failure of a borrower to make one or more timely payments
on a loan.
Escrow: A deposit with a third party, such as a broker, title company,
bank, or attorney, for performance or future claims under a contract.
Escrow Account: An account created by the mortgage company where
amounts are put in every month to pay taxes, insurance, and private mortgage insurance.
Foreclosure: Legal action to force the sale of a home. The foreclosure
process begins when a borrower/owner defaults on loan payments and after the lender
files the necessary documents to begin the foreclosure proceedings.
Housing Counseling Agency: Provides counseling and assistance on
a variety of issues, including loan default, fair housing, and homebuying.
Investor: The owner of a mortgage for whom the mortgage banker
services the loan. This can be any person or institution that buys mortgage loans
from the lenders.
Lien: A legal claim on a property by a lender or other entity that
is owed money by the owner of the property.
Loss Mitigation: Working with the customer to find a permanent
solution to resolve the delinquency.
Mortgage Broker: An individual or company that brings borrowers
and lenders together for the purpose of loan origination. Mortgage brokers typically
process loans for a number of lenders and require a fee or commission for their
services.
Partial Claim: A loss mitigation option offered by the Federal
Housing Administration (FHA) that allows a borrower, with help from a lender, to
get an interest-free loan from the U.S. Department of Housing and Urban Development
(HUD) to bring their mortgage payments up to date.
Prepayment: Payment of the mortgage loan, either in full or in
part, before the scheduled due date. This may be subject to a prepayment penalty.
Principal: The amount borrowed from a lender. This amount does
not include interest or additional fees.
RESPA (Real Estate Settlement Procedures Act): A law protecting
consumers from abuses during the residential real estate purchase and loan process
by requiring lenders to disclose all settlement costs, practices, and relationships.
Servicer: Responsible for customer service, processing payments,
and working with delinquent customers.
Special Forbearance: A loss mitigation option where the lender
arranges a revised repayment plan for the borrower that may include a temporary
reduction or suspension of monthly loan payments.
Title: A deed evidencing ownership to a property.
Sources: Realtytrac,
HUD