New Albany Real Estate
Short Sale Glossary
Assumption of the Loan: An assumption is a method of transferring a house to a new buyer who agrees to take responsibility for (assumes) the existing mortgage. Not all mortgages are assumable, so this option must first be discussed with the servicer.
Bankruptcy: A legal alternative that allows the borrower to clear any debt obligations by restructuring the payment terms. A bankruptcy stops the foreclosure process until the bankruptcy process is completed or the court allows the lender to resume the foreclosure.
BPO (broker Price Opinion): The estimated value of a property as determined by a real estate broker or other qualified individual or firm of probable selling price of a residential property based on selling prices of comparable properties in the area. Often used by a mortgage servicer as an alternative to a full property appraisal when a loan is placed in default or loan terms are modified.
Deed-in-Lieu of Foreclosure: A deed in lieu of foreclosure takes place when you voluntarily give the deed to the property back to the servicer. In other words, it’s a voluntary foreclosure. It benefits the lender in that it saves the lender the expenses of the foreclosure process. The seller will still lose their house and their credit.
Deed of Trust: A legal document that dictates the terms of a loan used to buy a property and transfers the ownership of the property to a third party called a trustee until the loan has been paid in full.
Default: Occurs when the borrower does not meet its legal obligations according to the loan terms.
Deficiency Judgment: If the foreclosure does not pay off the loan, including accrued interest and costs of sale, then the lender can pursue a court order decision making you personally liable for the remaining difference.
Forbearance: The lender may allow the homeowner to reduce or suspend payments for a short period of time and then agree to another option to bring the loan current. A forbearance option is often combined with a reinstatement when the homeowner will have enough money to bring the account current at a specific time. The “catch up” money might come from a signing bonus, investment, gift, insurance settlement, or tax refund.
Foreclosure: A process in which a lender attempts to recover the amount owed on a defaulted loan. The lender has the option of selling the property or repossessing the property. The beginning of a foreclosure process starts after a borrower defaults on mortgage payments and the lender files a Notice of Default or Lis Pendens.
Lien: A legal claim on a property by a lender or other entity (called the lien holder) against the property owner that owes the money.
Lis Pendens (LIS): A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.
Loan Modification: If the homeowner can make payments on the loan but doesn’t have the resources to bring their account current or can’t afford the current payment, the lender may be able to change the terms of the original loan in one of the following ways: ·Adding the missed payments to the existing loan balance ·Changing the interest rate, including making an adjustable rate into a fixed rate ·Reducing all or part of the past due amount ·Extending the number of years they have to repay
Notice of Default (NOD): A publicly recorded notice stating that a property owner is behind scheduled loan payments for a loan secured by a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.
Partial Claim: A one-time payment from the FHA-Insurance fund to bring mortgage payments current.
Only qualify if: ·Loan is at least four months delinquent but no more than twelve months delinquent: ·Homeowner is able to begin making full mortgage payments. When the lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay the lender the amount necessary to bring the homeowner’s mortgage current. The homeowner must execute a promissory note, and a lien will be placed on the property until the promissory note is paid in full. This promissory note is interest-free and is due when the owner pays off the first mortgage or when the property is sold.
Reinstatement: Occurs when the property owner pays off the amount in default to bring the loan payments current in order to stop the foreclosure process and return to the original terms of a loan.
REO (Real Estate Owned): A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.
Repayment Plan: The homeowner may be able to get an agreement to resume making their regular monthly payments plus a portion of the past-due payments each month until they are caught up.
Short Sale: (also called a “Pre-foreclosure Sale, “Short Pay” or “Pay off”) A pre-foreclosure sale is the sale of a property in which the servicer agrees to accept the proceeds of the sale, even though it may be less than the amount owed on the mortgage. To avoid going through a foreclosure proceeding, the servicer can agree to accept the proceeds of the sale in satisfaction of the mortgage.