FORECLOSURE TERMS GLOSSARY

A

ASSIGNMENT OF DEED OF TRUST: a written document that transfers the beneficial interest in a note and deed of trust from one to another.

AUTHORIZATION TO SIGN AS AGENT AGREEMENT: written document given by a beneficiary authorizing an agent to sign a document (such as a notice of default).

BANKRUPTCY: a legal proceeding which allows a debtor to discharge certain debts or obligations without paying the full amount or allows the debtor time to reorganize his financial affairs so he can fully pay his debts. (A bankruptcy does not discharge obligations secured by a deed of trust.)

BENEFICIARY: the lender their successor for whose benefit a trust is created and to whom the debt is owed.

BID AUTHORIZATION LETTER: your written authorization instructing the trustee to make the initial opening bid at the trustee's sale on the lender's behalf. This form will also advise our office of any additional amounts to be included in the opening bid, (total Debt), such as funds advanced by you to pay delinquent real estate taxes, etc.

BREACH: the failure without legal excuse to perform any promise made in a contract. A breach is stated in the notice of default.

C

CLAIM DATA: an itemization of the trustee's fee and expenses provided to the lender when the notice of default records and again at publication. A claim date is furnished for the lenders information and is not an invoice.

CERTIFICATE OF TITLE: a document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

D

DECREE OF FORECLOSURE: a court order to set out the outstanding amount on a delinquent mortgage in order to sell the property to pay the mortgagee.A court order to set out the outstanding amount on a delinquent mortgage in order to sell the property to pay the mortgagee.

DEED: the document that transfers ownership of a property.

DEED OF TRUST: a written document, describing the real property that is being given as security for the repayment of an obligation.

DEED-IN-LIEU: to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

DEFAULT: the inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.

DEFICIENCY JUDGMENT:a judgment entered in a lawsuit when a property is sold for less than the amount of the loan.

DELINQUENCY: failure of a borrower to make timely mortgage payments under a loan agreement.

E

EVICTION: the act of depriving a person of the possession of land or rental property that he has held or leased.

EXTENSION AGREEMENT: an agreement (normally written) giving additional time to pay an obligation.

F

FEDERAL TAX LIEN: an obligation to the United States government as a result of non-payment of taxes.

FORECLOSURE: a legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.

FORECLOSURE MITIGATION: a process whereby a property owner agrees in writing to allow a third-party to communicate directly with their lender during the process of foreclosure. This rapidly growing service segment is used to assist homeowners with saving their home from foreclosure through reinstatement, remodification and/or other potential options.

G

GRACE PERIOD: a period of days during which a debtor may cure a delinquency without penalty (before triggering a late charge, a foreclosure or an acceleration of the balance due).

GUARANTEE: Federal Insurance, such as from the Department of Veterans Affairs, agrees to cover loss up to a certain dollar figure on a loan made by a private lender if it goes into default and foreclosure.

I

INDEMNIFY: any losses and damages endured by another person that you are fully responsible for.

INVOLUNTARY LIEN: a lien issued against a property without the owners approval.

INVALID: not legally sufficient; no binding force.

J

JUDGMENT: the final decision of the court resolving the dispute and determining the rights and obligations of the parties.

JUDICIAL FORECLOSURE: a foreclosure process which is executed via a court action.

JUNIOR LIEN: a lien that is subordinate or junior to a senior lien.

L

LIEN: right to force sale of property to pay a debt.

LIMITED POWER OF ATTORNEY: a recorded document which authorizes someone to act as attorney-in-fact in a specific manner for someone else.

LIS PENDENS: a recorded notice of pending legal action, which notifies prospective purchases and encumbrances that any interest acquired by them in property litigation is subject to the decision of the court.

LOAN MODIFICATION: procedure in which a loan's terms, such as interest rate, monthly payment, or duration, are altered.

LOSS MITIGATION: a process to avoid foreclosure.

M

MORTGAGE: a lien on the property that secures the Promise to repay a loan.

MORTGAGE INSURANCE: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.

MORTGAGE INSURANCE PREMIUM (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.

MORTGAGE MODIFICATION: a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.



N

NON-JUDICIAL FORECLOSURE: foreclosure on a mortgage without filing lawsuit or obtaining court order; generally occurs because borrower has signed document such as deed of trust that gives trustee right to sell property to pay off debt.

NON-MILITARY AFFIDAVITS: a sworn statement, in writing from the beneficiary or his agent which declares that the property owner is not entitled to any rights under the Soldier's and Sailors Civil Relief Act of 1940.

NOTE: a written document, (promise to pay), that sets forth the amount of the obligation and the terms of repayment.

NOTICE OF DEFAULT: a written document that gives constructive notice of a trustor's failure to perform his obligation under a deed of trust. This document does not require the acknowledgment of a notary public.

NOTICE OF RESCISSION: a written document that cancels or annuls the effect of a notice of default when a default has been cured (reinstated). This document does not require the acknowledgment of a notary public, but must be recorded with the county recorder in the county in which the property is located.

NOTICE OF TRUSTEE'S SALE: a written document that sets forth the day, date and time of the trustee's sale, describes the property to be sold and gives an estimate of the opening bid. This document is prepared by the trustee and does not require the acknowledgment of a notary public must be recorded with the county recorder in the county in which the property is located at least 14 days prior to the scheduled sale date.

P

PARTIAL CLAIM: a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

POSTPONEMENT: a verbal announcement made at the time and place of the scheduled trustee's sale that establishes a new date for the trustee's sale. The sale cannot be changed from the originally noticed location.

PRE-FORECLOSURE SALE: allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

PRE-PUBLICATION PERIOD: the three month period following the recording of the notice of default. Prior to 1986 this period was called the reinstatement period.

PRESENT OWNER, CURRENT OWNER, NEW OWNER: the successor to the trustor named in the deed of trust and now the owner of the property.

PROMISSORY NOTE: See "Note."

PUBLICATION LETTER: this letter is sent to the lender by the trustee. When completed and returned, it authorizes the trustee to proceed with the scheduling of the trustee's sale and preparation of the notice of trustee's sale.

PUBLICATION PERIOD: this is the interval beginning the day after the pre-publication period expires and ending with the conducting of the trustee's sale. During the publication period, the notice of trustee's sale is published, posted, recorded, and copies are mailed to all entitled parties. The publication period is normally 30 to 40 days.

R

RECONVEYANCE: a recorded document which gives notice that the loan secured by the identified deed of trust has been paid in full.

REDEMPTION PERIOD: the time allotted to the mortgagor to reclaim his/her property after it has been sold at an auction. Not all states have a redemption period.

REINSTATEMENT: a curing of a default and restoration of the loan to current status through payment of past-due amounts together with the fee and expenses of the trustee.

REINSTATEMENT PERIOD: this is the interval from the date the notice of default is recorded until five business days prior to the date of sale during which time a default may be reinstated/cured.

REPAYMENT PLAN: plan for repaying missed payments over time.

RESCISSION: See "Notice of Rescission."

REQUEST FOR NOTICE: a recorded document which requests a copy of any notice of default and any notice of sale to be sent to the requester at the address shown. See California Civil Code section 2924b(1).

RETURN AND ACCOUNT OF SALE BY TRUSTEE: an itemization prepared by the trustee or his agent and sent to the successful bidder at the sale. It gives a complete accounting of the successful bid.

REQUEST TO PREPARE NOTICE OF DEFAULT: See "Transmittal Form.'

S

SHERIFF’S SALE: the sale of a property to satisfy a debt or judgment.

SHORT SALE: the term short sale describes an expedited property sale and escrow process used to quickly relieve a property owner of their obligation. In most cases, investors provide cash settlement and/or re-structure agreement for homeowners needing to sell their property quickly.

SOLDIER'S AND SAILOR'S RELIEF ACT: an act passed by Congress in 1940, for the financial protection of those persons serving in the military service. This act is the reason for the completion of the nonmilitary affidavit forms.

SPECIAL FORBEARANCE: a loss mitigation option where the lender agree to arrange a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

STATEMENT: an itemization of the trustee's fee and expenses incurred at the conclusion of the foreclosure proceeding (cancellation, reinstatement, payoff or completed sale).

STRICT FORECLOSURE: legal premise in some states that gives lender ownership to property, allows borrower to be evicted for nonpayment, and then gives lender full and complete title by waiting a set time period until borrower's right to redeem ends (lender also gets any property value in excess of what’s owed on loan).

SUBSTITUTION OF TRUSTEE: a written document that appoints a successor trustee to the trustee named in the deed of trust, (or present trustee). This document must be acknowledged by a notary public and recorded with the county recorder in the county in which the property is located.

SUMMARY JUDGMENT: legal procedure in which one side wins lawsuit without trial by showing the case involves no material fact issues but only legal issues that can be decided by the judge; if judge agrees, then one side wins by summary judgment.

T

TOLL: to temporarily stop. Frequently used to describe the tolling (stopping) during bankruptcy of any further acts in foreclosure.

TRANSMITTAL FORM: (TS138): this is the "Request to Prepare Notice of Default" transmittal form which is completed by the lender and forwarded to T.D. Service Company together with the note, deed of trust, assignments and other necessary loan documents. This form sets forth all pertinent information to enable us to prepare the default documents.

TRUSTEE: person named in deed of trust or other mortgage to conduct any foreclosure proceedings and sell property to pay off mortgage loan balance.

TRUSTEE'S DEED UPON SALE: a written document which is prepared and signed by the trustee when the secured property is sold at a trustee's sale. This document transfers successful bidder at the sale; must be recorded with the county recorder in the county in which the property is located.

TRUSTEE'S SALE: the public auction of the real property, described in the deed of trust, to satisfy the unpaid obligation.

TRUSTEE'S SALE GUARANTEE POLICY: a policy of title insurance given to the present trustee when a trustee's sale proceeding has been initiated. This policy provides the names of the current owner, all liens and encumbrances recorded and other information pertinent to the foreclosure process. The information is insured to be correct by the title company.

TRUSTEE'S SALE PROCEEDING (foreclosure): the term used to describe the non-judicial procedure followed by the trustee in enforcing a creditor's rights when a debt secured on real property is in default.

TRUSTOR: the borrower (or property owner) at the time the deed of trust was created. Trustor is often used to refer to the current owner.

TS138: See "Transmittal Form."

U

UNLAWFUL DETAINER ACTION (eviction): a legal action to remove someone who has unjustly retained possession of real property after one's right to possess has terminated.

UPSET PRICE: the opening bid amount that begins the auction bidding during a foreclosure sale.

V

VALID: a condition that is legally sufficient; that will be upheld by the courts.

VENDEE’S LIEN: a lien against property under contract of sale to secure a deposit paid by purchaser.

VOID: having no legal force or binding effect. Incurable.

VOIDABLE: a condition capable of being made void, although not necessarily void in itself.

W

WRONGFUL FORECLOSURE: foreclosure that was legally improper and caused borrower to suffer damages.