Glossary of Terms

There are many unfamilar foreclosure or legal terms you may not be familiar with. Please scroll down below to find a definition of some common terms. You may also contact a consultant or click here to view a list of our solutions.

Acceleration Clause:
An acceleration clause is a loan provision that gives the lender the right to declare that the entire amount is due immediately, and that it is payable upon a violation in any part of the contract. Another term that is commonly used for this is a due-on-sale clause.

Acre:
An acre is a measurement of land that equals 43,560 square feet.

Agreement of Sale:
An agreement of sale is a contract that is signed by the buyer and the seller that states the terms and conditions under which the property will be sold.

Appraisal:
An appraisal is a written estimate of the current market value of a property, made by an impartial and qualified professional, called an appraiser, who is knowledgeable of real estate markets.

Arrears:
Arrears are overdue mortgage payments (including interest).

Assessed Value:
The assessed value is the value of a property that is established for tax purposes.

Assignment of Deed of Trust:
Assignment of deed of trust is a written document that transfers the beneficial interest in a note and deed of trust from one person to another.

Assignment of Mortgage:
An assignment of mortgage is a document which shows the transfer of ownership of a mortgage from one party to another.

Assumable Loan (or Assumable Mortgage):
An assumable loan is one in which the buyer can take over the existing loan with the original borrower’s terms, often without going through the approval process required for an original loan.

Auction (or Foreclosure Auction):
A foreclosure auction is a public sale of property to the highest bidder.

Balloon Payment:
A balloon payment is an installment payment that is larger than the other scheduled payments. This payment is usually the last payment of the loan.

Bankruptcy:
Bankruptcy is a legal proceeding in a federal court to relieve certain debts of a person who is unable to pay its debts.

Beneficiary:
The beneficiary is the lender (or their successor in interest) for whose benefit a trust is created and to whom the debt is owed.

Clear Title (or Unencumbered Title):
Clear title means that the title does not have any liens, judgments, or other encumbrances.

Clouded Title:
A cloud on title refers to any conditions, such as liens and judgments, revealed by a title search that adversely affect the title on the property.

Credit Report:
A credit report is a report that details the credit history of a prospective borrower of a loan. It is used by lenders to determine the borrower’s creditworthiness.

Creditor:
A creditor is a person or business, such as a lender, to whom the debt is owed.

Debtor:
A debtor is a person who owes money.

Debt-to-Income Ration (DTI):
The DTI is the ratio of the total of minimum monthly debt payments to gross monthly income.

Declaration of Default:
A declaration of default is a written document that instructs the trustee to prepare and record a notice of default. It also instructs the trustee, if necessary, to sell the secured property in order to satisfy the unpaid obligation. This document does not require the acknowledgment of a notary public or recording and is merely retained by the trustee in their foreclosure file.

Deduction:
A deduction is an amount that can be subtracted from the total amount of taxes owed.

Deed:
A deed is a legal document conveying title to real property.

Deed of Release:
A deed of release is a legal instrument given by lien holders, mortgagees, or remaindermen to surrender their claim to a property.

Deed of Trust:
A deed of trust is a document (used in many states in place of a mortgage) that is held by a trustee pending the repayment of the loan.

Default:
Default is the nonperformance of a contractual or other kind of obligation, such as not making payments on the loan.

Deficiency Judgment:
A deficiency judgment is a court order that is requested by a lender when the foreclosure sale does not raise enough money to satisfy the debt on the mortgage. The lender will want the remaining amount that did not get paid off by the sale.

Delinquency:
Delinquency is the failure to fulfill the obligation of making the payments on the loan as agreed to in the loan contract.

Depreciation:
Depreciation is the reduction of value over time of the property.

Discharge:
Discharge is the release of a borrower from the obligation to repay a loan.

Discharge of a Lien:
A discharge of lien is the elimination of a lien on real property after the claim is satisfied.

Distressed:
Property is distressed when it is in poor physical or financial condition.

Due-On-Sale Clause:
A due-on-sale clause is a provision in a mortgage or deed of trust that allows the lender to declare immediate payment of the loan balance upon sale of the property.

Encumbrance:
An encumbrance is a claim against the property that affects its value, including mortgage loans, junior liens, deed restrictions, easements, or unpaid taxes.

Endorsement/Date Down:
An endorsement/date down is a continuation of the trustee's sale guarantee that reports any changes in the status of the property being foreclosed. Such "date downs" are requested from the title company prior to preparation of the notice of trustee's sale and prior to the trustee's sale.

Equity:
Equity is the difference between the market value of the property and the amount that is still owed on that property.

Extension Agreement:
An extension agreement is an agreement (normally written) giving additional time for the borrower to pay an obligation.

Federal Housing Administration (FHA):
The Federal Housing Administration is an agency within HUD (Housing and Urban Development) that administers several loan programs that are designed to make housing more affordable.

Federal Tax Lien:
A federal tax lien is an obligation to the United States government as a result of nonpayment of federal income taxes.

First Mortgage:
A first mortgage is a mortgage that is recorded at the earliest time.

Foreclosure:
Foreclosure is the process in which a lender terminates the borrower’s rights to the property. This is usually due to the borrower defaulting on the loan. The correct term for a "Foreclosure" involving a deed of trust is a "Trustee's Sale Proceeding."

Grace Period:
A grace period is the period of time (after the due date of the loan payment) that the borrower has without incurring a late penalty.

Hard-Money Lender:
A hard-money lender is a firm or private investor that does loans for people who cannot borrower money from a conventional lender (usually due to bad credit or little equity).

Home-Equity Loan:
A home-equity loan is a loan that is secured by the equity in the property. It is generally a second or third mortgage.

Housing and Urban Development (HUD):
HUD is a federal government agency that was established to run certain federal housing and community-development programs.

Important Notice (CA):
Important notice is a written document that sets forth the reinstatement amount as of a specific date, and contains specific language directed to the borrower and emphasizes the fact that a foreclosure proceeding has been initiated. It is a written document (required by California law) to be a part of the recorded Notice of Default.

Judicial Foreclosure:
A judicial foreclosure is a procedure to handle foreclosure proceedings as civil matters. These proceedings take place through one or more court hearings.

Land Trust:
A land trust is a revocable, living trust that is primarily used to hold title to real estate for privacy and anonymity.

Lease:
A lease is a contract in which the owner of a property allows another person to occupy the property for a specified period of time in exchange for monthly rent.

Lease Option:
A lease option is an agreement in writing in which the owner of a property allows someone to rent the property with an option to buy it at a specified price, and within a certain period of time.

Lender:
A lender is an organization that lends money (usually a bank, financial institution, mortgage company, or broker).

Lien:
A lien is a financial claim against a property for the payment of a debt that must be paid off when the property is sold. A mortgage is a lien; other types of liens a property might have include a tax lien for overdue taxes or a mechanics lien for unpaid debt to a subcontractor.

Lis Pendens:
Lis Pendens is Latin for “suit pending,” and is a written notice that a lawsuit has been filed, which concerns the title to the property.

Mechanics Lien:
A mechanics lien is a claim against the property by a contractor or other party who performed work on the property and is owed an outstanding payment.

Modification Agreement:
A modification Agreement is a written document (signed by the beneficiary and the borrower) that alters the terms of either the note or deed of trust.

Mortgage:
A mortgage is a legal instrument (contract) in which property serves as security for the repayment of a loan.

Mortgage Insurance:
Mortgage insurance protects the lender in case the borrower defaults on the loan.

Mortgage Loan:
A mortgage loan is a loan secured by a mortgage.

Mortgage Note:
A mortgage note is a legal document in which a mortgagor agrees to repay a loan.

Mortgagee:
The mortgagee is the lender in a mortgage agreement.

Mortgagor:
The mortgagor is the borrower in a mortgage agreement.

Multiple Listing Service (MLS):
The MLS is the system by which real estate firms share information about properties for sale.

Non-Judicial Foreclosure:
A non-judicial foreclosure is one that can occur without court approval.

Nonmilitary Affidavit:
Nonmilitary Affidavit is a sworn statement, in writing, from the beneficiary that declares that the property owner is not entitled to any rights under the Soldier’s and Sailor’s Civil Relief Act of 1940.

Nonperforming Asset:
A nonperforming asset is one that does not produce any income, such as a loan in default, or a property that has been foreclosed.

Note:
A note is a written agreement to repay a debt under certain terms and conditions.

Notice of Default:
A notice of default is a formal written notice to a borrower that he/she has defaulted and the legal action may be taken.

Notice of Rescission:
Notice of rescission is 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 Sale:
A notice of sale is sent to a defaulted property owner informing him/her that foreclosure proceedings have begun.

Perfect Title:
Perfect title means property with no encumbrances or clouds.

Personal Property:
Personal property is any property which is not real property.

Pre-Foreclosure Sale:
A pre-foreclosure sale is a procedure in which the investor allows a borrower to avoid foreclosure by selling the property for less than the amount that is owed to the investor.

Preliminary Injunction:
A preliminary injunction is a judicial order that is granted by a judge of the Superior Court, which prohibits the trustee from proceeding with any further action on a specific foreclosure file until a trial is held or settlement is reached. This occurs when there is a dispute between the owner of a property and the beneficiary. A Trustee's Sale cannot be held any sooner than seven (7) days from the dismissal of the action or the expiration of a restraining order, injunction or stay from any court of competent jurisdiction. However, the order or any amendment thereto may expressly provide for an earlier sale date.

Position:
When referring to a lien, it is the ranking among all judgments against a property.

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

Power of Attorney:
Power of attorney is a legal Document that authorizes one person to act on behalf of another.

Pre-Publication Period:
The pre-publication period is the period following the recording of the notice of default.

Principal:
Principal is the amount of money that is owed to the lender, not including interest.

Property:
Property is defined as anything that can be owned.

Property Disclosure:
Property disclosure is a statement to a prospective buyer listing information that relates to a piece of property, such as the presence of hazardous materials.

Publication Letter:
The publication letter is the letter that 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:
The publication period 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.

Quit Claim Deed:
A quitclaim deed is a deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

Real Asset:
A real asset is a physical property that has intrinsic value.

Real Estate:
Real estate is property including land and buildings.

Redemption Period:
A redemption period is the interval in which a borrower may reclaim a property by paying off the entire debt.

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

Reinstatement:
To reinstate a loan is to take one that is past due and restore it to current status through payment of past-due amounts together with the fee and expenses of the trustee.

Reinstatement Period:
The reinstatement period is the period after the foreclosure begins, and up until (5) five business days prior to the date of sale, when the borrower still has the opportunity to avoid losing the property by paying the overdue balances and other associated fees.

Repossession:
Repossession is the taking of property by a finance provider where the borrower has not fulfilled their obligations.

Request for Notice:
Request for notice is 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.

Right of Recourse:
The right of recourse is the entitlement to claim a bad debt.

Soldier’s and Sailor’s Relief Act:
Soldier’s and Sailor’s Relief Act is 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.

Substitution of Trustee:
Substitution of Trustee is 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.

Tax Lien:
A tax lien is a claim against a property for unpaid taxes.

Tax Sale:
A tax sale is a public sale of property by a government entity as a result of non-payment of taxes.

Temporary Restraining Order (TRO):
A TRO is a judicial order which is granted by a judge of the Superior Court. This order temporarily prohibits the trustee from proceeding with any further action under a specific foreclosure file until a trial is held or settlement reached. A TRO is effective, generally, for a 21 day time period or until a hearing is held and the judge decides whether a preliminary injunction will be granted or denied.

Trustee’s Deed Upon Sale:
Trustee’s deed upon sale is 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 ownership to the successful bidder at the sale; must be recorded with the county recorder in the county in which the property is located.

Trustee’s Sale Guarantee:
Trustee’s sale guarantee is a title report given to the present trustee when a trustee's sale proceeding has been initiated. This report 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.

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

Unencumbered Property:
Unencumbered property is property that is owned outright without any borrowing or other legal charge over it.

Warranty Deed:
A warranty deed is a deed in which the grantor fully warrants good clear title to the property.

Workout:
Workout refers to attempts to resolve a problematic situation, such as a bad loan.

Obtaining Legal Advice

Since foreclosure is a legal process, it would be wise to seek the advice from an attorney in your area who can answer any questions that you have, and who can inform you of your rights in the foreclosure process.