Glossary of Common Default/Foreclosure Intervention Terms
Bankrupt: The status of a borrower that cannot repay the debts it owes to its creditors.
Credit Report: A record of a borrower’s past borrowing and repaying, including information about late payments and bankruptcy.
Credit Score: is a number given based on a statistical analysis of your credit history with the score ranging from 300 (minimum) to 850 (maximum).
Deficiency Judgment: A money judgment against a borrower whose sale of property does not produce sufficient funds to pay the loan balance in full.
Eviction: After the public auction and the banks repossession of the property, the homeowner will be required to leave the premises immediately by the authority given by the court to the local sheriff.
Forgiven Debt: When a lender forgives all or a portion of a borrower's debt. (i.e. foreclosure, short sale, etc)
Foreclosure: The legal process by which a lender acquires possession of the property secured by a mortgage loan when the borrower defaults.
Gift Funds: Money gifted without the expectation of repayment for a down payment and closing costs to qualified homebuyers using an eligible loan program.
Home Affordable Refinance Program: (HARP) a program started by lenders to allow borrowers to refinance when the amount owed is more than the value of the home.
Homebuyer Assistance: A resource of local, state and federal assistance programs that may provide down payment assistance, subsidized payment assistance, increased qualifying guidelines and more. Law Set to Expire in 2012: See Mortgage Forgiveness Debt Relief Act
Loan Modification: A change in the terms of a loan due to the borrower's inability to make the payments under the existing terms and conditions. Long Term Solution: A remedy that will allow achievement of long term financial goals and objectives and instead of short term relief.
Mortgage Debt Relief Act: If a debt is owed to someone and the debt is canceled or forgiven, the canceled amount may be taxable. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence.
Negative Equity: Owing more on the house than the house is worth; also referred to as upside-down or under-water.
Negative Impact: (on a credit report) can have a long term impact on a borrower’s ability to borrow. With the adoption of risk-based pricing on almost all lending in the financial services industry, a poor credit history can be costly.
Net Loss: The difference between the amounts a lender is owed and the amount actually received. (i.e. if owed $200,000 and receives only $150,000, the net loss is $50,000)
Non Performing Asset: A loan in which a bank owns is an asset and an asset that is not making payments or in default is considered non-performing.
Past Due Amounts: All past due payments, late charges fees and costs, which have been assessed to the account.
Principal Balance: The total amount a borrower owes to a mortgage lender.
Principal Reductions: The permanent reduction of the outstanding balance of a loan.
Public Auction: The property, date and time of the auction is advertised. The bidding is open to the public and the property is sold to the highest bidder.
Refinance: Paying off an old loan with a new loan to either lower the interest rate or to increase the amount of money borrowed.
Reinstatement: The homeowner is required to provide a certified check that will include all past due payments, late charges, fees and costs, which have been assessed to the account.
REO Property: Property owned by a lender after purchased at a public auction.
Repossession: Taking back property that was used as security for a real estate loan. Savings Calculator: Determines the benefits of moving on from your financial hardship and calculates the amount of money you will save.
Scam Modification Companies: Companies that promise the assurance of a loan modification in exchange for an upfront fee, but once the fee is paid; the loan modification is not pursued. Such upfront fees are illegal.
Short Payoff: A payoff that is less than the principal balance of a homeowner's mortgage.
Short-Sale: A short-Sale is when a home is sold for less than is owed. The lender will need to approve the “short payoff” and with lenders not wanting to own any more REO property than they already do; banks are more likely to consider this option.
Short Term Solution: A remedy that may help in the short run but will not achieve long term financial goals and objectives.
Stated Income: is a mortgage where the lender does not verify the borrower's income by looking at their pay stubs, W-2 forms, income tax returns, or other records. Instead, borrowers are simply asked to state their income, and taken at their word. As expected, these types of loans are no longer available.
Source of Funds: The verified source of money used for a down payment and closing cost.
Take Control: Develop a plan to get through a financial hardship.
Tax Liability: The total amount of tax legally obligated to pay as the result of a taxable event. In the case of forgiven debt; that could be considered a taxable event and the amount forgiven could be considered taxable income.
Temporary Payment Reductions: Programs in which the lender may reduce the interest rate, and extend the term of the loan in order to temporarily reduce the monthly payments over a 3-5 year period.
Trustee Sale: When a loan goes into default, according to the terms of the deed of trust, the trustee is authorized to foreclose the mortgage and put the property up for a trustee's sale.
Upfront Fee: Required fees to be paid in advance for the processing of a loan modification. Please beware that such upfront fees are illegal.