For Homeowners Facing Foreclosure

AVOIDING

FORECLOSURE

The ULTIMATE Guide To

PART 1

25 Essential Foreclosure Terms & Definitions

Authored By: Redstone Law Group, LLC

www.RedstoneLaw.com

PART 1

Glossary of 25 Essential

Foreclosure Terms &

Definitions

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Understanding Foreclosure Terminology: Before fighting home foreclosure, it can be helpful to understand the commonly used terms.

“ Our greatest weakness lies in giving up. The

most certain way to succeed is always to try

just one more time.

- Thomas A. Edison

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Foreclosure Terms & Definitions 1-5

1. Bankruptcy – Filing bankruptcy may be an option for avoiding foreclosure whereby a homeowner may file Chapter 7 or Chapter 13 bankruptcy to stop the foreclosure process. The foreclosure process may be stopped once the automatic stay goes into effect, but it may not stop foreclosure indefinitely.

2. Deed in Lieu of Foreclosure – A deed in lieu of foreclosure (sometimes referred to as a mortgage release) may be an option for avoiding foreclosure whereby a homeowner negotiates with his or her mortgage lender to accept the deed of the home in exchange for release from mortgage debt obligation.

3. Deed of Trust – A deed of trust usually refers to a kind of deed whereby interest in a homeowner or borrower’s property is transferred to a trustee to be held as security for a debt between a borrower and a lender.

4. Default – A default in finance is often the failure to fulfill a legal obligation to repay a loan or debt.

5. Deficiency – A deficiency or deficiency balance is typically the remaining amount that is owed and due to a lender after the collateral (real estate or personal property) has been sold or transferred for less than the outstanding balance on the loan.

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Foreclosure Terms & Definitions 6-10

6. Deficiency Judgment – A deficiency judgment can be a court order making a homeowner personally liable for the remaining debt when a home is sold or transferred for less than the outstanding loan balance.

7. Dual Tracking – Dual tracking often refers to a prohibited practice wherein a mortgage lender actively considers a homeowner for a loan modification while simultaneously moving forward with the foreclosure process.

8. Foreclosure – Foreclosure is usually a legal procedure mortgage servicers may initiate after one or more delinquent payments to recover a mortgaged property.

9. Judicial Foreclosure – A judicial foreclosure is typically a type of foreclosure whereby mortgage lenders are required to go to court in order to initiate the foreclosure process.

10. Lis Pendens (LIS) – A lis pendens is often a written notification of a pending lawsuit. In judicial states, the lis pendens is typically filed by a mortgage servicer’s attorney or trustee to initiate the foreclosure process after a homeowner defaults on monthly mortgage payments. The lis pendens is usually filed during the PRE-foreclosure process.

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Foreclosure Terms & Definitions 11-15

11. Loan Modification - A loan modification (sometimes referred to as a mortgage modification) may be an option for avoiding foreclosure whereby the original terms of a mortgage agreement may be permanently modified in order to make the loan more affordable for a homeowner. A loan modification may be able to reduce monthly mortgage payments, lower principal and/or extend the life of the loan.

12. Mortgage Forbearance – Mortgage forbearance may be an option for avoiding foreclosure for homeowners who may be experiencing a temporary financial hardship. A mortgage forbearance typically works by negotiating with mortgage lenders to temporarily suspend the foreclosure process while the homeowner tries to bring the deficient loan current.

13. Mortgage Servicer – A mortgage servicer is usually a company (in many cases a bank) which is responsible for processing loan payments, responding to borrower inquiries, keeping track of principal and interest paid and may initiate foreclosure in the event of a default. A mortgage servicer typically handles the day-to-day tasks of managing a loan while a mortgage lender is the financial institution which loaned the money.

14. National Mortgage Settlement – The National Mortgage Settlement was a landmark joint state-federal settlement with five of the United States’ largest mortgage servicers as a result of rampant robosigning and other mortgage servicing violations. The settlement established improved servicing standards (like the prohibition of dual tracking) and provided relief to distressed borrowers.

15. Nonjudicial Foreclosure – A nonjudicial foreclosure often refers to a type of foreclosure whereby mortgage lenders may initiate the foreclosure process without going to court or filing a lawsuit.

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Foreclosure Terms & Definitions 16-20

16. Notice of Default (NOD) – A notice of default is often one of the first documents in a non-judicial foreclosure filed by the trustee to initiate the foreclosure process. Trustees typically file the notice of default during the PRE-foreclosure process.

17. Notice of Foreclosure Sale (NFS) – A notice of foreclosure sale is usually an order signed by a judge directing a “Notice of Sale” to be published and the trustee to sell the property at public auction. The Notice of Sale typically outlines the location, time and date for the auction of a home in foreclosure.

18. Notice of Trustee’s Sale (NTS) – A notice of trustee’s sale is typically a written document which may be mailed, advertised or posted outlining the date, time and location of a Trustee’s sale with a description of the property to be sold.

19. Postponement – A postponement (sometimes referred to as sale date postponement) may be able to delay a foreclosure sale in order to provide homeowners with some valuable extra time before the final foreclosure auction. This may help distressed homeowners negotiate for a last-minute loss mitigation option or prepare to leave the home.

20. Predatory Lending – Predatory lending may occur when a creditor or mortgage lender attracts borrowers into a loan with high fees or interest rates, a loan the borrower cannot afford or a loan which strips the borrower of equity.

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Foreclosure Terms & Definitions 21-25

21. Reinstatement Period – The reinstatement period is typically the time during which a homeowner may try to bring the mortgage loan current by paying all delinquent amounts, including the trustee’s fees and costs.

22. Short Sale – A short sale may be an option for avoiding foreclosure whereby the homeowner negotiates with his or her mortgage lender to accept the sale of the home for less than the remaining balance on the mortgage. This may result in a deficiency judgment, but can be helpful for avoiding the negative effects of foreclosure.

23. Robosigning – Robosigning was an illegal practice bank employees utilized to sign thousands of documents and affidavits used to foreclose on homeowners without verifying the information contained in the document or affidavit.

24. Underwater Mortgage – An underwater mortgage may occur when the outstanding balance on a mortgage loan is greater than the fair market value for the home. Underwater mortgages can be problematic for homeowners who cannot afford their homes, because mortgage lenders may not agree to a sale of the home if the homeowner owes more than the home is worth.

25. Zombie Foreclosure – A zombie foreclosure may occur when a homeowner in foreclosure chooses to leave his or her home prior to the foreclosure sale, but the mortgage servicer does not follow through with the foreclosure sale. As a result, homeowners may unknowingly become financially responsible for unpaid property taxes, utility bills, maintenance costs and more.

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DISCLAIMER OF ADVERTISING

Redstone Law Group, LLC does not practice law in every state or

jurisdiction. All legal situations are unique, and all legal advice is fact-

specific and often time-sensitive. The foregoing is not, and is not

intended to constitute, any form of legal advice or recommendation.

The discussion and definitions herein are only general, for

information only, and not designed to reflect the law of any particular

legal jurisdiction or legal circumstance. There is no substitute for

personal consultation with appropriate counsel of one’s choice

admitted to practice law in one’s own jurisdiction.

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