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This is a short list of common terms that are used in the foreclosure and real estate business. There are some legal terms that we try to put in a way that everybody can understand.

Accelerate
An option given to lenders through an "acceleration" clause in the mortgage or deed of trust requiring the borrower to pay the entire balance of the loan all at once if their loan is in default.

Addendum
An addition or change to a contract.

Adjustable-Rate Mortgage (ARM)
A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.

Affidavit
A sworn statement in writing usually given while under oath or in the presence of a notary.

Annual Percentage Rate (APR)
The cost of the loan expressed as a yearly rate on the balance of the loan.

Appraisal
The process in which a licensed or authorized person gives an estimate of property value.

Appreciation Assignment
The transfer of property to be held in trust or to be used for the benefit of the creditors (lenders).

Balloon Payment
The final lump sum payment due at the end of a balloon mortgage.

Balloon Payment Mortgage
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal. It is common for these loans to be rather short terms, less than 10 years.

Bankruptcy
A proceeding in Federal Court in which an insolvent debtor can obtain relief from payment of certain obligations. Bankruptcies remain on a credit record for 7-10 years and can severely limit a person's ability to borrow.

Bid
The offered amount for a property for sale at auction.

BPO
Broker's Price Opinion.

Certificate of Sale
A document given to the winning bidder at a foreclosure sale stating their rights to the property once the borrower's redemption period has expired.

Clause
A distinct part of a document, it may be a simple sentence or a paragraph, or as complex as several pages.

Clear Title
A title that is not burdened with defects such as liens.

Clouded Title
A title or deed that has liens filed upon it, preventing clear and smooth transfers of property.

Credit Bid
A bid on behalf of the lender at a foreclosure sale. The bid amount must be less than or equal to the balance of the loan in default.

Credit History
A record of an individual's current and past debt payments.

Credit Rating - Score
The degree of credit worthiness assigned to a person based on credit history and financial status.

Creditor
An individual or institution to whom a debt is owed.

Decree
A judicial decision.

Deed
A signed document that transfers ownership from one party to another.

Deed-in-Lieu of Foreclosure
An instance where borrowers voluntarily convey (transfer) their rights in a property to the lender in order to prevent foreclosure on their credit history.

Deed of Trust
A three party security instrument conveying the legal title to real property as security for the repayment of a loan. The three parties included in a deed of trust are the borrower, lender, and trustee.

Default
A mortgage or deed of trust is said to be in default when the borrower fails to make the payments as agreed to in the original promissory note.

Deficiency Judgment
A personal judgment against the borrower for the remaining balance on the loan after a foreclosure and sale.

Delinquent
An account which is past due and has not had any repayment arrangements made.

Discretionary Income
The money remaining from net income after essential living expenses.

Equitable Title
The present right to possession with the right to acquire legal title once a preceding condition has been met.

Escrow
A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

Et al
A Latin term meaning "And others"

Et ux
A Latin term meaning "And wife"

Fair Credit Reporting Act
A federal law passed in 1971 that regulates the activity of credit bureaus. It is designed to prevent inaccurate or obsolete information from staying in a consumer's credit file and requires credit bureaus to have reasonable procedures for gathering, maintaining and disseminating credit information. The act also requires credit bureaus to show a consumer their credit file if the consumer presents proper identification, although the bureau reserves the right to charge a fee for doing so.

Fair Debt Collection Practices Act
A federal law passed in 1977 which outlaws debtor harassment and other types of collection practices. The act regulates collection agencies, original creditors who set up a separate office to collect debts, and lawyers hired by the creditor to help collect overdue bills. An original creditor--the company or individual that originally granted the credit--is not covered by the act, but may be covered by similar measures approved by state governments.

Fair Market Value
The price a property would sell for on the open market.

Fannie Mae
The official name of the Federal National Mortgage Association (FNMA), it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Farmer's Home Administration
A U.S. Department of Agriculture agency that provides credit to farmers and rural residents.

FHA - Federal Housing Administration
A government agency that insures residential mortgages. They impose certain structural and qualifying standards, but the interest rate is set by Congress.

Fixed-Rate Mortgage
A home loan with an interest rate that will remain at a specific rate for the term of the loan. About 75 percent of all home mortgages have fixed rates.

Federal National Mortgage Association
See Fannie Mae.

First Mortgage
The primary mortgage on a property that has priority over all other voluntary liens.

Foreclosure
The forced sale of property pledged as security for a debt that is in default.

Freddie Mac
The common name for the Federal Home Loan Mortgage Corporation, a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Free ∓ Clear
Ownership of property free of all indebtedness.

FSBO
Pronounced "Fizbo" - For Sale By Owner

Guarantee Mortgage
A loan guaranteed by a third party, such as a government institution.

Housing and Urban Development (HUD)
A federal agency that oversees the Federal Housing Administration (FHA) and a variety of housing and community development programs.

HUD-1 Uniform Settlement Statement
A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.

Judgment
The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person's property.

Judicial Foreclosure
A foreclosure that is processed by a court action (always used in Wisconsin).

Lien
A legal claim upon real or personal property for the satisfaction of a debt, usually placed upon the title to a property to cloud the title.

Legal Description
A formal description of real property sufficient to locate it by reference to government surveys or approved recorded maps.

Lender
A person or company who lends money for temporary use on condition of repayment with interest (i.e., the bank, mortgage company, etc).

Lis Pendens
A recorded notice of pending lawsuit.

Loan to Value (LTV)
The total amount of loans or liens currently against (or that will be allowed against) the property compared to the value of the property. To figure your LTV, divide your total liens by the value of your home. Here's an example, $85,000.00 in loans divided by $100,000.00 house value equals 0.85 or 85% LTV.

Loan Term
The amount of a time set by the lender for a buyer to pay a mortgage. Most conventional loans have 30-year or 15-year terms.

Mediator
An outside party who attempts to convice two contending parties (the lender and the homeowner) to adjust or settle their dispute.

Modification
A change in any of the terms of the loan agreement.

Mortgage
A written pledge of property that is used as security for the repayment of a loan.

Mortgagee
A lender

Mortgagor
A borrower

Net Income
Gross income minus allowable expenses, equal net income.

Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when a "power of sale" clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default.

Note
The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

Notice of Acceleration
A notice giving specific information about the loan in default and the proceedings about to take place. This notice must be recorded on the deed in where the county where property is located and advertised as stated in the security document or as dictated by state law.

Notice of Default
A lender's initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed. This is typically mailed to the borrower by registered mail so the lender has proof of delivery, and if the borrower refuses the delivery, proof of attempted delivery.

Per-Diem Interest
Interest charged or accrued daily.

Personal Property
Property other than real property (real estate) consisting of things temporary or movable (examples: appliances, lawn mowers).

PITI
Principal-Interest-Taxes-Insurance: When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower's actual total monthly mortgage-related expenses.

Posting
To publish, announce or advertise by physically attaching a notice to an object.

Postponement
To put off to a later time. In the case of a foreclosure sale, this is generally done by announcement at the original sale or by posting notices establishing the new date and time the foreclosure sale will take place.

Private Mortgage Insurance (PMI)
A special type of loan insurance that many lenders require borrowers to purchase if the borrower's down payment is less than 20 percent of the home's purchase price.

Qualifying Ratios
Lenders compute qualifying financial ratios to determine how much a potential borrower can qualify for (such as LTV).

Quit-Claim Deed
A document that releases a party from any interest in a piece of real estate. This also can be used to add or subtract a spouse or other party to or from a deed. It also can be used to transfer ownership between two parties.

Real Estate Owned (REO)
Property has gone to the Sheriffs Sale and no one has bid on it other than the bank or mortgage company. The property is now owned by the bank or mortgage company. The homeowner has no claim on the property since the period of Redemption has expired.

Redemption Period
This is the period of time that the homeowner has, according to the state law, to reacquire title to property lost through judicial foreclosure. In many states the redemption period ends 6 months after the Judgment of Foreclosure is entered into the Court record. If the Court declares the property to be abandoned, the redemption period can be as short as 30 days. In other states, the redemption period can extend beyond the foreclosure sale.

Refinancing
The process of replacing an older loan with a new mortgage that has better terms.

Request for Notice
A recorded document requiring a trustee send a copy of a Notice of Default or Notice of Sale concerning a specific deed of trust in foreclosure to the person who filed the document.

Repayment Plan
When a borrower falls behind in mortgage payments, a plan that is negotiated to prevent a foreclosure.

Right of Redemption
A borrowers right to reacquire property lost due to a foreclosure. Varies by state. The courts will grant a reduced period of redemption upon motion by the bank. In exchange for this reduced period of redemption the bank will agree to waive deficiency rights.

Second Mortgage
A mortgage placed upon a piece of property. This lien is recorded behind the first mortgage.

Sheriff's Sale
An auction of real property conducted by the county Sheriff in accordance with state law.

Short Sale
The lender who foreclosed upon the property decides to sell the property at a dollar amount below the balance owed on the loan.

Tax Lien
An impediment placed against a property, such as back taxes.

Tax Sale
The public sale of a property by the government for nonpayment of taxes.

Title
The instrument (document) that is evidence of a person's right in real property (i.e., a deed).

Trustee
A third party who advertises the foreclosure property for sale and conducts the auction to sell said property to the highest bidder. This party holds the property in trust for another to secure the performance of an obligation. This party in the foreclosure world is typically an attorney, although there are some situations where it is an individual, or a bank.

Trustee Sale
An auction of real property conducted by a trustee. Also known as a Sheriff's Sale.

Truth in Lending Act
A federal law that protects consumers in a variety of ways. One of its key provisions allows a consumer to cancel a home-improvement loan, second mortgage or other loan if the home was pledged as security (except for a first mortgage or first trust deed) until midnight of the third business day after the contract was sign.

Underwriting
The process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan.

Upset Bid
A recorded bid placed after a foreclosure sale has ended that is higher than the highest bid received at the actual foreclosure sale.

Veteran's Administration (VA)
A department of the U.S. Government that Guarantees home loans for veterans of the U.S. Armed Forces.

Variable Rate Mortgage
A loan that has an interest rate that varies according to changes in the index to which it is tied. These mortgages typically hold a certain rate for a certain term (example, 6 months), and then adjust to what the index margin in the mortgage designates. There is always a floor and a ceiling rate that the loan can not go above or below.

Variable Interest Rate
A loan rate that moves up and down based on factors including changes in the rate paid on bank certificates of deposit or Treasury bills.

Writ
An order or mandatory process in writing issued in the name of a court or judicial officer commanding the person to whom it is directed to perform or refrain from performing a specified act.

Wraparound Mortgage
A loan to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both loans are made to the lender who holds the wraparound loan. These are not legal in all states.

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Please Note: We are not attorneys nor are we credit counselors. The information that we are presenting here is general information and should not be confused with legal advice. If you require legal advise, please consult with your attorney.

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