Foreclosure Terms

GLOSSARY OF TERMS

Bankruptcy – Proceedings initiated by an individual or business seeking distribution of the debtor's assets or a reorganization of the debtor's debts. The most common forms of bankruptcy are Chapter 7, Chapter 11, and Chapter 13.

Bankruptcy Trustee – A person appointed by the bankruptcy court to take charge of the debtors assets and manage the bankruptcy estate.

Closing Attorney – An attorney who oversees the consummation of a real estate closing between a buyer and a seller.

Contract – An agreement, such as a real estate purchase and sale agreement, between two or more parties which creates an obligation to do or not to do a particular thing.

Deed in Lieu of Foreclosure – An agreement between a borrower and his mortgage company whereby the mortgage company agrees to allow the borrower to return the property to the lender. A deed in lieu of foreclosure allows a lender to avoid the costs associated with a foreclosure.

Deficiency Judgment – A judgment obtained by a lender giving it the right to collect from the borrower any short fall or loss it suffered as a result of a borrower's default on a loan.

Due Diligence – Any reasonable or prudent action taken by a buyer of real estate to protect his interests, such as a home inspection or title search.

Due Diligence Period – The period of time agreed upon by the buyer and seller during which the buyer may exercise his due diligence.

Earnest Money Deposit – A sum of money paid by a buyer to a seller as evidence of his good faith intention and ability to purchase the property that is the subject of the purchase and sale agreement.

Financing – The process through which a buyer obtains a loan to purchase property.

Foreclosure – The legal process which allows a mortgage company to seize and sell a property in order to satisfy the debt of a homeowner who has defaulted on his mortgage. Foreclosures can be either judicial or non-judicial.

HUD-1 – The document prepared by the closing attorney or title company that gives an itemized breakdown of the costs involved in a real estate transaction.

Judicial Foreclosure – A form of foreclosure sale which requires entry of a court order authorizing the lender to proceed with the foreclosure.

Lender's Title Insurance – A form of insurance that protects the lender's interest in the property which is the collateral for a loan from defects and clouds on title. Lender's title insurance is mandatory on most mortgage loans.

Mortgage Fraud – Any scheme or plan by which a party defrauds or attempts to defraud a lender, seller, or purchaser of real estate.

Non-Judicial Foreclosure – A foreclosure sale not requiring court approval. Also known as a power of sale foreclosure, a non-judicial foreclosure is an auction type sale that ordinarily takes place on the courthouse steps in the county where the property is located.

Offer – A proposal by a buyer to pay a particular sum for the purchase of property.

Owner's Title Insurance – A form of insurance that protects the buyer's interest in the property from defects and clouds on title. Owner's title insurance is optional.

Pre-foreclosure – The period after default, but before an actual foreclosure sale.

Purchase and Sale Agreement – An agreement between a buyer and seller of property which describes the property being sold and sets forth the terms of the sale, including the sales price, closing date, and other duties and obligations of the parties to the agreement.

Real Estate Owned (REO) – A term used to describe properties which have been foreclosed by a lender.

Settlement Statement – See "HUD-1".

Short Sale – An agreement between a homeowner and his mortgage company whereby the mortgage company agrees to accept less than what is actually owed on the mortgage as a full pay off of the loan.

Title – The formal right of ownership. Fee simple title is the highest form of ownership.

Title Company – A company that examines title, issues title insurance, and handles closings.

Title Insurance – An insurance policy, issued by a closing attorney or title company, that protects an insured's interest in property against defects and clouds on title. The most common forms of title insurance are Owner's Title Insurance and Lender's Title Insurance.

Title Search – The process of examining real estate records to ascertain whether the title to a property is clear.

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