KEY MORTGAGE AND
FORECLOSURE TERMS
Take a moment to review some key terms you may hear when working with your mortgage lender or servicer. These definitions can help you understand the mortgage-financing process and make informed decisions about your home loan and finances.
Adjustable-Rate Mortgage (ARM)-- A mortgage loan with an interest rate that can change at any time, usually in response to the market or Treasury Bill rates. These types of loans usually start off with a lower interest rate comparable to a fixed-rate mortgage.
Advance (HomeSaver Advance)-- allows servicers to provide an unsecured personal loan to qualified borrowers that are delinquent on a Fannie Mae loan.
Amortize-- Paying off a debt by making regular installment payments over a set period of time, at the end of which the loan balance is zero.
Balloon Mortgage-- A mortgage loan with initially low interest payments, but that requires one large payment due upon maturity (for example, at the end of seven years).
Buy-down Mortgage-- A mortgage loan in which one party pays an initial lump sum in order to reduce the borrower’s monthly payments. .
Collections-- The efforts a lender takes to collect past due payments.
Convertible ARM-- An Adjustable Rate Mortgage loan that can be converted into a fixed-rate mortgage during a certain time period.
Deed-- A legal document under which ownership of a property is conveyed.
Deferred Payments-- Payments that are authorized to be postponed as part of a workout process to avoid foreclosure.
Deficiency -- The difference between the amount owed on the mortgage and what the bank collects at short sale.
Deficiency Judgement-- A judgment approved by a Judge during a legal proceeding for the deficiency amount incurred from the short sale of a property .
Delinquency-- Failure to make a payment when it is due. A loan is generally considered delinquent when it is 30 or more days past due.
Equity-- Ownership interest in a project after liabilities are deducted. Also referred to as your assets.
Escrow -- A lender-held account where a homeowner pays money toward taxes and insurance of a home.
Escrow Account-- The actual account where the escrow funds are held in trust.
Escrow Analysis-- A periodic review of escrow accounts to make sure that there is sufficient funds to pay the taxes and insurance on a home when they are due.
Final Judgment-- The written determination of a mortage foreclosure by the Judge presiding the foreclosure case. Known as the final decision, a sale date is assigned when the Final Judgment is executed by the Judge.
Fixed-Rate Mortgage-- A mortgage loan in which the interest rate remains the same for the life of the loan.
Forbearance-- The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.
Foreclosure-- The legal process by which a property may be sold and the proceeds of the sale applied to the mortgage debt. A foreclosure occurs when the loan becomes delinquent because payments have not been made or when the borrower is in default for a reason other than the failure to make timely mortgage payments.
Foreclosure Prevention-- Steps by which the servicer works with the borrower to find a permanent solution to resolve an existing or impending loan delinquency.
HAFA-- "Home Affordable Foreclosure Alternatives" is a government sponsored initiative program overseen by he U.S. Territory Department and administered by Fannie Mae.
Hazard Insurance-- Insurance coverage that pays for the loss or damage or a person’s home or property.
Home Equity Line of Credit — A way of borrowing money against the equity or assets that you have in your home to pay for things such as home repairs, college education, or other personal uses.
Interest-Only Mortgage-- A mortgage where the borrower pays only the interest on the loan for a specified amount of time.
Investment Property-- A property not considered to be a primary residence that is purchased by an investor in order to generate income, gain profit from reselling or to gain tax benefits.
Investor-- The owner of the loan on a property.
Lender Placed Insurance-- Insurance placed on a home or property by a lender to protect their interest on collateral which secures the loan.
Lis Pendens-- Latin for "Suit Pending". Can refer to any pending law suit to a specific situation with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded.
Mortgage Insurance-- Insurance that protects lenders against losses caused by a borrower's default on a mortgage loan. Mortgage insurance (or MI) typically is required if the borrower's down payment is less than 20% of the purchase price.
Mortgage-- A legal document that pledges property to a lender as security for the repayment of the loan. The term is also used to refer to the loan itself.
Refinance-- Paying off an existing loan (such as a balloon mortgage) with a newer, usually lower rate loan.
Repayment Plan -- A borrower promises to pay down past due amounts on a mortgage while continuing to make regular monthly payments on a home.
Servicer-- A firm that performs functions in support of a mortgage that include collecting mortgage payments, paying the borrower's taxes and insurance, and generally managing borrower escrow accounts.
Short Sale-- Is the sale of real estate in which the sale proceeds fall short of the balance owed on the propety's loan.
Title-- The documented evidence that a person or organization has ownership of real property.
Work Out -- A way to resolve or restructure a loan or prevent someone from going into foreclosure through a loan modification, forbearance or short sale.
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