Foreclosure Terminology

Acceleration Clause: A clause in the mortgage that makes the total amount of the mortgage plus any additional fees due if payments are delinquent.

Adjustable Rate Mortgage: A mortgage loan with an interest rate adjusted periodically—every six months or a year. The rates start at below market rates to keep the monthly installments low during the initial periods.

Appraisal: A document that gives an estimate of a property's fair market value by comparing it to recent sales in the area. It’s an evaluation of real estate property which is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Bankruptcy: A legal recourse that allows a person to clear any debt obligations by reorganizing the payment amount and payment schedule of those debt obligations.

Collections: The process of contacting the homeowner for and receiving delinquent amounts which are owed.

Delinquency: Failure of a borrower to make one or more timely payments on a loan.

Escrow: A deposit with a third party, such as a broker, title company, bank, or attorney, for performance or future claims under a contract.

Escrow Account: An account created by the mortgage company where amounts are put in every month to pay taxes, insurance, and private mortgage insurance.

Foreclosure: Legal action to force the sale of a home. The foreclosure process begins when a borrower/owner defaults on loan payments and after the lender files the necessary documents to begin the foreclosure proceedings.

Housing Counseling Agency: Provides counseling and assistance on a variety of issues, including loan default, fair housing, and homebuying.

Investor: The owner of a mortgage for whom the mortgage banker services the loan. This can be any person or institution that buys mortgage loans from the lenders.

Lien: A legal claim on a property by a lender or other entity that is owed money by the owner of the property.

Loss Mitigation: Working with the customer to find a permanent solution to resolve the delinquency.

Mortgage Broker: An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically process loans for a number of lenders and require a fee or commission for their services.

Partial Claim: A loss mitigation option offered by the Federal Housing Administration (FHA) that allows a borrower, with help from a lender, to get an interest-free loan from the U.S. Department of Housing and Urban Development (HUD) to bring their mortgage payments up to date.

Prepayment: Payment of the mortgage loan, either in full or in part, before the scheduled due date. This may be subject to a prepayment penalty.

Principal: The amount borrowed from a lender. This amount does not include interest or additional fees.

RESPA (Real Estate Settlement Procedures Act): A law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships.

Servicer: Responsible for customer service, processing payments, and working with delinquent customers.

Special Forbearance: A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

Title: A deed evidencing ownership to a property.

Sources: Realtytrac, HUD