Glossary Terms

Bankruptcy: A legal alternative that allows the borrower to clear any debt obligations by restructuring the payment terms. A bankruptcy stops the foreclosure process until the bankruptcy process is completed or the court allows the lender to resume the foreclosure.
 

Deed in Lieu: Voluntary conveyance of title in exchange for a discharge of debt.  The house must be free of other liens and must have clear title.  In simple terms, the borrower agrees to transfer title of the property to the lender, who accepts the property in exchange for the total debt. 

Deed of Trust: A legal document that dictates the terms of a loan used to buy a property and transfers the ownership of the property to a third party called a trustee until the loan has been paid in full.

 
Default: Occurs when the borrower does not meet its legal obligations according to the loan terms.

 
Forbearance: Under a forbearance agreement, the lender agrees to stop the foreclosure process and determines payment terms that, at a certain time, will bring the borrower current.

 
Foreclosure: A process in which a lender attempts to recover the amount owed on a defaulted loan. The lender has the option of selling the property or repossessing the property. The beginning of a foreclosure process starts after a borrower defaults on mortgage payments and the lender files a Notice of Default or Lis Pendens.

 
Lien: A legal claim on a property by a lender or other entity (called the lien holder) against the property owner that owes the money.

 
Lis Pendens (LIS): A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.

Modification: A transaction in which lender agrees to modify any or some of the terms of the mortgage. This is a process where an existing note is modified, but not cancelled. Changes may include: extending the term of the loan, changing the monthly payments, changing the interest rate, etc.

 
Notice of Default (NOD): A publicly recorded notice stating that a property owner is behind scheduled loan payments for a loan secured by a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.

 
REO (Real Estate Owned): A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

 
Reinstatement: Occurs when the property owner pays off the amount in default to bring the loan payments current in order to stop the foreclosure process and return to the original terms of a loan.

Short Sale: (Also called "Short Pay" or "Pay Off") A process in which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party.