Terms Distressed Homeowners Should Know
DEED
IN-LIEU-OF FORECLOSURE - An agreement with the lender to
return the title to the property and avoid foreclosure proceedings.
It may include an agreement to pay additional money to the lender,
or the remaining debt may be forgiven.
DEFICIENCY
JUDGMENT - The result of a lawsuit after a property has
been sold in a foreclosure sale, and insufficient funds were raised
to pay off the balance of the loan. A judgment will be placed against
the former homeowner's assets to recover the amount of the shortage,
or deficiency. A deficiency judgment can also be placed against the
former homeowner after a short sale or deed in-lieu-of foreclosure,
if no agreement was made with the lender to forgive the remaining
debt.
DISTRESSED
PROPERTY - A property, on which the mortgage payments are
not current.
FANNIE
MAE - Formerly
the Federal National Mortgage Association. The largest and oldest
of the secondary market institutions, which buys and sells existing
loans. A private institution after 1968, it was reacquired by the
federal government in 2009, and it currently owns more loans than
any other institution in the country.
FHA
- The Federal Housing Administration - A branch of the Department
of Housing and Urban Development (part of the federal government).
FHA insures loans under specific guidelines set by FHA. They also
provide assistance for distressed homeowners under certain circumstances.
FREDDIE
MAC - Formerly the Federal Home Loan Mortgage Corporation.
The second largest secondary market institution, behind Fannie Mae.
It was also reacquired by the Federal Government in 2009.
HUD
- The Department of Housing and Urban Development, a cabinet-level
department in the federal government. HUD provides a variety of housing-related
services, including insuring FHA loans, providing assistance to distressed
homeowners and administering fair housing laws.
HUD
CERTIFIED COUNSELOR-
A housing counselor for distressed homeowners, certified by the Department
of Housing and Urban Development. HUD Certified Counselors are non-profit
and do not charge for their services. A list of counselors can be
found at HUD.gov.
INVESTOR
- The lender or other institution that provided the money for a loan.
This could be the original investor or one that acquired the loan
through the secondary market.
LOAN
MODIFICATION - A modification of the terms of an existing
loan agreement. It is not a refinancing. The property owner would
still be bound by any terms of the original loan that are not addressed
in the modification agreement. The payments would be recalculated
from the date of the modification. Terms can vary greatly depending
on the type of loan and investor guidelines.
MORATORIUM
- An agreement to allow a borrower to temporarily stop making payments
on their loan. The payments are not forgiven, and will cause the borrower
to get further behind on their loan. Therefore, a borrower should
only agree to this under desperate circumstances.
PARTIAL
CLAIM (or CLAIM ADVANCE) - A program to assist delinquent
borrowers on FHA loans under specific guidelines. The reason for the
delinquency must have been resolved.
PROMISSORY
NOTE - The document that creates the real estate loan (the
mortgage or deed of trust pledges the property as security). A promise
by the borrower to repay the loan. Sometimes the lender may require
a borrower to sign a promissory note for part or all of the unpaid
balance of a loan, in exchange for approval of a short sale.
REFINANCING
- A completely new loan on a property, used to replace an existing
loan or loans. Commonly used to lower the monthly payment for the
borrower. The borrower must qualify in the same way they qualified
for their original loan.
REPAYMENT
PLAN - An agreement by a borrower to make their regular
payments, plus repay a portion of their delinquent payments and delinquency
expenses every month until they are brought current. A Repayment Plan
WILL raise the borrower's monthly payment until they are current.
Once they are current, they will go back to their regular monthly
payment.
SECONDARY
MARKET - The level of the finance industry where loans
are bought and sold. This includes cases where loans are sold from
one lender to another. There are also several institutions set up
specifically to be part of the secondary market, including Fannie
Mae, Freddie Mac and Ginnie Mae.
SERVICER
- The lender that takes care of the loan for the investor. The borrower
receives loan information from the servicer and makes payments to
the servicer. If the borrower becomes delinquent, negotiations will
be done with the servicer. The servicer will need either the approval
of the investor for any agreement, or authority from the investor
to make agreements with the borrower.
SHORT
SALE - A sale
of real estate, where the value of the property is lower than the
balance of the loan. The lender agrees to accept less than the full
amount owed. Lenders will require that the sale be handled by a licensed
real estate agent. The property can not be sold to a family member
or rented back to the borrower.
SPECIAL
FORBEARANCE -
An agreement with the lender to temporarily pay less than the full
amount of their monthly payment. A special forbearance WILL cause
the borrower to become delinquent (or more delinquent), and the borrower
will need to reach an agreement with the lender to bring themselves
current after the special forbearance has ended.
VA
- Formerly the Veterans' Administration, now the common usage term
for the Department of Veterans' Affairs.
©Copyright
2011 Douglas R. Barry.
