Glossary of Foreclosure Terms

A type of mortgage that allows for periodic changes in the interest rate the lender charges. Generally ARM loan interest rates are tied to US Treasury bills and notes. At certain points in time the lender looks up what the current US Treasury bill or note rate is, adds an agreed-upon number of additional interest rate points to it, and re-adjusts the borrower's interest rate and monthly payments accordingly. A legal notice published in a newspaper that says that the lender is foreclosing on your property. Legal papers a person might file at the court to answer the Complaint filed by the lender. The filing of bankruptcy by a person stops any lawsuits, foreclosures and other collection actions, including collection phone calls, at least for a period of time. A type of mortgage loan where the borrower makes monthly payments for a period of years, then the loan becomes due in full. The payments the borrower makes are not intended to pay the loan off. Loans with 5 and 7 year balloon periods have been common over the past several years. A legal process by which a person's unsecured debts (loans and credit cards, but not car loans or mortgages) are wiped out and under which a person's personal liability for secured loans like car loans and mortgages is wiped out. The secured loan remains in force after bankruptcy, but the lender can only repossess the car or the home and cannot try to recover the loan from the borrower's bank accounts or other assets. A form of bankruptcy in which a person does not attempt to enter into a payment plan with his or her creditors. A form of bankruptcy in which a person negotiates a repayment plan with his or her creditors. To use this form of bankruptcy, a person must be employed. Legal papers filed in court by the lender asking the court to order that your mortgage be foreclosed and your property sold. The process under which a borrower and lender agree that the borrower will move out and will deed the property over to the lender to end the foreclosure process or to avoid foreclosure. An account the lender holds in order to pay your property taxes and homeowner's insurance. A portion of many people's monthly mortgage payment is money that is deposited into this account. For mortgage loans with escrow accounts, this is a process the lender goes through each year to determine whether it collected enough money in the previous year from the borrower to pay the taxes and insurance premiums that it paid the previous year and to determine how much needs to be collected in the coming year to pay what the lender estimates those bills will be in the coming year. After this analysis, the borrower is given a statement showing the lender's calculations and the borrower's monthly payment is adjusted up or down depending on the calculations. Sometimes the borrower receives a check because the lender determined that is collected too much in the previous year. Legal proceedings that the owner of property files to ask the court to have the sheriff remove a person who is on that property illegally. After the foreclosure process is over, the lender owns the property and a homeowner who is still in the home is there illegally. He or she can be forcibly removed by the sheriff acting on a court order following an eviction hearing. Two corporations that were established by the federal government, but are not owned by the federal government, whose purpose is to buy mortgage loans from lenders so that the lenders then have money to lend to other borrowers. An agency of the federal Department of Housing and Urban Development that insures lenders against loss in the event that they are unable to fully collect money they loaned to a borrower. FHA does not lend money. A type of mortgage loan in which the interest rate never changes. The borrower's monthly payment could still change if the borrower has an escrow account and the lender performs an escrow analysis. See those terms elsewhere in this Glossary. The legal process a lender must go through in order to repossess a home. A legal document signed by a borrower that places a lien on the borrower's property to secure the borrower's promise to pay back money borrowed from a lender. Mortgage loans that allowed or directed borrowers to make monthly payments that were less that the monthly payment that was necessary to pay all of the interest due on the loan. The shortage between what a full payment would have been and what the borrower actually paid is then added to the principal amount of the loan and the loan increases in size rather than decreases as is normally the case. A legal document signed by a borrower in which the borrower promises to pay back money borrowed from a lender. A letter from the lender or from the lender's lawyer that says the borrower has 30 days to pay the mortgage in full or foreclosure will begin. Generally however, the borrower still has the right to bring the mortgage current before legal action begins by paying all the past due payments. A period of weeks or months during which you may continue to live in your home and you may pay the full amount due on your mortgage and thereby keep your home. After the Redemption Period, the lender is the legal owner of your home. The Real Estate Settlement Procedures Act, a federal law that governs many aspects of mortgage lending. An auction generally held at the courthouse or other county building at which your property and other properties are put up for bid as part of the foreclosure process. Usually the lender is the highest bidder, but any member of the public is entitled to bid on any property. A deed to your property that is given to the person who is the highest bidder for your property at the sheriff sale or trustee sale. The process under which the borrower and lender agree that the lender will allow the borrower to sell the home for less than the amount due on the mortgage and that the lender will accept this sale as a full payoff of the mortgage loan. A foreclosure brought by the government to collect unpaid property taxes. At the end of the process, if the taxes are not paid, the government owns the property. In some states, the person that conducts a foreclosure on behalf of the lender. A federal law that requires lenders to give disclosures concerning the terms of a loan at the time the loan is applied for and at the closing.