Stop Home Foreclosure Glossary

Adjustable Rate Mortgage (ARM): A loan with an interest rate that periodically adjusts based on a specified financial index. Typically these loans start with a lower monthly payment than a fix rate mortgage. With time the monthly payment increase to more than that of a fixed rate loan. 

Annual Percentage Rate (APR): The amount it costs to borrow money, as expressed in a yearly percentage rate.  

Appreciation: The increasing value of an item over time. Also refers to the difference between the current value of a property and the original sales price, provided the current value is greater. 

Assumable Mortgage: A mortgage that can be transferred to a new buyer upon sale of the home. The new buyer, typically, must meet the credit requirements of the lender. 

Assumption of Mortgage: The formal process of a new buyer taking over an assumable mortgage. 

Balloon/reset mortgages: A mortgage that has a low interest rate for a set amount of time. At the end of that time the entire remaining balance of the mortgage is due, typically leading to a new mortgage or the sale of the house. 

Balloon Payment: The remaining balance of the mortgage due at the end of a balloon mortgage. 

Borrower: A person who takes a loan from another party, called the lender, and is required to pay that loan back according to the set terms of the loan. 

Budget: A record of income and expenses for a specific amount of time. 

Closing Costs: Costs, excluding the price of the property, that must be paid prior to a property transfer. These costs usually include points, taxes, title insurance, and finance costs. 

Deed: A publicly recorder document that demonstrates ownership of property; also know as a title.  

Deed-in-Lieu of Foreclosure: An agreement between a lender and borrower where the lender accepts the deed to the mortgaged property as repayment of the mortgage. 

Deed of Trust (Trust Deed): A three party lending system, required in some states, where the title is held by a neutral third party. The neutral party gives the title to the borrower when the loan obligation is paid, or commences the foreclosure process as directed by the lender if the borrower is in default. 

Default: Failure of a borrower to make payments as agreed upon in a mortgage. For most states a default is defined by three missed mortgage payment. 

Deficiency Judgment: A court decision requiring a borrower to pay lender the difference between the

amounts owed on a mortgage and the amount the lender made during a foreclosure. 

Delinquency:  A situation where a loan payment has not been paid by the time specified in a mortgage. 

Equity: The value of a home as defined by taking the current market value of the house and subtracting all moneys owed on the house. If more money is owed than the house is worth it is said to have “negative equity.” 

"FANNIE MAE": Federal National Mortgage Association is a private company, started by the federal government, which holds and manages residential mortgages as an investment tool. As the largest holder of mortgages the policies of Fannie Mae work to secure the mortgage industry. 

FHA: Federal Housing Administration, a branch of the U.S. Department of Housing and Urban Development (H.U.D) is a government program designed to keep the housing market growing and make homes available to those who may not qualify for mortgages in the open bank market. FHA assists homebuyers by giving loans and providing insurance for lenders who follow its guidelines. 

Fixed expenses:  Payments, due each month, that do not fluctuate. (a mortgage payment is an example) 

Fixed-rate mortgage:  A mortgage where the interest rate and monthly payment do not change for the life of the loan 

Forbearance Agreement: An agreement between a borrower and a lender, usually result form discussions between the two, where the lender temporary postpones the foreclosure process. This allows the borrower time to make arrangement to make good on missed payments. 

Forced Sale: A sale when the borrower would prefer not to sell. 

Foreclosure: A legal process of a lender reclaiming a house from a borrower who has not fulfilled the

obligations of a mortgage. 

“FREDDIE MAC”: The Federal Home Loan Mortgage Corporation (FHLM) is a private company, started by the federal government, which purchases private mortgages from banks and uses them as security for investors. The money received by the banks for the mortgage is often used to provide funds for other homebuyer to purchase homes. 

Grace Period:  The time between when a payment is due and when the lender will consider the payment delinquent. The lender can still add a late charge and fees if the payment is made after the due date. 

Graduated Payment Mortgage:  Mortgages that have payment which start low and slowly go up over time until they reach a set max which is then fixed for the remainder of the loan. They are designing to help homebuyer get into home they otherwise could not afford.  

Home equity loan: A loan issued to homeowner and backed, or secured, by the equity in the house.

HUD: The U.S. Department of Housing and Urban Development; established to help provide decent homes in underdeveloped portions of the US, and to enforce fair housing laws. 

Interest: The cost of using borrowed money. 

Interest Rate: The cost of borrowing money, expressed as a percentage. 

Judicial Foreclosure: A foreclosure that is conducted via the court system. 

Late Payment Charges: The fee a borrower is charged if they miss a payment (become delinquent) on a loan.

Lender: A party that lends money to another party (the borrower.) It can also refer to a party that manages a loan for a party.

Letter of demand: Written notice, sent by a lender, notifying a borrower that they are delinquent on a loan. The letter will typically stipulate the action the lender will take if the loan is not made current in a set amount of time; also know as a letter of delinquency or letter of acceleration.

Lien: A legal claim against property.

Loan: Borrowed money.

Loan Acceleration: A clause written into a loan that allows the lender the right to demand payment in full if the loan becomes delinquent; also called mortgage acceleration.

Loss Mitigation: Literally means to reduce loss. For the foreclosure process, it is the lenders attempt to recoup as much of the loan value as possible. 

Modification: A change to the terms of a loan.

Mortgage: A loan that is secured by a home. Also refers to the document upon which the terms of the loan are detailed.

Mortgage Acceleration: A clause written into a loan that allows the lender the right to demand payment in full if the loan becomes delinquent; also called loan acceleration. 

Non-Judicial Foreclosure: A foreclosure that is conducted outside of the court system.

Notice of Default: An official notice that this recorded with the county court house that details the delinquency or default of a mortgage. It is typically the first official step in the foreclosure process in most states.  

Partial Payment: A payment that is less than a normal payment. Partial payments still count as a missed payment, unless prior arrangements have been made with the lender. 

Principal: The amount of money still owed on a loan not including interest.  

Private Mortgage Insurance (PMI): Insurance protecting a mortgage lender from a loss in the event of a default by the borrower.  

Redemption Right: The right of a defaulted borrower to reclaim property lost after a foreclosure. State laws determine if redemption is available and for how long after a foreclosure the borrower has this right.

Repayment plan: An agreement made between a lender and a delinquent borrower where the borrower agrees to make extra payments, to make good on past due payments, in addition to making the regular loan payment plans.

Short Sale: The sale of house at market price if that price is lower than the remaining balance of a mortgage. 

Title: A publicly recorder document that demonstrates ownership of property; also know as a deed.  

VA (U.S. Department of Veterans Affairs): A federal agency that insures loans made to veterans in order to protect lenders from losses if the veteran defaults.  

VA Mortgage: A mortgage insured by the Department of Veterans Affairs (VA).  

Variable Rate Mortgage: A loan with an interest rate, and therefore a monthly payment, that adjusts based on a specified financial index. 

Variable Expenses: Payments that fluctuate from month to month (food and entertainment are examples).