Talking about foreclosure real estate can be hard enough without even entering the market. That's because foreclosures tend to have their own language, employing many obscure words originating in govermnent housing legislation and real estate law. Without a background in these areas, it can be difficult for a homeowner This article lists some of the more common foreclosure-related terms as a reference for people interested in this lucrative market.
Abandonment: Wherein a property owner has given up ownership rights without coercion, and does not want to retrieve those rights, or pass them to somebody else. A situation involving an unused property does not guarantee abandonment.
Acceleration Clause: A clause commonly written in a mortgage enabling the lender to demand full re-payment immediately, rather than at the end of the contracted term. The clause must also detail an occurance that would put it into effect, such as a default on regular payments, sale of the property, or re-assignment of property rights. In most cases the debtor must be given reasonable notice, and a chance to reverse the occurance. The debtor is also immune from acceleration if there is no such clause written into the agreement.
Chattel: Personal property, including household items.
Closing Costs: Expenses not related to the marketing and selling of the property, sure as loan fees and paperwork fees. Foreclosures might also involve extra legal and escrow fees.
Deed in Lieu of Foreclosure: Property owners may deed their property to the lender if foreclosure is imminent, rather than go through the entire process. For the deeding to be official, the lender must give approval.
Default: Failure of the borrower to make payments as required by the lender. "Default" may refer to a missed payment without any further reprecussion, or a series of missed payments resulting in a failed mortgage.
Equity Right of Redemption: The right of the borrower to remove all encumbrances related to the mortgage, in order to avoid foreclosure.
Federal Housing Administration (FHA): A part of the Housing and Urban Development Federal agency responsible for determining industry standards for mortage loans by private lenders. FHA also insures mortgages by private lenders. Forclosure investors must occasionally deal with this agency.
Federal National Mortgage Association: Also known as FNMA, or Fannie Mae, this federal agency oversees conventional residential mortgages, and will buy out loans that follow its rules. Some foreclosure investments require direct communication with this agency.
HUD1 Statement: A form mandated by the US Department of Housing and Urban Development that specifies the costs of acquiring a foreclosed home.
Loan-To-Value Ratio: A comparison of the total loan amount and the lesser of the property's sale price or appraised value.
Notice of Rescission: A notice from the lender notifying the borrower that he or she is again in good standing with the loan, and payment deficiencies have been corrected.
Short Sale: A property sale priced at or below market value, and lower than the amount of a mortgage on the same property.
Truth-in-Lending Act: A law requiring the lender to provide the borrower with a full written explanation of the mortgage's terms.