F
F
F
oreclosure and Short Sale
Guide
F
F
Foreclosure and Short Sale Guide Table of Content:
Page 1: Foreclosure Summary Page 2: Foreclosure - Types Defined Page 3: Foreclosure - Steps Page 4: Foreclosure - Time line (non-judicial) Page 5: Foreclosure - Bank and Lender Page 6: Buying Foreclosed Properties - Pros/Cons Page 7-9: How to avoid a Foreclosure Q-A Page 10: What is a Short Sale Page 11-12: Short Sale - Escrow Side Page 13: Short Sale Hazard Page 14: How CalCounties Title can help
Glossary of Terms Personal Notes
All information contained in this book is for informational purposes and is not intended to offer advice - legal, financial or otherwise - about specific situations or problems. This information is a general guideline only, consumers are urged to consult legal councel regarding their rights and responsibilities under state and federal law. The information contained is deemd reliable but not guaranteed.
Foreclosure and Short Sale Guide F ORECLOSURE
SUMMARY
Foreclosure Summary
FORECLOSURE - SUMMARY
A foreclosure begins when a lender has not received a mortgage payment within a specific amount of time (generally 3-4 months). After taking certain steps to recover the money owed and failing, the lender will then foreclose on the property. The property will then be auctioned off on the steps of the court house or on the property itself to the highest bidder.
01
A Few things to Remember The following terminology is used in the foreclosure process:
Borrower = Trustor Lender
=
Trustee
= Third party, usually a Title Company.
Beneficiary
Foreclosure Time Line Lien Filed
30 Days
Notice of Default filed.
90 Days
Notice of Sale filed
Trustee Sale (Auction)
21-25 Days
REO Property if not sold.
Foreclosure and Short Sale Guide F ORECLOSURE
TYPES DEFINED
“Non-Judicial” means not regulated by the courts, which in the foreclosure process limits time and money spent while protecting the rights of both lender and borrower
Non-judicial Foreclosure Without court intervention Non-Judicial foreclosures are processed within the requirement of the state statues for foreclosures. In many states, upon a loan default the homeowner will be mailed a default letter and at the same time a Notice of Default (NOD) will be recorded. If the Notice of Default is not satisfied by the borrower, it then progresses to the next step in the foreclosure process and becomes a Notice of Sale, which will be mailed to the homeowner, posted in public places, along with being recorded at the county recorder’s office and published in area legal publications. A public auction will be held after the legally required time period has expired and depending on the receipt and recordation of the deed, the property will be then given to the highest bidder. Generally, at a Non-Judicial Foreclosure auction, a payment in cash is required or the equivalent at the time of sale or very shortly thereafter.
Judicial Foreclosure Judicial Foreclosures are monitored and processed through the courts, initially beginning with a complaint and a notice of Lis Pendens filed by the lender. The complaint will state all pertinent information such as what the debt is, and why the loan in default should allow the lender to foreclose on the property. The borrower will then have an opportunity to be heard in court after being served the notice of complaint either via mail, direct service or publication. A judgment will then be issued by the court for the amount owed and all detriments of the foreclosure process. The judgment only transpires if the court finds the debt valid and in default. The court will then enter in writing a statement authorizing an auction after the judgment has been issued. Open to the public, auctions usually take place on the steps of the courthouse or on the auctioned property itself.
FORECLOSURE - TYPES DEFINED
Two types of foreclosures proceedings are permitted in the State of California. One is the Non Judicial-Foreclosure which is the most common form of the two proceedings and the other being Judicial Foreclosure. In this section of the guide both Foreclosure proceedings will be explained.
02
4
Foreclosure and Short Sale Guide F ORECLOSURE
STEPS
FORECLOSURE - STEPS
The Non-judicial Foreclosure process consists of these steps.
1 2
The Lender files a Notice of Default (N.O.D) with the courts and the borrower.
3
If the borrower does not respond and the court accepts a default then a judgment is filed in favor of the lien holder and against the borrower. A Lis Pendens notice is issued by the lender explaining the type of foreclosure and all information on the property. During the redemption period the borrower can pay the amount owed and retain the property.
Borrower is required to respond to the complaint to avoid a foreclosure on his/her property and is able to explain the issues at a court hearing. The Borrower can get the lawsuit dismissed if the entire payment due is made during the court proceedings.
- Many Real Estate Agents Specialize in assisting borrowers at this stage of the transaction. A sale of the property may be arranged allowing the lender to receive the full amount owed on the loan and discontinuing the foreclosure process.
03
- Some lenders will allow a “Short Sale�, where the lender accepts less than the full amount of the debt, discontinuing the foreclosure process (see the Short Sales section of this booklet for further information)
4
If the borrower neglects to pay and redeem the property within the redemption period, ownership is then lost. In order to verify there is not an additional third party defendant a title examination is conducted.
5
Before the sale of the property the Notice of Sale must be posted and published for a specified period of time. The property is then sold to the highest bidder at an auction which takes place on the property or on the steps of the court house in the county the property is located.
6
Past due taxes and other liens are paid off by the winning bidder. If the minimum bid is not met, the property will revert back to the lender and then becomes an REO (Real Estate Owned). When the property becomes an REO it can be purchased by contacting the lender directly.
Foreclosure and Short Sale Guide F TIME LINE CALIFORNIA (NON-JUDICIAL)
Beginning (Day 1-3)
Notice of Default recorded with the county recorder.
Within 10 business Days
Trustee mails Notice of Default to borrower(s) and anyone with a special Request for Notice.
Within a Month
Mail Notice of Default to all parties with an interest in title.
After 3 Months
Set sale date.
25 Days Prior to Sale Date
Send Notice of Sale to IRS, if pertinent
20 Days Prior to Sale Date
Publish Notice of Sale - Post Notice of Sale - Mail Notice of Sale - Begin publishing Notice of Sale in a newspaper for consecutively 3 weeks.
14 Days Prior to Sale Date
Record the Notice of Sale with the county recorder’s office.
7 Days Prior to Sale Date 5 Business Days Prior to Sale Date Sale Date
FORECLOSURE - TIME LINE CALIFORNIA (NON-JUDICIAL)
ORECLOSURE
04 Trustee cannot sell for 7 days after expiration of bankruptcy court order.
The borrower’s right to reinstate expires.
The property is sold to the highest bidder or reverts back to the lender.
Foreclosure and Short Sale Guide F ORECLOSURE
BANKS AND LENDERS
FORECLOSURE - BANKS AND LENDERS
Changing your outlook on Foreclosure
05
When a foreclosure process approaches, never assume the lender wants to foreclose on your property without working with you first. Giving up on the foreclosure process will not help you keep your home. Be advised that most lenders never want to foreclose on a borrower’s home, but only do so as a last resort to regain the money owed. Having this knowledge of working with a lender to protect your home can give you an advantage during this unpleasant situation. Filing for a foreclosure, dealing with the court proceedings and the time and costs that go into the foreclosure process, is a huge inconvenience for the lender. When a lender forecloses on a property, they do not receive the interest that was expected when they loaned you the money to purchase your home. Realistically, foreclosures are costly to lenders and they are not in the business of spending money, they are in the business of making money. Lenders will often work hard with the homeowner to help keep their home. It is imperative, when working with the lender towards an agreement to keep your home, to unquestionably maintain contact and communicate your needs with the lender. Lenders in most cases are more than willing to work with the borrower to establish an agreement or payment method in order to avoid the foreclosure process.
Here are 3 things you can do to work with a lender to avoid a foreclosure: 1. Communication is the key: Communicating with the lender can only bring good things out of a bad situation. 2. Financial Positioning: If the lender agrees, you may ask for a deferment of loan payment by providing evidence to the lender that you are able to position yourself in a better financial situation. 3. And finally‌.Having the right attitude: Having the attitude to NOT give up in a bad situation not only helps strengthen you in a foreclosure process but also in life in general. Never give up and never speculate, learn the facts and continue pressing on.
UYING ORECLOSED
ROPERTIES
PROS AND CONS
Auction buying of foreclosed properties is the most profitable and common way to make a fortune in the real estate business. If you do not know how to buy a foreclosed property, it could turn out to be the easiest ways to lose a fortune. Most disasters occur due to over bidding on the properties without properly assessing the real market value and fix up costs of the property under the hammer. Research can make or break the fortune one could make on a foreclosed property. Auctions of foreclosed properties are held at public auctions that are conducted under the supervision of the county or state court where the property is situated. This works towards the advantage of the buyer since the transfer of title is immediately executed upon winning the bid. In most cases the winning bidder is the lender who has requested foreclosure of the property in the first place.
The Advantages The main advantage of buying a foreclosed property through auctions is the profitability, the difference between the highly discounted price and the estimated value you can sell it. Normal foreclosure property auctions have a six week notice enabling the interested buyers to inspect the property and assess its total cost including fix ups and liens and other issues and research the market price at which it can be disposed of. It is always important to remember that bidding at a foreclosed property auction need not be competitive but based on your own assessment.
A
06
The Disadvantages The main disadvantage in buying a foreclosed property from a court auction is that it requires a lot of capital investment. The payment period is very short and should be read even before bidding to successfully buy a foreclosed property. Another major disadvantage is that the transfer of title involves great risk. If your research is not correct or incomplete it could lead to major losses in the process of buying and selling foreclosed property. Higher the risk, higher the gain, therefore one should be doubly careful and do significant research before bidding on an interesting property. Buying a foreclosed property is a science in itself and involves a lot of learning. Financially smart businesspersons have been known to have burnt their fingers buying and selling foreclosed properties. If one is careful, a fortune can be made. But, if one a little careless, they could be bankrupt in a matter of weeks. Written by Tim Lee | http://www.real-estate-foreclosed-home.info/
BUYING FORECLOSED PROPERTIES - PROS AND CONS
Foreclosure and Short Sale Guide B F P -
D
Foreclosure and Short Sale Guide H A F Q A HOW TO AVOID A FORECLOSURE Q AND A
OW TO
07
VOID A ORECLOSURE
AND
Avoiding a foreclosure is all about communication. When your not able to make a payment or are in financial trouble, communicating with your lender is the best way to work things out. Do not ignore the warning signs regarding your mortgage payment, ignoring them will result in a credit score hit and the foreclosure of your home.
Q&A
Q: What Happens Q ppens ens Wh W When I Miss My Mortgage Payments?
A. Foreclosur A Foreclosure may occur. TThis is the legal means that your lender can use to repossess (take over) your home. home. When tthis his happens, you must move out of your house. If your property is worth less than the total total amount you owe on yyour mortgage loan, a deficiency judgment could be pursued. If that happens, you not only lose your home, you also would owe HUD an additional amount. Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if possible. Q: What Should I Do? A. 1. DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call or write to your lender’s Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help. 2. Stay in your home for now. You may not qualify for assistance if you abandon your property. 3. Contact a HUD-approved housing counseling agency. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.
Q: What Are My Alternatives? A. You may be considered for the following: Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
OW TO
VOID A ORECLOSURE
AND
ONTINUED
Q: What Are My Alternatives? (continued..) A. Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount. Partial Claim. Your lender may be able to work with you to obtain a one-time paym men ment from the FHA-Insurance A Insurance sura fund to bring your mortgage current.
Q&A You ou mayy qualify qu if:
1. Your Yo r loan oan is at le least st 4 months d delinquent but no more than 12 months delinquent; 2. You Yo are able to t begin begin gin making full ffu mortgage payments. When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your Whe lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full. The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property. Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.
HOW TO AVOID A FORECLOSURE Q AND A CONTINUED
Foreclosure and Short Sale Guide H A F Q AC
You may qualify if: 1. The loan is at least 2 months delinquent; 2. You are able to sell your house within 3 to 5 months; and 3. A new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines. Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it is not as damaging to your credit rating as a foreclosure.
You may qualify if: 1. You are in default and don’t qualify for any of the other options; 2. Your attempts at selling the house before foreclosure were unsuccessful; and 3. You don’t have another FHA mortgage in default.
Q: How Do I Know if I Qualify for Any of These Alternatives? A. Your lender will determine if you qualify for any of the alternatives. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender. Call (800) 569-4287 or TDD (800) 877-8339.
Q: Should I Be Aware of Anything Else? A. Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you’re selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:
08
HOW TO AVOID A FORECLOSURE Q AND A CONTINUED
09
Foreclosure and Short Sale Guide H A F Q AC OW TO
VOID A ORECLOSURE
AND
ONTINUED
Equity skimming. In this type of scam, a “buyer” approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The “buyer” may suggest that you move out quickly and deed the property to him or her. The “buyer” then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your y you obligation on your our loan loan.
Q&A
Phony Ph onyy counse cou counseling ing g agen agencie agencies. Some groups calling themselves “counseling agencies” may approach you and yo nd offer tto perform erform certain ce cert services for a fee. These could well be services you could do for yo you yourself rself for free, free fr such as negotiating nego neg a new payment plan with your lender, or pursuing a prefo for foreclosure closure sale sale. If you have aany doubt about paying for such services, call a HUD-approved housing cou counseling agency at (800) 569-4287 or TDD (800) 877-8339. Do this before you pay anyone or sign anything.
Q: Are There Any Precautions I Can Take? Here are several precautions that should help you avoid being “taken” by a scam artist: 1. Don’t sign any papers you don’t fully understand. 2. Make sure you get all “promises” in writing. 3. Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt. 4. Check with a lawyer or your mortgage company before entering into any deal involving your home. 5. If you’re selling the house yourself to avoid foreclosure, check to see if there are any com plaints against the prospective buyer. You can contact your state’s Attorney General, the State Real Estate Commission, or the local District Attorney’s Consumer Fraud Unit for this type of information.
Q: What Are the Main Points I Should Remember? 1. Don’t lose your home and damage your credit history. 2. Call or write your mortgage lender immediately and be honest about your financial situation. 3. Stay in your home to make sure you qualify for assistance. 4. Arrange an appointment with a HUD-approved housing counselor to explore your options at (800) 569-4287 or TDD (800) 877-8339. 5. Cooperate with the counselor or lender trying to help you. 6. Explore every alternative to keep your home. 7. Beware of scams. 8.Do not sign anything you don’t understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation. Act now. Delaying can’t help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating.
Foreclosure and Short Sale Guide W HAT IS A
SHORT SALE
How does a Short Sale work? Completing a successful short sale transaction requires the cooperation of all parties in the transaction. In agreeing to accept a short payoff, the lender will normally have restrictions on the amount of closing costs, repairs, and even commission that is paid by the seller. Following are some suggestions when handling a Short Sale.
The short sale Lender will require certain documentation in order to make a decision on approving the short sale. The following is a list of common requirements, but there may be additional items requested: Documents required for a Short Sale. - Listing agreement. - Purchase Agreement and Escrow Instructions. - Preliminary Title Report. - Estimated Seller’s closing statement. This statement has to be as accurate as possible, these figures will be the lender’s base of approval for short sale. - Written notice from junior lien holders of their willingness to release their liens even though they receive little or no proceeds from closing. - Broker Price Opinion (BPO).
Required from Seller: - Hardship Letter. - Completed Financial Statement or credit report. - Appraisal. - Documentation proving hardship. - Federal tax returns, including W-2’s and all schedules for last two years, from all mortgagors. - Pay stubs for last two months, from all mortgagors. - 401K/IRA Account Information. - Closing statement from original purchase of home. - Self-employed Sellers will be required to provide additional business documentation as required by the lender.
Who Qualifies for a Short Sale? Usually, the mortgage lender will only accept a short sale if you are a month behind on your current mortgage payments, have a buyer for the home ready and can provide the adequate information to the lender about your hardship. Lenders will also qualify you for a short sale if you find your self without a job or making substantially less money then before.
WHAT IS A - SHORT SALE
What is Required for a Short Sale?
10
Foreclosure and Short Sale Guide S S HORT
ALE
THE ESCROW SIDE
SHORT SALE - THE ESCROW SIDE
Short Pay/Short Sale Contingency:
11
Close of this escrow is contingent upon Seller’s successful negotiation with Lender(s) of record to accept payoff(s) of current loan(s) of less that the actual amount(s) owed. Escrow Holder’s receipt of a copy of Lender’s written payoff statement, requirements, and conditions, approved by Seller, shall be deemed satisfaction of this contingency without further instructions required. Escrow Holder is instructed to furnish the Lender with any necessary documentation, including estimated closing statements, required by Lender to issue short payoff statement. Seller is hereby advised to obtain independent legal and/or tax advice regarding any legal and/or tax ramifications of a short pay/short sale transaction.
Escrow Short Sale Steps - Read the prelim and look for the over encumbered or highly encumbered property. - Review contract carefully. Enter all costs and charges immediately when known and/or received to keep up to the minute on monies owed at close of escrow. - Have the Title Officer do weekly date downs and see if a Notice of Default has been recorded. - Ask Listing broker if the lender has been contacted regarding the short sale. If not, contact lender and get list of requirements. As soon as they are received, immediately send these requirements to the listing broker.
Working with Agents and Buyers: - When a short sale is approved, make sure all parties are fully aware that this transaction involves a short sale. - Communicate with the lender the time limit of the escrow, regarding this short sale. Approving a short sale can take several weeks to obtain. The lender often makes the short sale acceptance period only good for a certain amount of time. If the payoff of the loan is not received, during this given period, the transaction will be void. Flexibility and patience is needed in a short sale to make this transaction fully work for all parties involved in the process.
Continue on next page
Foreclosure and Short Sale Guide S S ALE
THE ESCROW SIDE - CONTINUED
What to look for in the Lender’s Approval Letter - Must be addressed to escrow holder. - Maximum allowable closing costs and charges associated with the sale. - Maximum allowable real estate commission. - Expiration date of lender’s approval. - Restrictions in allowable payments to be made from seller’s proceeds such as: payments to junior lien holder’s, unpaid taxes, past due homeowner’s association fees, credits to buyer for closing costs, payment for rent-back after close of escrow, payment for mortgage insurance.
Escrow Process - The escrow will use the following phrase in the escrow instruction (will be added to fast INS phrase group as “Short Sale Contingency”). “Close of Escrow” is contingent upon escrow holder having received from (Name of Lender) a “Read, Approved and Accepted” Pre-closing Seller’s Statement and/or a letter from said lender approving all items listed on the Preclosing Seller’s Statement.” - Make sure the statement gets faxed to the lender before close of escrow and that the lender approves it, including any amount going to the seller (which they may allow).
SHORT SALE - THE ESCROW SIDE - CONTINUED
HORT
12
Foreclosure and Short Sale Guide S S HORT
ALE
HAZARDS
SHORT SALE - HAZARDS
New Hazards - Equity lines that are taken out after close of escrow. Lets say the seller pulls out
13
equity lines on a property, and problems arise. The seller having taken the equity lines out of the property, might not have the funds available to pay for the closing costs. (Rounded to about 6% Commission) - Existing loans on a property (depending on the loan amount) may have huge prepament penalty attached to them. - New Loans with options like “Interest Only” payments and Negative Amortization can cause your loan balance to rise. - Using bank handled escrows or signing services can result in loss of information on refinances that a seller acquired prior to the sale. The seller might not have been informed correctly about the loan plan and documents in conjunction with the refinance. - California Withholding. It is possible for the seller not to sell at a “loss” as determined by the CA Franchise tax Board, even if they don’t have the funds for the closing. If the seller decides to pull their equity out on a non-owner occupied property, they may have to pay the State of California 3⅓ of the purchase price, regardless of not having the funds for it. - IRS and State Tax Liens - Negotiated items (i.e. credits for closing costs, termite repairs) unless approved by the lender, these types of costs can jeopardize the short sale transaction..
FYI... Remember, a Lender approving a short sale is not guaranteed. Also a lender will ask the seller for financial contributions. The lender also requires an unsecured note, to be signed by the borrower. During a short sale or prior to a short sale, a borrower is still required to pay the mortgage payments as negotiations continue. Failure to pay the mortgage payment on time or at all, can result in a credit score hit. It is greatly advised to the seller, that they find independent legal counseling or tax advice having to do with tax ramifications on the short sale transaction.
Foreclosure Guide F HOW CCTN CAN HELP
CalCounties TitleNation company has a wealth of knowledge and experience with foreclosure and short sale properties. CCTN title has the resources you need to help you with your foreclosed home, whether it be buying or selling. The information products and lists we have available can help you expand your investment with a secured transaction all the way through.
Title Services and Property Information - Contact your local CCTN title representative for more information on property profiles, comparable sales and property tax information. - NOD Lists (Notice of Default) and NOT Lists (Notice of Trustee’s Sale) are of public record - CCTN title team can help with today’s laws and requirements for your foreclosure or short sale transaction.
Short Sale Escrows Your CCTN title team is in place to help you through your short sale escrow. There are special requirement so be sure to discuss the transaction procedures with your CCTN title Escrow Officer when your escrow is opened. - When your short sale escrow is open, be sure to advice your escrow officer that the property is potentially a short sale. The preliminary title report will show all liens, vested owners and borrowers located on the property. The Seller will be asked to complete a Statement of Information ( also known as an “SI” ), which will help with determining any outstanding judgements. - Payoff Demands on the existing loan should be requested after the seller has negotiated with the lender - Demands on other existing judgements and liens should be requested after the seller has negotiated with the other creditors. - Once the lender approves the HUD proposal, no changes can be made unless the escrow officer receives written confirmation from the lender.
HOW CALCOUNTIES TITLENATION CAN HELP
ORECLOSURE
14
Foreclosure and Short Sale Guide G T LOSSARY OF ERMS
Absolute Auction: Auction with no minimum bid
Closing (also called settlement): The completion of a
amount. The highest bidder wins. Abstract (of title): A history of all transactions shown in the public records affecting a particular tract of land. Acceleration Clause: A provision in a promissory note that specifies conditions under which the lender may advance the time when the entire debt which is secured by the mortgage becomes due.
real estate transfer, where the title passes from seller to buyer or a mortgage lien is given to secure debt. Closing Costs: Expenses involved in closing a real estate transaction over and above the price of the land. Clouded Title: A land title having an irregularity, possible claim or encumbrance that, if valid, would adversely affect or impair it.
Adjustable Rate Mortgage (ARM): Mortgage loans under which the interest rate ie periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. Affidavit: A written statement made under oath before a notary public or other judicial officer. Agreement: A legally binding contract made between two or more persons.
Appraisal: A report from an independent third party detailing the estimated value of real estate. Balloon Note/balloon Payment: A promissory note with amortization payments scheduled for a long term, usually 30 years, but maturing in a shorter term, often five to seven years. It requires a substantial final balloon payment for the remaining principal. Bankruptcy: A fedeal court proceeding under the United States Bankruptcy laws where an insolvent debtor either has its estate liquidated and debt discharged, or is allowed to reorganize its affairs under the protection of the bankruptcy court. Beneficiary: A person or entity that is legally entitled by a will, trust or insurance policy to receive money or property. Chain of Title: The history of successive ownership and transfer in the title to a tract of land.
Clear Title: Real property ownership free of liens, defects and encumbrances or claims.
Contract of Sale: Agreement by one person to buy and another person to sell a specified parcel of land at a specified price. Conveyance: The transfer of title property from one person to another. Deed: An instrument for conveying real estate. Deed of Trust: A form of security instrument for mortgage loans. Default: A failure to meet legal or contractual obligations
Deficiency judgment: When The Proceeds from a foreclosure sale are less than the amount due on the debt. Encumbrance: Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burdon upon the property. Equity: The market value of real property, less the amount of existing liens. Escrow: closing a real estate transaction when all required documents and funds are in place with a third party for processing and disbursement. Execute: To sign a legal instrument, A deed is said to be executed when it is signed, sealed, witnessed and delivered. Federally-insured Loan: A mortgage loan that originates in a federally-insured government program like the Federal Housing Authority (FHA).
Foreclosure and Short Sale Guide G T LOSSARY OF ERMS
Foreclosure: A legal proceeding following a default by
Redemption: The right of the owner in some states to
a borrower in which real estate secured by a mortgage of deed of trust is sold to satisfy the underlying debt. Instrument: A written document. Judgment: The decision of a court regarding the rights of parties in an action. Junior Mortgage: A mortgage lower in lien priority than another. For example, a second mortgage or home equity line.
reclaim title to property if he or she pays the debt to the mortgage within a stipulated time after foreclosure. Release: To relieve from debt or security or abandon a right, such as release of a mortgage lien from a part or all of the land mortgaged.
Lawsuit: A dispute between two or more parties that has been filed in the court system by one of them. Lien: A monetary Charge imposed on a property, usually arising from some debt or obligation. Market Value: The average of the highest price that a buyer would pay and lowest price a seller would accept. Mortgage: A conditioned pledge of property to a creditor as security for the payment of a debt.
Note: (also called a Promissory Note): A written promise to pay a sum of money, usually at a specified interest rate, at a stated time to a namd payee. Power of Attorney: A written instrument by which one person, the principal, authorized another, the attorney-in-fact, to act on hiss or her begalf. Principal: A sum of money owed as a debt on which interest is payable. Public Records: Records which by law disclose constructive notice of matters relating to the land. Real Estate (also called real property): Land and anything permanently affixed to the land such as buildings, such as plumbing and heating fixtures, or other such items that would be personal property if not attached.
Recording: The noting in a public office of the details of a legal document, such as a deed or mortgage, affecting the title to real estate.
RESPA: The Real Estate Settlement Procedures (12 U.S.C. 2601 et. seq.) that, together with regulation X promulgated pursuant to the Act, regulates real estate transfers involving a “federally-related mortgage loan� by requiring, among other things, certain disclosures to borrowers. Satisfaction: An instrument releasing the lien of a mortgage.
Senior Lien or Mortgage: If there is more than one lien on land, those liens are ranked by priority. A senior lien or mortgage is entitled to be paid first in foreclosure or bankruptcy, before a junior lien. Tenant: One who has right of possession of land by any kind of title. Title Defect: Any possible or patent claim or right outstanding in a chain of title that is adverse to the claim of ownership. Title Insurance Policy: A contract of title insurance under which the insurer, in keeping with the terms of the policy, agrees to indemnify the insured against loss arising from claims against the insured interest. Trustee: Person or entity who is given the legal authority to manage money or property on behalf of somebody else. In a foreclosure action, this is often the title company. Trustor: A person who creates a trust by transferring property to a trustee. When a borrower signs the Deed of Trust, the borrower becomes a trustor.
Foreclosure Guide N OTES
Office Locations
Pasadena Office
790 E. Colorado Blvd., Suite 400 Pasadena, CA 91101 Office: 888.282.5855
Newport Beach Office
4667 MacArthur Blvd., Suite 150 Newport Beach, CA 92660 Office: 877.727.3900 www.calcounties.com