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Real Estate Sales & Property Management

Foreclosure Glossary


Beneficiary:  In states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary.

Deed in Lieu of Foreclosure:  A deed given by an owner/borrower to a lender to prevent a lender from bringing foreclosure proceedings.  The validity of the deed depends to some degree on "fairness" under the circumstances, and adequacy of consideration will be considered.

Deed of Trust:  An instrument used in many states in place of a mortgage.  Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and is reconveyed upon payment in full.  A property may have two, three or more deeds of trust as liens at the same time.  Legal priority would determine whether they are called a first, second, third etc. lien.

Deficiency Judgment:  Commonly, the amount for which the borrower is personally liable on a note and mortgage if a foreclosure sale does not bring enough to cover the debt.  Actually the judgment is for the total amount and not for the deficiency, the recovery from the foreclosure sale being deducted from this amount.

Forced Sale:  A sale which is not the voluntary act of the owner, such  as to satisfy a debt, whether of a mortgage, judgment, etc. The selling price under such a sale would not be considered market value.

Foreclosure:  A proceeding in or out of court , to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.

Foreclosure Sale:  A sale of property used as security for a debt, to satisfy said debt.

Judicial Foreclosure:  Foreclosure through court action rather than by power of sale.  Judicial foreclosure is sometimes necessary to remove certain tax liens.

Junior Lien:  A lien which is subordinate to a prior lien.

Lien:  An encumbrance against property for money, either voluntary or involuntary.  All liens are encumbrances all encumbrances are not liens.

Mortgage:  (1) To hypothecate as security, real property for the payment of debt.  The borrower (mortgagor) retains possession and use of the property.  (2)  The instrument by which real estate is hypothecated as security for the repayment of a loan.

Nonjudicial Foreclosure Sale:  Sale by a trustee under a deed of trust, or mortgagee under a power of sale of a mortgage.  There is no (court) judicial proceeding.  This is the most common type of foreclosure in California.

Notice Of Default (NOD):  A notice filed to show that a borrower under a mortgage or deed of trust is in default (behind on payments).

Real Estate Owned (R.E.O):  Most commonly refers to property owned by a lender from foreclosure or mortgages or trust deeds.  This property is usually for sale.

Redemption Period:  A time period during which a mortgage, land contract, deed of trust, etc., can be redeemed.  Usually set by statute, and after judicial foreclosure.

Redemption:  The process of canceling a defeasible title to land, such as is created by a mortgage foreclosure or tax sale.

Reinstatement Period:  A trustor has the right to reinstate a loan up to five business days prior to the date set for the trustee´s sale of the property.  Once the loan is reinstated the foreclosure process is stopped.

Reinstatement:  Payment of a note, mortgage, deed of trust, etc., to bring it from default to good standing.  This includes all back payments, costs, fees, and penalties attached to the loan.

Short Sale:  A sale of property which includes some forgiveness of debt by the lender under a mortgage or trust deed.  The amount forgiven may be considered income to the seller and taxable i.e. debt relief.

Trustee:  One who holds title to real property under the terms of a deed of trust.

Trustee´s Deed:  A deed by a trustee under a deed of trust, issued to a purchaser, pursuant to foreclosure.

Trustee´s Sale:  A sale at auction by a trustee under a deed of trust, pursuant to foreclosure proceedings.

Trustor:  The borrower under a deed of trust.  One who deeds his property to a trustee as security for the repayment of a loan.

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