Foreclosure Glossary

Auction/Clerk’s Sale

The public sale ordered by the Final Judgment.  The property is sold at the courthouse to the highest bidder.  Successful bidder gets title to property.  All lien holders named in the suit are “foreclosed” at the sale.

Deficiency Judgment

Used by the lender after the clerk’s sale to recover the balance of the debt remaining unpaid. Can result in a judgment lien against other real and personal property. May be avoided if the leader accepts, and the owner agrees to a new promissory note or recording a mortgage against another property.

Encumbrance

Any lien or other financial claims recorded against a real property title. Association (condo or HOA) fees, IRS liens, and judgment liens from other creditors are all encumbrances.  Any lien holders that are not fully paid from the proceeds of the public sale may later seek a Deficiency Judgment.

Final Judgment

A Court order mandating that the property is offered at a Clerk’s Sale. The judgment identifies the total amount awarded, including all the cost incurred by filing the foreclosure suit.

Foreclosure

When an owner stops making their mortgage payments the lender begins the foreclosure process by trying to encourage payment (letters, calls). When that doesn’t work, they file a lawsuit in Court seeking to “foreclose” the owner’s title.  At the time the suit is filed a Lis Pendens (notice of pending legal action) is recorded in the public records.  The lawsuit concludes with the Court issuing a Final Judgment.

Mortgage

The leader’s recorded lien pledging the property as collateral for the loan. When the owner signs a mortgage they also sign a Promissory Note making the borrower personally liable for the loan. This personal liability can remain even after the property is sold if the loan is not fully paid.


Mortgage “Investor” (referred to in this outline as the “lender”)

The party who actually funded the loan. The “end” lender. The “Investor” makes the final decision to reject the short sale, based largely on the servicing agent’s recommendations.

Mortgage Servicing Agent

Hired by the lender to collect the mortgage payments that are forwarded to the mortgage investor. It is usually the servicing agent who initiates the foreclosure process on behalf of the mortgage investor.

Pre-Foreclosure

Pre-Foreclosure is an inexact non-legal term that means whatever the user wants it to mean. Most often used to describe an owner who is having trouble making mortgage payments or may already have missed payments.

REO

Real Estate Owned by the lender. The lender acquires title at the public sale (if not out-bid) and now attempts to recover the amount loaned by offering the property for sale. The property may be listed with a real estate broker.  Any excess proceeds above the first mortgage are distributed to lien holders based upon rank. Property taxes and governmental assessment are always paid first.

Short Sale

When a lender of a property allows the property to be sold for less than the remaining balance on the mortgage loan instead of pursuing a foreclosure.