Foreclosure Terms You Should Know

What's the difference between a trust deed and a mortgage?

The difference between the trust deed instrument and the mortgage instrument is that while both are used by lenders to provide for the foreclosure on the real property that is the collateral behind a mortgage loan. With a trust deed the need to go through the court system is accelerated by bypassing it all together. With a trust deed instead of having to go get a judges order to grant title to a lender, in event that the borrower cannot make payments, the trustee who is appointed in a trust deed has the authority to convey title from the borrower to the lender without the need of going through the courts judicial system.

What is the difference between a trust deed state and a mortgage state?

The difference between a trust deed state, which are 1/4 of the states in the United States, and a mortgage state, are that in a trust deed a trustee is appointed as part of the the loan and security arrangement around the trust deed, such that if the borrower is not able to make payments as agreed, the trustee has the authority to convey title to a new buyer without a judicial proceeding through the court system. This can be accomplished in sometimes 120 days or 150 days, and the reason that states have adopted trust deed laws is in order to expedite the foreclosure process, which is attractive to lenders and allows them to make mortgage loans for a lower interest rate. Whereas in a mortgage state, in order to foreclose you need to bring a legal action in the relevant court jurisdiction, and like any lawsuit you have to eventually plead your case, if you are a lender, against the borrower in order to regain possession of the property in the event that you don't get paid the remaining balance as part of that legal action.

What is 'forbearance'?

Forbearance is a term applied to a lender on a mortgage loan offering to grant additional time to the borrower to make mortgage payments.

What is a 'notice of default'?

A notice of default is a notice that is sent by a mortgage lender to a borrower who is in arrears of failure to make mortgage payments that essentially gives the homeowner borrower a limited amount of time, typically three days to fifteen days, to pay their mortgage current or if they are not able to do so, since they are now in default, then the lender gets the right to accelerate the remaining balance on the loan.

What is a 'notice of sale'?

A notice of sale is a notice that a lender is required to announce and advertise through various means in order to attract the interest of prospective buyers, in sufficient time that they will be able to bid on the purchase of a home, and typically 90 days after the notice is filed.

What is a 'short sale'?

A short sale is a transfer of a homeowners deed to the lender in order to satisfy the remaining balance due on a mortgage, typically done at a time when their mortgage balance exceeds the market value of the home.

What is the homeowner's 'right of redemption'?

The homeowner's 'right of redemption' is part of state laws, varying among the states in the United States, that underlies the specific laws that they have. The purpose of the homeowner's 'right of redemption' is for state to enact laws that give the homeowner an opportunity to regain possession of their home, should they be able to do so, at a later time, after they have been unable to make mortgage payments. And the homeowner's 'right of redemption' is, in some states, of equal importance to the lender's 'right of foreclosure' on a property, such that, falling foreclosure and the transferred title, some states have laws in place, that under the homeowner's 'right of redemption' they're able to come in, as much as a year following the sale of a property through foreclosure, a homeowner's able to come in, with money, pay the lender and regain their home.