| Let's start with some basic terms to get your mind | | | | that are servicing a loan for some third party. The |
| going. | | | | actual lien holder could be a group of investors (Wall |
| Foreclosure Terms : | | | | Street) or even a country. Short sales are typically |
| DELINQUENCY: The day after a payment is due, a | | | | transacted through the service provider. |
| loan is DELINQUENT. For example, if the grace period | | | | DATA COLLECTOR: Level one person at a servicing |
| runs until the 16th of each month (as it does for most | | | | company (bank). After a short sale package and offer |
| conventional and FHA loans) payments made from | | | | has been sent in, their responsibility is to ensure that all |
| the 17th to the end of the month results in the loan | | | | of the short sale documents are appropriate. They |
| actually becoming DELINQUENT for a short period | | | | forward the package to the assigned mitigator for |
| each month. | | | | determination. These people can be the most |
| DEFAULT: A loan is IN DEFAULT as soon as any | | | | challenging people to interface with through the entire |
| payment has been due and unpaid for more than 30 | | | | transaction. |
| days. Lenders normally have collections departments | | | | LOSS MITIGATOR: Level two person at a servicing |
| established to handle owner's of loans in different | | | | company (bank). After a short sale package and offer |
| stages of default. | | | | has been sent in, they "mitigate" the bank's loss by |
| FORECLOSURE: The legal process by which a lien | | | | following a set of mathematical computations (internal |
| holder repossesses a property. | | | | to the bank). Most of the time, a loss mitigator has |
| FORECLOSING ATTORNEY: Attorney representing | | | | approval authority of a short sale offer. Sometimes |
| the foreclosing lender. A knowledgeable attorney can | | | | the losses are sufficiently large that the short sale |
| be a great asset in getting short sales through the | | | | approval process may involve the management chain |
| system. | | | | as well as the investor. |
| NOTICE OF ELECTION AND DEMAND (NOD or | | | | And finally some Bank Workout Options: |
| NED):This is the result of legal action taken on behalf | | | | These service providers have more options than just |
| of the lien holder. This notice serves to inform the | | | | short sales. Below are a list of the more common |
| borrower and the public that their property has entered | | | | options and their relative meanings: |
| the foreclosure process and will be sold at an auction | | | | Reinstatement--Catch-up on late payments and bring |
| at some specified date (about 110 to 120 days | | | | the loan current--can also be called a "Cure." |
| henceforth). Foreclosure lists are normally generated | | | | Forbearance--Take the total of the arrearages and |
| from "NOD" lists. | | | | divide this number by six or twelve months. |
| PUBLIC TRUSTEE: My state has a third party | | | | Homeowner has to be able to pay this amount |
| representative in between the lender and the borrower | | | | monthly PLUS their regular monthly payments. Low |
| (and the public) in a deed of trust state. They conduct | | | | probability of success, and bank's do not favor these. |
| the public aspects of the foreclosure process. After | | | | Loan Modification--Basically a "re-casting" of the loan. |
| the NOD (also commonly called NED) is filed, the | | | | The bank reps will take the total of the arrearages |
| homeowner generally has to work through the | | | | and pile it on to the principle (the bank can even alter |
| appropriate county public trustee to work on their | | | | interest rates). Homeowner must qualify for this option. |
| loans. Each county has a Public Trustee's office | | | | Sometimes the bank will discount the interest rate and |
| whose charter is to notify the public and, receive cure | | | | even the principle balance. Currently there is over a |
| payments, and to conduct auctions. Most states do not | | | | 50% default rate on modifications that are zero to |
| have public trustees. | | | | eight months old. |
| CURE: An amount of money determined by the bank | | | | Short Sale--The bank takes less than what is owed. |
| and the bank's attorneys needed to pay all arrearages | | | | The lien holder may seek monies owed. |
| on the delinquent loan. Successful curing will result in a | | | | Deed in Lieu--Sign over deed and give keys to bank |
| withdrawn NOD, and a re-instated mortgage. | | | | and walk away. Junior liens normally kill this option. This |
| AUCTION: A foreclosure sale. An auction is the public | | | | option is sometimes called "Cash for Keys." |
| sale of a mortgaged property, following foreclosure of | | | | Foreclosure--A repossession of the property by the |
| the loan secured by the property. In today's market, it's | | | | lien holder (1st normally). These properties are known |
| typically the 1st lien holder who promulgates the typical | | | | as REOs (Real Estate Owned). |
| auction and ends up with the property.nd now some | | | | I hope this helps define some of the normal terms |
| key Bank Personnel/Terms : | | | | used in foreclosure (short sale) transactions. I have |
| SERVICING COMPANY: Most entities that we think of | | | | tried to use their common meanings, without getting |
| as "banks" or "lenders" are actually service providers, | | | | into too much jargon. |