Acceleration Clause
A clause contained in a note or deed of trust that allows the lender to call the entire note due and payable if payments are missed.
Antideficiency Protection
In some states, such as California, statutory protection which prevents the lender from going after the personal assets of the borrower if the foreclosed house is not sold at auction for an amount sufficient to pay off the mortgage.
Beneficiary
One of the parties to a deed of trust.
The beneficiary is the lender.
Borrower
The person who signs the promissory note.
If there is a mortgage, the borrower is the mortgagee.
Where there is a deed of trust, the borrower is the trustor.
Deed of Trust
The document used in many states instead of a mortgage to enable lenders foreclose on the borrower’s house. The borrower is the trustor, the lender is the beneficiary, and the party holding the title and who enforces the terms of the note upon default is the trustee.
Deficiency Judgment
If a foreclosure does not bring enough money to pay off the amount owed the bank, there is a deficiency. In some states, the lending institution can sue the homeowners for this balance. In other states, there are anti-deficiency rules that, in most cases, prohibit this.
Encumbrance
The deed of trust and all other liens on real property.
It is anything that can impede the transfer of title to property.
HAMP
Home Affordable Modification Program.
Guarantor
A person who promises to pay a debt of another if there is a default. Typically, this is a family member.
Instrument
Another name for a legal document such as a deed of trust or promissory note.
Junior Encumbrance and Junior Lien
An encumbrance (defined above) or lien (defined below) that has a lower priority that other encumbrances or liens on a property.
A junior encumbrance or lien can be fully or partially wiped out by a senior encumbrance or lien if a foreclosure does not bring enough money to pay off both the senior and the junior instruments.
Lender
The party who loans money and who is the beneficiary of the deed of trust.
Lien
Recorded on property and used as security for a loan or other obligation.
For instance, the Internal Revenue Service can place a tax lien on your property.
Mortgage
Creates a security interest (defined below) in a house by given the lender a lien.
Nonpurchase Money
A loan that is not used to purchase real property such as a house.
The money borrowed to refinance a home loan is nonpurchase money and is not covered by antideficiency protection.
Nonrecourse
A nonrecourse note prohibits a lender from going against the borrower if the borrower’s assets are insufficient to cover a debt.
Recourse
A recourse note allows the lender to sue the borrower for any deficiency or short-fall if the sale price of a house is insufficient to cover the mortgage.
REO "Real Estate Owned"
Refers to property that is owned by the lender and that is acquired either through foreclosure or a deed in lieu of foreclosure.
Banks typically do not want REO’s because they are expensive to maintain and because they are obvious evidence that the lender has poor lending policies.
Right of Redemption
The right to repurchase a house after it sells at an auction.
This right is available for judicial foreclosure, but not for a trustee sale.
Secured Debt
A debt that has collateral. When you purchase a house or car the lender gets to foreclose or repossess if the debt isn't repaid. In most cases, cannot be discharged in bankruptcy.
Security Interest
An interest in property that secures that payment or performance on a note.
Short Sale
In the context of real property, the process of selling a property for less than the amount owed a lender, resulting in a deficiency.
Senior Encumbrance and Senior Lien
An encumbrance or lien (both defined above) that has a higher priority than other encumbrances or liens on a property.
Trustee
One of the parties to a deed of trust who is given the power to sell the property upon the default of the borrower.
Trustor
The borrower, the person who signs the promissory note.
