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Understanding the Foreclosure Market

During these times of frequent foreclosures, homeowners encounter unfamiliar or vaguely-understood terms used in legal and government documents. Homeowners need to understand the exact meanings of these terms so that they can better respond to what are being asked in the documents and bwe able to find foreclosed properties thorugh all the states.

The following are the most common terms used in foreclosure proceedings:

Deed in lieu of foreclosure
refers to an agreement which allows the troubled homeowner to give the deed of the property to the mortgage lender in exchange for foreclosure avoidance and cancellation of the mortgage debt. The homeowner benefits because his credit record would not be stained with a foreclosure mark, and he can still take another mortgage loan in the future when his financial conditions get better and more stable.
Forbearance
concerns an agreement in which the mortgage lender allows the borrower to miss his monthly amortizations for a certain number of months. The total unpaid amortizations would have to be paid later by the borrower.
Foreclosure
Is a legal procedure which enables a mortgage lender with a claim on a certain property to declare a sale on the property and obtain the proceeds of the sale.
Modification
Is a process that changes certain aspects of a mortgage loan to make monthly amortizations easier for the borrower. This process can involve reduction of the interest rate, extension of the loan term or reduction of the remaining principal.
Non-judicial foreclosure
Refers to a foreclosure undertaken without court proceedings. This type of foreclosure is common in California.
Notice of default
Is a legal notice given by the mortgage lender to the borrower to pay all past dues, including interests and penalties, so that the property involved would not be foreclosed and sold.
Notice of trustee's sale
Refers to the process in which the mortgage lender files a notice of sale of the foreclosed property with the county. This is filed at least three months after the notice of default.
Reinstating a mortgage
Means bringing back a mortgage loan into its updated status by paying all past dues, including interests and penalties.
Repayment plan
A plan devised by the mortgage lender in consultation with the borrower to enable the borrower to pay past dues over a certain period of time.
Short sale
An agreement in which the mortgage lender allows the borrower to sell the unpaid house for less than the remaining balance of the mortgage loan. The lender agrees to accept the proceeds of the sale in exchange for cancellation of the mortgage, preventing foreclosure.

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