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Foreclosure Help: The Complete Foreclosure Glossary

Foreclosure homes are essentially legal matters, and like all things legal, tend to be bound in hard to understand jargon which often requires a lawyer or real estate agent to decipher. While you will almost inevitably need foreclosure help from an attorney or real estate agent somewhere in the foreclosure process – whether you are a buyer or a seller – a good basic understanding about foreclosures will obviously be of great aid to you.

To help you make sense of foreclosure homes and the process of buying one, here is an easy to understand foreclosure glossary starting, of course, with the terms about foreclosures themselves.

1. Foreclosure:
Also known as a mortgagee auction in some jurisdictions, this is a procedure through which property (usually real estate property like a home) is sold by a lender to recover money lent to the property owner in the event of the property owner being unable to repay the loan - which they borrowed with the property in question as security.
As it were, before advancing loans, lenders often require some sort of security (a valuable asset) which they can later sell should the borrower be unable to service their loans. Therefore when it comes to pass that the borrower is indeed unable to service their loan, it is through a foreclosure that the lender gets to sell the property that was pledged as security for the loan.

Terms Dealing with Types of Foreclosure:

2. Judicial Foreclosure:
This is a type of foreclosure usually done under the supervision of a court – with an aim to ensure fair treatment of all parties in the foreclosure. In this type of foreclosure the auction of the property is often done by a court official or another government official authorized by the courts.
The lender and other people having an interest in the property have the first priority to the money gotten from the sale of the property, but the borrower gets what is left (if anything) after paying the lenders.
The spirit of judicial foreclosures is to protect the interests of all parties involved – because if the borrower had substantially paid the loan, and the property fetches a reasonably good price in the auction, the borrower has a chance of getting back the money they had put in loan repayments before they were unable to service their loan.
3. Non-judicial foreclosure:
In this type of foreclosure, the courts are not involved – unless the borrower puts in place legal proceedings to stop the foreclosure from going on. Therefore unlike a judicial foreclosure in which the auction is conducted by court officials, in non-judicial foreclosures, the property is auctioned by the lender or agents of the lender.

Terms About the Foreclosure Process:

4. Foreclosure Auction:
The actual sale of a property in a foreclosure usually takes the form an auction. In most cases this is conducted by the county sheriff (in judicial foreclosures), but it could also be done by a private auctioneering company engaged by the lender (in non judicial foreclosures).
5. Eviction:
This tends to occur in non-judicial foreclosures, where the simple act of selling a property may not be enough to transfer ownership, and where the borrower might have to evict the current owner before they can transfer ownership to the person who bought the property in the auction.
Eviction, as used in this sense, does not necessarily refer to the physical eviction of the person occupying the house (though it often comes to that). It could just be the legal process of eviction, where the person occupying the property could be notified that the property has been sold, and that they are notified to move out.
6. Pre Foreclosure Homes:
This is the period before the foreclosure during which the borrower has an opportunity to forestall the foreclosure. One may forestall the foreclosure by, among other things, renegotiating the loan or by simply selling the property in question themselves – and using the money to pay off the debt (which might leave them with something to spare and, perhaps more importantly, shield their credit history from the ruin that could come from a foreclosure).

Terms About the Parties Involved in Foreclosures:

7. Borrower:
This refers to the person who took the loan from the lender – and pledged the property which is subject to a foreclosure as security for the loan.
8. Lender:
The person from whom the loan was taken - with the property being foreclosed being pledged as security. This could be a bank, a mortgage company – or in some cases, a contractor whose (substantial) payments have not been made.
9. Tenant:
This is the name of the person occupying the property in question in a foreclosure under some sort of agreement with the owner. While tenants are not directly party to the foreclosure, their eviction from a property upon foreclosure can be quite complicated – especially where they had entered into long-term leases with their landlord, who is the borrower in the loan leading to the foreclosure.

Terms About the Documents Involved in Foreclosures:

10. Agreement of sale:
Refers to the final document in the foreclosure process, which seals the sale of the property in the foreclosure. This is often issued in the case of non-judicial foreclosures.
11. Certificate of sale:
Often issued in judicial foreclosures, confirming that the person who got the property at the auction as the property’s owner, and that the property’s title can be transferred to them.
12. Conveyance:
This is the instrument which transfers the title (ownership) of the property in question to the person who buys the property during the auction.
13. Disclosure Statement:
Document which shows the loan’s terms. This is one of the documents which the courts require before they can issue a foreclosure decree.
14. Foreclosure decree:
Foreclosure decree is the court order on which the foreclosure is carried out, and which mentions among other things, the value of outstanding debt necessitating the foreclosure.
15. Notice of intent to foreclose:
A document from a lender to a borrower, notifying the borrower that he (the borrower) is in default of the terms of their agreement, and giving the borrower the opportunity to do something about their debt (to cure the debt as it is termed in foreclosure circles) failure to which they risk having their property foreclosed.
16. Title Abstract:
This document shows the ownership history of the property in question in the foreclosure. It is necessary before a foreclosure can take place to protect the interests of other people who might have an interest in the property.

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