Short Sale Debt - Prudential California Realty

>> GLOSSARY

Bankruptcy:
A legal alternative that allows the borrower to clear any debt obligations by restructuring the payment terms. A bankruptcy stops the foreclosure process until the bankruptcy process is completed or the court allows the lender to resume the foreclosure.

Bankruptcy-Chapter 7
Often called a straight bankruptcy-involves the liquidation of all non-exempt by the bankruptcy trustee, who in turn distributes the proceeds to qualified creditors. All dischargeable debts are discharged and the person(s) filing receive a ‘fresh start’.

Bankruptcy-Chapter 13
Often called a debt reorganization. A Chapter 13 Bankruptcy is generally appropriate for those individuals who have non-exempt property they wish to retain and who have enough income to reasonably pay the reorganized debt after covering reasonable living expenses.

Beneficiary
The beneficiary in a foreclosure context is generally the mortgage lender. Frequently referred to as the ‘Benny’.

Deed in Lieu:
Voluntary conveyance of title in exchange for a discharge of debt. The house must be free of other liens and must have clear title. In simple terms, the borrower agrees to transfer titel of the property to the lender, who accepts the property in exchange for the total debt.

Deed of Trust:
A legal document that dictates the terms of a loan used to buy a property and transfers the ownership of the property to a third party called a trustee until the loan has been paid in full.

Default:
Occurs when the borrower does not meet its legal obligations according to the loan terms.

Forbearance:
Under a forbearance agreement, the lender agrees to stop the foreclosure process and determines payment terms that, at a certain time, will bring the borrower current.

Foreclosure:
A process in which a lender attempts to recover the amount owed on a defaulted loan. The lender has the option of selling the property or repossessing the property. The beginning of a foreclosure process starts after a borrower defaults on mortgage payments and the lender files a Notice of Default or Lis Pendens.

Judicial Foreclosure:
A foreclosure action conducted through the courts instead of through a foreclosure trustee. Judicial Foreclosures are very uncommon in California, particularly on residential properties. Should a lender elect to pursue a deficiency judgment, it would be through a Judicial Foreclosure.

Junior Liens:
A lien, usually a mortgage loan, that is subordinate to a Senior Lien, usually a first mortgage. Lien priority is generally established by order of recordation . NOTE: if you refinance a 1st mortgage on a property with a 2nd mortgage already in place the new 1st mortgage holder will require a subordination agreement from Junior Lien holders to legally establish the new mortgage holder as 1st or Senior Position.Lien: A legal claim on a property by a lender or other entity (called the lien holder) against the property owner that owes the money.

Lis Pendens (LIS): A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.

Modification: A transaction in which a lender agrees to modify any or some of the terms of the mortgage. This is a process where an existing note is modified, but not cancelled. Changes may include: extending the term of the loan, changing the monthly payments, changing the interest rate, etc.

Notice of Default (NOD): A publicly recorded notice stating that a property owner is behind scheduled loan payments for a loan secured by a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.

REO (Real Estate Owned): A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

Reinstatement: Occurs when the property owner pays off the amount in default to bring the loan payments current in order to stop the foreclosure process and return to the original terms of a loan.

Short Sale:
(Also called "Short Pay" or "Pay Off") A process in which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party.

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Is a Short Sale right for me?

Mortgage lenders are increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship that makes it likely you will be unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure.

As you consider the option of pursuing a Short Sale, remember your lender is looking to limit any potential loss on your loan. By completing a Short Sale, your lender has arrived at a solution that is, for them, much better than a foreclosure.

Bottom line, your lender wants to work with you.

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The information contained in this website is intended to be used for informational purposes only and to provide a general overview of the topics described herein. There may be tax and other legal consequences associated with a short sale. ShortSaleDebt.com makes no representations or warranties concerning potential tax or legal consequences relating to any final disposition of any property. Clients are advised to consult with a tax professional regarding the potential tax consequences for their particular situation. ShortSaleDebt.com is providing a service in response to a complex situation and offers a recommended solution where possible. Nothing is represented as tax advice to our clients as every situation may result in different tax consequences. ShortSaleDebt.com is not a law firm or an accounting firm and regarding any specific questions relative to any transaction, ShortSaleDebt.com strongly encourages all parties, agents, and brokers involved in a transaction to seek such advice from a professional advisor.

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