Foreclosure Dictionary
Absorption Rate - Key to Successful Pricing!
Telling sellers the price they want to hear may get that Realtor the listing, but it won’t sell the home. Only pricing the listing right will do that, and the right price depends in large part on the current absorption rate in that particular market. Below are the steps necessary to find out what the “absorption rate”:
- First, determine the number of homes closed in your market segment over a specific period — say, 12 months. You can get this data from your local MLS or your favorite Realtor www.primacyrealestate.com
- Next, divide the number of homes closed by the number of months in the period — in this case, 12. This calculation gives a per month absorption rate.
- Last, divide the rate into the number of current listings. This yields the months’ supply of homes.
Six months’ supply is considered a balanced normal market — and this is when the number of listings roughly equals the number of buyers. Numbers over six months represent a typical buyers’ market and those below six, a sellers’ market.
To assess sales trends, you can also calculate supply over shorter six- and three-month periods. “Price in real estate is mostly a matter of supply and demand, just like in every other industry”.
Once you have these basic calculations down pat, you can focus on absorption in particular neighborhoods or price ranges. A Realtor showing clients local absorption rates will give Sellers the information they need to price their homes to sell. “Once they’ve arrived at a price, the Realtor can decide whether he wants to spend his marketing dollars selling it”. If the Sellers don’t price the home realistically, then the Realtor should seriously consider taking a pass on that listing.
Even in a hot market, it’s rare for more than 50 percent of homes to sell. Here is a way to calculate the odds of selling any one home and the steps to the calculation:
- Search the MLS to determine how many transactions have closed in the last six months.
- Divide that number by the number of new listing that came onto the market during the same six months. (Don’t include listings that expired and then were re-listed.)
- This equation gives you the percentage of homes entering the market that actually sold. For example, if 100 homes sold and 200 were listed, the odds of selling are 50 percent.
Advertizing (or Publishing) - A copy of the Notice of Trustee Sale must be published once a week for three weeks.
Asset Manager - An individual responsible for assigned REO properties belonging to lending institutions.
Assignment of Deed of Trust - A written document, that transfers the beneficial interest in a note and deed of trust from one to another.
Authorization to Sign as Agent Agreement - Written document given by a beneficiary authorizing an agent to sign a document on their behalf (such as a notice of default).
AVM- Asset Valuation Management.
Bankruptcy - A legal proceeding which allows a debtor to discharge certain debts or obligations without paying the full amount or allows the debtor time to reorganize his financial affairs so he can fully repay his debts. (A bankruptcy does not discharge obligations secured by a deed of trust.)
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 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. Also frequently referred to as the ‘Benny’. The lender or their successor in interest for whose benefit a trust is created and to whom the debt is owed.
Bid Authorization Letter - Your written authorization instructing the trustee to make the initial opening bid at the trustee's sale on the lender's behalf. This form will also advise our office of any additional amounts to be included in the opening bid, (total Debt), such as funds advanced by you to pay delinquent real estate taxes, etc.
Breach - The failure without legal excuse to perform any promise made in a contract. A breach is stated in the notice of default.
BPO - Brokers Price Opinionis the essential alternative valuation tool for financial institutions currently pursuing home equity lines of credit, refinancing, loss mitigation and collection efforts. Locally licensed real estate professionals that know the local market trends commonly perform the BPO. These licensed real estate professionals are also able to produce a more detailed observation of the valuation. The standard BPO guideline follows the Freddie Mac and Fannie Mae valuations guidelines.
Estimate of probable selling price of a residential property based on selling prices of comparable properties in the area or a drive-by inspection, often used by a mortgage servicer as an alternative to a full property Appraisal when a loan is placed in default or loan terms are modified. Also called comparative market analysis.
BPO - Drive-By - is the essential alternative valuation tool for financial institutions currently pursuing home equity lines of credit, refinancing, loss mitigation and collection efforts. Locally licensed real estate professionals that know the local market trends commonly perform the BPO. These licensed real estate professionals are also able to produce a more detailed observation of the valuation. The standard BPO guideline follows the Freddie Mac and Fannie Mae valuations guidelines.
BPO - Interior - This 3 page report provides a detailed value of the property with interior and exterior photos. This report is similar to an appraisal but less expensive. Our clients commonly use this for Appraisals Reviews, and 2nd Broker Price Opinions.
BPO/AVMV - A report as an exterior or interior version. It combines the BPO and an AVM to produce a real estate valuation more detailed than a traditional AVM. As an exterior form, the client will receive a value with 3 sold comparable, 3 active comparables, a front exterior photo of the property, street view and the range of values.
Cash-for-Keys - An agreement between the foreclosed homeowner and the REO Department. The previous owner-occupant of the property agrees to immediately move and vacate the premises in exchange for an agree dollar amount.
Credit Counseling - Under the new bankruptcy law which took effect in October of 2005, those wishing to file bankruptcy must complete an approved credit counseling course within the six (6) months prior to filing.
Declaration of Default - A written document that instructs the trustee to prepare and record a notice of default and if necessary, to sell the secured property in order to satisfy the unpaid obligation. This document does not require the acknowledgment of a notary public or recording and is merely retained by the trustee in their foreclosure file.
Deed in Lieu of Foreclosure - The voluntary surrender of property by an owner/borrower to a lien holder that eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non Acceptance with the County Recorder.
Deed of Trust - A written document, describing the real property that is being given as security for the repayment of an obligation.
Discounted Pay-off - The pay-off of a mortgage loan where the lender accepts an amount less than the actual amount owed to pay-off the loan.
Equity Deficient - A property is Equity Deficient when, if sold, sales proceeds would not fully pay off existing mortgage debt.
Endorsement / Datedown - A continuation of the trustee's sale guarantee that reports any changes in the status of the property being foreclosed. Such "date downs" are requested from the title company prior to preparation of the notice of trustee's sale and prior to the trustee's sale.
Estoppel Certificate - An instrument executed by the mortgagor setting forth the status of and the balance due on the mortgage as of the date of the execution of the certificate.
Eviction - See "Unlawful Detainer."
Extension Agreement - An agreement (normally written) giving additional time to pay an obligation.
Federal Tax Lien - An obligation to the United States government as a result of nonpayment of federal income taxes.
Field Asset Verification (FAV) - A drive-by property evaluation of residential real estate, performed by a licensed real estate agent or appraiser. The FAV combines the field agent’s drive-by opinion of value with a supporting nearby comparable sale and other available public information about subject property. The FAV is not an appraisal and does not include either (a) a physical inspection of the interior of subject property, or (b) photographs of the interior or exterior of subject property.
Forbearance Agreement - An agreement between a mortgage holder and a borrower that lays out a specific loan payment plan and puts a stop on the foreclosure action so long as the borrower meets the terms of the agreement. The payment plan includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond its original term. A Forbearance Agreement is a tool that allows the borrower to keep the property.
Foreclosure (judicial) - 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.
Foreclosure (non-judicial) - A popular term used to describe the procedure followed in enforcing a creditor's rights when a debt secured by any lien on property is in default; however, the correct term for a "Foreclosure" involving a deed of trust is a "Trustee's Sale Proceeding."
Foreclosure Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Foreclosure Department” is often times used when referring to the “Loss Mitigation Department”.
Home Value Explorer (HVE) - An effective tool to value residential property. The Freddie Mac “HVE” is the most precise AVM available and offers true national coverage with data in over 2,500 counties. The HVE actually encompasses several models rolled into a single product, for one low cost. When you use the HVE you benefit from Freddie Mac's Combining Process, which is a unique proprietary algorithm that blends multiple model estimates returned by the Repeat Sales model and the Hedonic model. This process is able to provide a more accurate estimate than either model would on its own.
Important Notice - A written document required by California law to be a part of the recorded Notice of Default. This document is completed by our office and attached to the Notice of Default (as page 1) prior to recording. It sets forth the reinstatement amount as of a specific date and contains certain language directed to the borrower and emphasizes the fact that a foreclosure proceeding has been initiated.
Invalid - Not legally sufficient; no binding force.
IRS Form 1099-C - Issued by those canceling all of part of a debt to the person receiving debt relief. Note: The cancelled debt may not need to be reported as income. For more on a 1099-c, please go here http://www.irs.gov/
Junior Lien - A legal claim upon real property recorded subsequent (or recorded prior but has subordinated) to another legal claim upon the same real property. 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.
Limited Power of Attorney - A recorded document which authorizes someone to act as attorney-in-fact in a specific manner for someone else.
Lis Pendens - A recorded notice of pending legal action, which notifies prospective purchases and encumbrances that any interest acquired by them in a property, litigation is subject to the decision of the court.
Loan Modification Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Loan Modification Department” is sometimes used when referring to the “Loss Mitigation Department”.
Loss Mitigation Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through their Loss Mitigation Departments.
Loss Mitigation Representative - Individual employed by the bank assigned to the REO asset.
Mailing - A copy of the Notice of Trustee’s Sale must be mailed (certified and first class) at least 20 days before the foreclosure sale to the borrower and to anyone who was entitled to receive a copy of the Notice of Default and Secretary of State and IRS, if applicable.
Modification Agreement - A written document, signed by the beneficiary and the borrower that alters the terms of either the note of deed of trust.
NOD - Short for Notice of Default.
Nonmilitary Affidavits - A sworn statement, in writing from the beneficiary or his agent which declares that the property owner is not entitled to any rights under the Soldiers and Sailors Civil Relief Act of 1940.
Note - A written document, (promise to pay), that sets forth the amount of the obligation and the terms of repayment.
Notice of Default - A written document that gives constructive notice of a trustor's failure to perform his obligation under a deed of trust. This document does not require the acknowledgment of a notary public and must be recorded. An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.
Notice of Rescission - A written document that cancels or annuls the effect of a notice of default when a default has been cured (reinstated). This document does not require the acknowledgment of a notary public, but must be recorded with the county recorder in the county in which the property is located.
Notice of Trustee’s Sale - A written document that sets forth the day, date and time of the trustee's sale, describes the property to be sold and gives an estimate of the unpaid debt as of the first publication debt. This document is prepared by the trustee and does not require the acknowledgment of a notary public and must be recorded with the county recorder in the county in which the property is located at least 14 days prior to the scheduled sale date. The notice of trustee's sale must be arranged to be published in a qualified newspaper in the city (or judicial district), in which the property is located. This publication must appear for 3 consecutive weeks, with the first publication date being at least 20 days prior to the sale date.
PAA C.A.R. Form - Short Sale Residential Agreement Addendum.
Postponement - A verbal announcement made at the time and place of the scheduled trustee's sale that establishes a new date or time for the trustee's sale. The sale cannot be changed from the originally noticed location.
Preliminary Injunction - A judicial order granted by a judge of the Superior Court, which prohibits the trustee from proceeding with any further action on a specific foreclosure file until a trial is held or settlement reached. This occurs when there is a dispute between the owner of a property and the beneficiary. A Trustee's Sale cannot be held any sooner than seven (7) days from the dismissal of the action or the expiration of a restraining order, injunction or stay from any court of competent jurisdiction. However, the order or any amendment thereto may expressly provide for an earlier sale date.
Pre-Publication Period - The three month period following the recording of the notice of default. Prior to 1986 this period was called the reinstatement period.
Present Owner, Current Owner, New Owner - The successor to the Trustor named in the deed of trust and now the owner of the property.
Promissory Note - See "Note."
Property Condition Report (PCR) -
- Fast, Objective Property Condition Inspections You Can Trust
The FNIS Property Condition Report (PCR) helps mortgage originators and lenders to quickly verify subject property condition and conformity to the immediate neighborhood through the efforts of our national network of 15,000 real estate professionals and appraisers. - Industry Standards
We use generally accepted practices to provide you with an inspection product you can count on. The Property Condition Report (PCR) is a drive-by property inspection. The PCR features information about the subject property, provides an exterior photograph and identifies any adverse conditions that could negatively affect property value. - Local Real Estate Marketplace Knowledge
Since our field inspection product is prepared by real estate professionals with local real estate knowledge, you get the benefit of their insight about the subject property and how it relates to the neighborhood.
Property Evaluation Report (PER)
- A property evaluation of residential real estate performed by a licensed real estate agent or appraiser
- The PER is based upon a direct sales comparison approach
- The field agent value conclusion is supported by three nearby comparable properties that have recently sold and public records information
- The PER comes as an interior (PERi) or exterior report, with or without photos
- The PER is not an appraisal
Publication Letter - This letter is sent to the lender by the trustee. When completed and returned, it authorizes the trustee to proceed with the scheduling of the trustee's sale and preparation of the notice of trustee's sale.
RBPO – Residential Brokers Price Opinion - See BPO…
Reconveyance - A recorded document which gives notice that the loan secured by the identified deed of trust has been paid in full.
Reinstatement - To bring the loan current. Borrower may reinstate up to five (5) business days before foreclosure sale. A curing of a default and restoration of the loan to current status through payment of past-due amounts together with the fee and expenses of the trustee.
Reinstatement Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Reinstatement Department” is sometimes used when referring to the “Loss Mitigation Department”.
Reinstatement Period - This is the interval from the date the notice of default is recorded until five business days prior to the date of sale during which time a default may be reinstated/cured.
Request for Notice - A recorded document which requests a copy of any notice of default and any notice of sale to be sent to the requester at the address shown. See California Civil Code section 2924b(1).
Rescission - See "Notice of Rescission."
Request to Prepare Notice of Default - See "Transmittal Form."
Return and Account of Sale by Trustee - An itemization prepared by the trustee or his agent and sent to the successful bidder at the sale. It gives a complete accounting of the successful bid.
Sheriff Sales - A sale of property by the sheriff under authority of a court's writ of execution in order satisfy an unpaid obligation.
Short Sale - The sale of a home which is completed through negotiation with the existing lender(s) in which the lender(s) agrees to accept less than the full amount owed them to satisfy the debt allowing the debt to be paid off, ‘short’.
Short Sale Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Short-Sale Department” is sometimes used when referring to the “Loss Mitigation Department”.
Soldier’s and Sailor’s Relief Act - An act passed by Congress in 1940, for the financial protection of those persons serving in the military service. This act is the reason for the completion of the nonmilitary affidavit forms.
Statement/Invoice - An itemization of the trustee's fee and expenses incurred at the conclusion of the foreclosure proceeding (cancellation, reinstatement, payoff or completed sale).
Substitution of Trustee - A written document that appoints a successor trustee to the trustee named in the deed of trust, (or present trustee). This document must be acknowledged by a notary public and recorded with the county recorder in the county in which the property is located.
Temporary Restraining Order (TRO) - A judicial order which is granted by a judge of the Superior Court. This order temporarily prohibits the trustee from proceeding with any further action under a specific foreclosure file until a trial is held or settlement reached. A TRO is effective, generally, for a 21 day time period or until a hearing is held and the judge decides whether a preliminary injunction will be granted or denied.
Toll - To temporarily stop. Frequently used to describe the tolling (stopping) during bankruptcy of any further acts in foreclosure.
Transmittal Form (TS138) - This is the "Request to Prepare Notice of Default" transmittal form which is completed by the lender and forwarded to T.D. Service Company together with the note, deed of trust, assignments and other necessary loan documents. This form sets forth all pertinent information to enable us to prepare the default documents.
Trustee (Foreclosure Trustee) - A Foreclosure Trustee is appointed by the mortgage company when a mortgage reaches the default status for the purpose of processing the foreclosure.
Trustee’s Deed Upon Sale - A written document which is prepared and signed by the trustee when the secured property is sold at a trustee's sale. This document transfers ownership to the successful bidder at the sale; must be recorded with the county recorder in the county in which the property is located.
Trustee’s Sale - The public auction of the real property, described in the deed of trust, to satisfy the unpaid obligation.
Trustee’s Sale Guarantee - A Title report given to the present trustee when a trustee's sale proceeding has been initiated. This report provides the names of the current owner, all liens and encumbrances recorded and other information pertinent to the foreclosure process. The information is insured to be correct by the title company.
Trustee’s Sale Proceeding (foreclosure) - The term used to describe the non-judicial procedure followed by the trustee in enforcing a creditor's rights when a debt secured on real property is in default.
Trustor - The borrower (or property owner) at the time the deed of trust was created. Trustor is often used to refer to the current owner.
TS138 - See "Transmittal Form."
Unlawful Detainer Action (eviction) - A legal action to remove someone who has unjustly retained possession of real property after one's right to possess has terminated.
Upside Down – The typical definition of a homeowner owing more to the lender than what his property is worth.
Valid - A condition that is legally sufficient; that will be upheld by the courts.
Void - Having no legal force or binding effect. Incurable.
Voidable - A condition capable of being made void, although not necessarily void in itself.
Work-Out Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Work-Out Department” is sometimes used when referring to the “Loss Mitigation Department”.