Understanding Mortgage Foreclosure Terminology

By Sheryl Landrum
Mortgage Credit Problems Columnist

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The thought of a mortgage foreclosure is unsettling and overwhelming for most homeowners; however, having an understanding of the terminology and the process used in the foreclosure proceedings many help homeowners avoid the foreclosure process if they fall behind on their monthly mortgage payments.

The ABCs of foreclosure terminology:

  • Foreclosure is the process in which a lien holder, usually a lender or government entity, takes possession of or sells a property to collect the amount owed them on a defaulted mortgage loan, uncollected taxes, or judgment.
  • A notice of default (NOD) is a publicly recorded notice that the homeowner has missed scheduled mortgage payments. Some states require lenders to record this notice before initiating foreclosure proceedings.
  • Lis Pendens is a publicly recorded notice of pending litigations against a property owner and may also be required by states prior to beginning the mortgage foreclosure procedure.
  • Notice of Sale is a recorded document announcing the public sale of property to recover mortgage debt. It is mailed to the property owner and advertised in local publications and provides the date, time, and location of the property sale.
  • Foreclosure Sale is officiated sale of the property that is governed by state law.
  • REO stands for real estate owned by the lender as a result of the foreclosure sale.
  • Reinstatement is the stoppage of mortgage foreclosure proceedings through the payment of the missed mortgage payments or through a forbearance agreement in which the lender agrees to add the defaulted payments to the mortgage balance and/or allow the borrower a reprieve from making his scheduled payments.
Remember, often there is recourse if you get behind on your monthly mortgage payments. Lenders can lose money on foreclosure proceedings and will most likely work with a borrower to avoid foreclosing. If you find yourself in mortgage trouble, call your lender immediately, explain your concerns, and stop the home foreclosure process.

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