Acceleration Clause — part of the mortgage that states if “X” number of payments are missed the lender has the right to dismiss any payment agreements and demand payment in full of the outstanding loan and associated fees. At this stage the lender will not accept monthly payments.

Assumption — in reference to foreclosure, allowing a subsequent buyer to take over payments on the defaulted seller’s home. The new buyer would be responsible to pay the seller the difference between the selling price and the balance owed on the loan. The new buyer would have to be approved by the lender in most situations.

Deed in Lieu of Foreclosure — As an option to foreclosure, the deed is transferred to the lender in exchange for cancellation of the mortgage debt. This is a good option for the homeowner if s/he has little or no equity in the home, and has lost the ability to maintain all monthly obligations.

Default — A payment is defaulted if it remains unpaid after the grace period ends. A 4% to 5% or greater late payment is assessed after each late payment. In most cases the loan is not technically in default until it is two months or more past due.

Delinquency — A payment is delinquent when it is unpaid between the original due date and the end of the grace period, typically 15 days.

Foreclosure — The process by which a home owner loses their home due to non-payment of mortgage, violating the due on sale clause, failing to keep taxes and insurance paid, or failing to maintain the home.

Forbearance — Arranging the arrearages of the payment to be spread out over a specified time frame in addition to regular monthly payments in order to repay a past due balance.

Loan Originator — The loan officer who represents the company that delivers the mortgage to the customer.

Loan Servicer — The company that collects house payments, disburses funds, and does record keeping following the loan closing.

Loss Mitigation — The process of attempting to collect past due mortgage payments.

Modification — Changing the terms of a loan by either reducing the interest rate and thereby lowering the principle and interest portion, or by extending the term of the loan by putting past due amounts at the end of the monthly payments.

Mortgagor — Persons who have entered into the contract to purchase a home.

Mortgagee — The company financing the mortgage.

Notice of Intent — Legal paper sent by certified mail or hand delivered that indicates the lender’s intention to proceed with foreclosure or sheriff sale.

Pre-foreclosure Sale — References selling a home that was financed with a conventional mortgage for less than the amount due on the loan, and holding the borrower harmless because the private mortgage insurer pays the difference between the sale price and the amount owed.

Redemption Period — The period of time after the foreclosure or sheriff sale when the homeowner has the opportunity to re-acquire his/her home for the full amount owed on the home.

Reinstatement — When all past due amounts are caught up and the loan is once again being paid by the terms of the agreement. May also refer to a process allowing arrears to be forgiven until the loan is paid in full, and then requiring repayment at a 0% interest rate, This is available only for Veterans Administration loans when the household income is affected by a call to duty.

Short Sale — The FHA equivalent of a pre-foreclosure sale in which the FHA agrees to share some or all of the loss with the seller.

Straight Sale — As a way to avoid foreclosure, borrowers are sometimes urged to put the home on the market. The foreclosure process may be delayed if the borrower notifies the servicer that the property is for sale.

Temporary Injunction — A court order commanding the lender and the lender’s lawyer to stop the foreclosure process. In order for the to be used, the homeowner must retain an attorney. This process should only be considered when the homeowner can prove that their financial condition will improve.

Workout Plan — The process where the loan servicer in the loss mitigation department requests W-2s, pay stubs, bank statements, child support, and other debt information in order to develop the best plan to pay the arrearage and bring the loan current.