Foreclosure Glossary

What Terms Come Up Before a Foreclosure Starts?

The earliest foreclosure terms describe the warning letters you receive and the options you have while the loan is only behind, not yet in a foreclosure case. Federal rules give most homeowners at least 120 days of missed payments before any foreclosure filing, and these words cover that window. Under the federal early intervention rule, your servicer must try to reach you by the 36th day you are behind and send a written notice of your options by the 45th day, so the first of these terms often arrives in that letter.

• An acceleration clause lets the lender demand the whole loan balance at once after a default, instead of just the missed payments.
• A notice of intent to foreclose is a warning letter, required in some states, that says foreclosure is coming unless you catch up by a deadline.
• Loss mitigation is the umbrella term for every alternative a servicer can offer, from a payment plan to a loan modification.
• Forbearance pauses or lowers your payments for a set time, but the skipped amount still has to be repaid later.
• Reinstatement means paying everything you are behind on, plus fees, so the loan goes back to normal and the foreclosure stops.
• Dual tracking is a servicer pushing a foreclosure forward while it is still reviewing your request for help, which federal Regulation X restricts.
• Foreclosure mediation is a meeting with a neutral mediator, available in some states, where you and the servicer try to agree on a workout.
• A deed in lieu of foreclosure hands the home to the lender voluntarily so it does not have to foreclose.

The federal limits on dual tracking are set out in 12 CFR 1024.41. A complete application for help sent more than 37 days before a scheduled sale generally keeps the servicer from holding that sale while the request is reviewed.

Loan Documents and Types of Foreclosure

The loan documents you signed decide whether your lender has to go to court, and that one difference explains much of why foreclosure takes 5 months in some states and years in others.

• A deed of trust is a security document with three parties, you, the lender and a neutral trustee who holds the power to sell the home if you default.
• A power of sale clause is the wording in a mortgage or deed of trust that allows a sale without a court case.
• A substitution of trustee is the recorded document a lender uses to replace the original trustee, often with a foreclosure firm, before a sale.
• Judicial foreclosure runs through a lawsuit, so you can answer in court and nothing is sold until a judge rules.
• Non-judicial foreclosure skips the lawsuit and relies on mailed, posted and published notices before a trustee sale.
• Strict foreclosure is a rare court process, used mainly in Connecticut and Vermont, that gives the lender the title without any auction.

Notices and Court Filings

The notices and filings in a foreclosure are the dated public records that start each legal clock, so the date on each one matters more than anything else in it.

• A notice of default is the formal statement that you have broken the loan terms, and in many non-judicial states it is recorded to start the process.
• A lis pendens is a recorded notice that a lawsuit over the property is pending, and it is usually the first public sign of a court foreclosure.
• A judgment of foreclosure is the court’s order that the debt is owed and the home can be sold to pay it.
• A notice of trustee sale gives the date, time and place of a non-judicial auction, and it must go out a set number of days before the sale.

What Happens at the Foreclosure Sale?

The foreclosure sale is a public auction run by a trustee, sheriff, clerk or court officer, and these terms explain how bidding works and how ownership passes to the buyer.

• A trustee sale is the auction held under a deed of trust without a court case.
• A credit bid is the lender bidding the debt it is owed instead of cash, which is why lenders win so many auctions.
• An upset bid is a higher bid filed after the auction, allowed in a few states such as North Carolina, that reopens the sale.
• A certificate of sale is the document issued to the winning bidder right after the auction, before final title passes.
• A confirmation of sale is a judge’s approval of the auction, required in some court-based states before the sale is final.
• A sheriff’s deed transfers the home to the buyer after a court-ordered sale.
• A trustee’s deed does the same after a non-judicial trustee sale.

What Terms Apply After the Sale?

The terms that apply after a foreclosure sale cover whether you can still get the home back, who gets any leftover money and whether you can still owe the lender.

• The right of redemption lets a former owner buy the home back, either up to the sale or for a set period after it, depending on the state.
• Surplus funds are the money left when the winning bid is more than the debt and costs, and they go to junior lienholders and then to the former owner.
• A deficiency judgment is a court order to pay the shortfall when the sale brings in less than you owed.
• A writ of possession is the court order that lets a sheriff remove occupants who stay after the sale.
• Cash for keys is a payment from the new owner to occupants who agree to move out by a date and leave the home in good condition.