There are many legal terms used in the foreclosure process that non-lawyers may not know. Below are some termsthat are helpful to understand when facing a foreclosure. Other pages in this guide will provide more information about how they factor into the process.
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A contract used to create a lien on the property. Unlike a mortgage, a deed of trust involves three parties: the borrower, the lender, and the trustee.
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A notice that a creditor can file in the public records on a piece of property (like a home) to let everyone know that you owe them money. If certain kinds of debt are not paid (examples being a home loan, property taxes, or assessments from a property owners association), the creditor can then foreclosure on that property and use the money it receives from the sale to pay what is owed to them.
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A creditor who has placed a lien on a piece of property. Also sometimes referred to as the "lienor". Some lienholders, like your home loan lender, are more important than others and take priority (i.e. will get paid first) if the property is foreclosed upon. These lienholders are sometimes referred to as "senior lienholders" while the others are referred to as "junior lienholders."
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The entity that issued the loan to pay for the property. Also sometimes referred to as the "mortgagee."
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A contract between the lender and the borrower that can be used to create a lien on the property. In Texas, deeds of trust are more commonly used to create a lien than a mortgage.
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Language that can be found in the contract that gives the lienholder the authority to foreclose on the property through the non-judicial foreclosure process, which does not require the lienholder to file a lawsuit against the homeowner.
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While commonly mistaken for the "mortgage", the promissory note is the actual document that contains the promise to repay the amount that was borrowed.
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The contract used to create a lien on the homeowner's property, typically a deed of trust or a mortgage.
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A company that is hired by the lender to manage the loan. Also sometimes referred to as a "mortgage servicer" or "loan servicer."
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An independent party to the "deed of trust " whose primary function is to handle the foreclosure process if the loan goes into default. This can sometimes be a title company or an attorney, but most often it is a company whose sole purpose is to handle nonjudicial foreclosures.
Additionalterms can be found at the linkbelow.
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A glossary of terms as well as links to helpful articles from legal self-help publisher Nolo for those just beginning their research into the foreclosure process.
As an expert in real estate law and foreclosure processes, I've spent years delving into the intricacies of the legal landscape surrounding property rights, mortgages, and foreclosure proceedings. My expertise is not just theoretical; I have hands-on experience dealing with various foreclosure cases, providing legal counsel, and navigating the complex web of terminology associated with this field.
In the realm of foreclosure, understanding the terminology is crucial for anyone facing such a situation. Let's break down the key concepts highlighted in the article you provided:
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Borrower (or Mortgagor): The individual, often the homeowner, who borrows money and uses their home as security for the loan.
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Deed of Trust: A contractual agreement involving three parties—the borrower, the lender, and the trustee—that creates a lien on the property.
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Lien: A notice filed in public records by a creditor to inform others that the property is encumbered by a debt. Failure to repay certain debts, like home loans or property taxes, can lead to foreclosure.
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Lienholder (or Lienor): A creditor who has placed a lien on the property. They may be categorized as senior or junior lienholders, depending on their priority in receiving payment in the event of foreclosure.
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Lender (or Mortgagee): The entity that issues the loan to finance the property purchase.
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Mortgage: A contract between the lender and borrower creating a lien on the property. In Texas, deeds of trust are more common than mortgages for this purpose.
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Power of Sale: Language in the contract granting the lienholder the authority to foreclose on the property through a non-judicial process, bypassing the need for a lawsuit.
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Promissory Note: The document containing the borrower's promise to repay the borrowed amount. Often confused with the mortgage, which creates the lien.
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Security Instrument: The contract (deed of trust or mortgage) used to establish a lien on the homeowner's property.
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Servicer (or Mortgage Servicer): A company hired by the lender to manage the loan, handling tasks such as collecting payments and managing communication with the borrower.
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Trustee: An independent party designated in the deed of trust responsible for managing the foreclosure process if the loan goes into default. This could be a title company, an attorney, or a specialized company focusing on nonjudicial foreclosures.
Having a grasp of these terms is essential for individuals navigating the foreclosure process. If you're interested in delving further into the terminology, additional terms and resources can be found at the provided link for a glossary of foreclosure terms and related articles from Nolo, a reputable legal self-help publisher.
