Definition of Terms

Notice of Default (NOD): This is an official notice form the Lender that the borrower has defaulted on the mortgage. The NOD will be filed by the Trustee at the County Recorder’s Office in the county in which the property is located. “NOD” is common terminology describing the first step in the Foreclosure Process however; it is not used in Arizona. When you hear this term in Arizona, it often refers to the Notice of Trustee Sale (see definition below).

Pre-Foreclosure: The period beginning with the initial mortgage default up to when the distressed property is sold at Trustee Sale or transferred back to the Lender. The length of what is considered a pre-foreclosure varies, depending on state laws and the Lender.

Notice of Trustee Sale: The Lender will prepare, record and publish (in a legal newspaper once each week for at least 3 weeks) a Notice of Trustee Sale that includes a sale date, time and place for the auction of the property. This notice informs the borrower/owners that the Lender intends on selling the property.

Short Sale: AA Real Estate Transaction in which the seller (1) owes more money on the loan than the sale of the property will net and (2) is unable or willing to bring money to closing. The seller may or may not be in pre-foreclosure.

Real Estate Owned (REO): The status of the property when the Trustee Sale is not successful and ownership of the property is transferred involuntarily to the Lender. At this time, the Lender may chose to use a Real Estate Agent to market the property for sale.

Reinstatement: To reinstate a mortgage, the homeowner has to pay all the missed payments, late fees and legal fees that are due to the date that the loan is reinstated.

Forbearance or Repayment Plan: The Lender allows the buyer to pay the missed amount over a period of time or the Lender places the missed payments on the end of the amortization of the loan.

Rent the Property: In some cases, homeowners facing foreclosure will have payments low enough to allow them to rent their property and keep up their mortgage payments.

Sell the Property: If sellers have equity in their property, they can sell it and prevent a foreclosure.

Refinance: If homeowners have sufficient equity and income and their credit has not been too badly damaged, they may be able to refinance.

Mortgage Modification: A loan modification is very similar to a lower interest refinance when the Lender lowers the interest rate on the existing loan to lower the payments.

Short-refinance: This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well.

Deed-in-lieu of Foreclosure: A deed-in –lieu of foreclosure is sometimes referred to as a friendly foreclosure because the homeowner essentially gives the deed back to the bank

Bankruptcy: A bankruptcy may stop a foreclosure and allow homeowners to reorganize their debt and keep their property.

Servicemembers Civil Relief Act (SCRA): This law provides certain protection to military personnel who are in foreclosure in specific situations.

Short Sale: When homeowners owe more on a property than it is currently worth and one of the previous solutions does not apply to their situation, there is the option of pursuing a short sale