LEGAL TERMS
The participants in the lawsuit:
Defendant(s)—the individual(s) or entity(ies) being sued
Master in Equity/Special Referee—The title for the type of judge that most commonly decides foreclosure cases
Plaintiff—The individual or entity who brought the lawsuit
The documents in a lawsuit:
Answer—A written document, filed by a defendant, to respond to a plaintiff’s complaint
Complaint—A written documents that the plaintiff files that starts a lawsuit. A standard foreclosure complaint typically asserts that the plaintiff holds a note and a mortgage, that the one or more defendants defaulted under the terms of the note or mortgage, and asks the Court for a judgment of foreclosure against the defendants.
Judgment of Foreclosure—A court order that will establish how much money is owed on the Note and Mortgage and will order a sale of the real estate described in the Mortgage to pay the debt.
Lis Pendens—A document filed by the plaintiff to let everyone who is not already a participant in the lawsuit that a lawsuit has been filed against a certain piece of real estate.
Notice of Right to Foreclosure Intervention—A Notice that informs each defendant who is an Owner, Mortgagor, or Debtor under the Note and Mortgage relevant to the case that (s)he can ask to participate in Foreclosure Intervention.
Summons—The document filed with the Complaint that tells defendants that they must Answer the Complaint within 30 days of being served with the Complaint
Other lawsuit terms:
Appraisal Rights—the right to have a property appraised after foreclosure sale to possibly reduce the amount of a Deficiency.
Default—What happens when a Defendant does not Answer a Summons and Complaint timely. This permits a court to accept as true whatever the Plaintiff says in the Complaint.
Deficiency judgment—a money Judgment taken against a Mortgagor if the real estate does not sell for enough to pay off the entire debt owed to the Plaintiff. If a Plaintiff seeks a Deficiency judgment, it usually will be requested in the Complaint and granted in the Judgement of Foreclosure.
Foreclosure Intervention—a process that occurs, if at all, at the beginning of a Foreclosure Lawsuit, whereby the Plaintiff and Defendant engage in Loss Mitigation or attempt to come to a negotiated settlement before a final hearing occurs in the Lawsuit. This process is established by Supreme Court Administrative Order 2011-05-02-01.
Lawsuit or Suit—The name for the legal process by which a Plaintiff seeks relief from a court against a Defendant. A Lawsuit begins with the filing and service of the Summons and Complaint.
MORTGAGE INDUSTRY TERMS
The parties involved a mortgage loan:
Borrower—The person(s) who signs the Note as part of the financial transaction to borrow money. This person agrees to be personally responsible for repaying the money borrowed. The Borrower and Mortgagor can be the same person, or they might be different people.
Mortgagor—The person(s) who signed the Mortgage as part of the financial transaction to borrow money. If the Mortgagor is not also the Borrower, then (s)he only stands to lose his or her real estate if the Note is not repaid. (S)he is not personally responsible for repaying the Note unless (s)he is also a Borrower.
Owner/Investor/Mortgagee—The party on the other side of the Note and Mortgage. This is the person or company that is entitled to receive the payments made pursuant to the Note and also entitled to foreclose the Mortgage if payments are not made according to the terms of the Note. This company or person usually does not deal directly with the Mortgagor. Two common Owners/Investors that purchase many mortgages are Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation)
Servicer—The company that collects payments from the Borrower or Mortgagor and sends them to the Owner/Investor/Mortgagee. The Servicer does many other things such as sending notices, conducting Loss Mitigation, and monitoring the foreclosure process for the Owner/Investor/Mortgagee.
Mortgage Insurer—A company that has agreed to pay insurance proceeds to the Owner/Investor/Mortgagee if the Mortgagor defaults on the Mortgage. A common Mortgage Insurer the Federal Housing Administration (FHA). Mortgage insurance is different from homeowners insurance or title insurance.
Common lending and servicing documents:
Forbearance Agreement—A legal contract whereby the Owner or Servicer agrees to forbear, i.e. defer, collection of payments that are otherwise due based on the payment schedule in the Note. These payments are often due in full at the end of the forbearance period.
Deed in lieu of foreclosure—An agreement between a Borrower/Mortgagor who cannot pay the Mortgage anymore and an Owner or Servicer where the Borrower/Mortgagor agrees to deed the real estate to the Owner or Servicer in exchange for the Owner or Servicer not pursuing a Foreclosure Lawsuit.
Loan Modification Agreement—A legal contract that adjusts the terms of the Note. Typically it modifies some or all of the following Note terms: interest rate, loan term, loan balance, and/or mortgage payment amount.
Mortgage—The legal contract that a Borrower signs saying that the Mortgagee can force a sale of the real estate described in the Mortgage if a Borrower Defaults, such as by not paying the full mortgage payment, not paying property taxes, etc.
Note (or Promissory Note)—The legal contract signed by the Borrower where the Borrower agrees to repay a certain amount of money over a period of time at a given interest rate.
Repayment plan—A legal contract between the Borrower/Mortgagor and the Owner or Servicer whereby the Owner or Servicer agrees to permit the Borrower/Mortgagor to catch up past due payments by paying part of the past due amount over a period of time, usually 3 months or more.
Short Sale Agreement—A legal contract between a Borrower/Mortgagor who cannot pay the Mortgage anymore and an Owner or Servicer where the Owner or Servicer agrees to accept less that the total amount of the debt under the Note and Mortgage. Typically a Short Sale will satisfy all outstanding debt the Borrower owes under the Note.
Trial Plan—A short term agreement between a Borrower/Mortgagor and the Owner or Servicer that usually precedes a Loan Modification Agreement. The primary purpose of the Trial Plan is to ensure that the Borrower/Mortgagor can make the estimated payments under the Loan Modification Agreement.
Other Legal and Financial Terms:
Acceleration—The legal term for a right that the Owner/Investor/Mortgagee has under the Note/Mortgage after a Borrower/Mortgagor Defaults. Acceleration permits the Owner/Investor/Mortgagee to stop accepting regular payments and instead demand payment of all sums due under the Note and Mortgage in one lump sum.
Balloon—A financial term for what occurs when a mortgage payment is not large enough to pay off the Mortgage’s Principal Balance by the end of the Loan Term. This usually results in the Borrower owing a large lump sum at the end of the Loan Term.
Closing—The legal term for what occurs when a Borrower reviews and officially signs the Note, Mortgage and other Closing documents.
Default—A legal term describing a circumstance where the Mortgagor/Borrower has breached a term of the Note or Mortgage. Default leads to Acceleration.
Interest—The amount of money that a lender charges for the use of money. Money paid as Interest does not pay down the Principal balance.
Lien—A term for a legal right that one person has to have property sold in order to satisfy a debt. Also called a security interest. A Mortgage is a type of lien.
Loan Term—The length of the Note and Mortgage, usually expressed in a number of months or years.
Loss Mitigation—Generally a term for any process or program that a Servicer uses to permit a Borrower/Mortgagor who is behind on a loan to come current, usually without having to pay the entire past due amount in one lump sum.
Origination—The process that a mortgage company used to underwrite and approve a Mortgage loan. Many statutes and regulations govern what kind of information Borrowers must receive during the Origination process, including at Closing.
Principal—The amount of money that a Borrower borrows under the Note. Most conventional mortgage payments include both an Interest payment and a Principal payment.