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Orlando Foreclosure Attorney
Orlando, Florida 32801
Foreclosure Attorney Michael Stites
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Acceleration (accelerate) When the borrower is required to pay the full amount of the loan immediately after missing so many payments. When the loan was originally created there is usually an “acceleration clause” in the promissory note. This says if the borrower gets behind on payments the lender can require the full amount to be paid immediately. This acceleration is what allows the lender to foreclose on the home. In Florida and many other states there is an option to reinstate the loan by paying back all missed payments, interest, taxes, and attorneys fees. This will cancel the acceleration and the foreclosure.
Example: “You have missed 4 payments so we have accelerated your loan. The full amount is now due immediately”
“Our family decided to go with an adjustable-
Ad Valorem tax
Example: “The new lender attached a signed affidavit from the original lender to the foreclosure summons. The affidavit stated the new lender was now the owner of the promissory note. This helps prove to the court they have standing to foreclose on the home.”
Amortization – Making your monthly payments over a specified period of time. At the beginning of a loan, a portion of each payment made with go to paying the principal (paying down the total loan amount) while the rest goes to paying interest on the loan. As the time progresses and payments continue to be made on time, more will be applied to the principal and less toward interest.
Example: “Borrowers usually will experience amortization with a mortgage or bank loan. At the beginning of a loan more of the payments will be applied to paying interest on the loan. ”
Example 2: “Let’s say someone takes out a 15 year $100,000 home loan with a 6% interest rate. On a $100,000 home loan that takes 15 years to pay back (at 6% interest) the payment would be $843.86 a month. In the first month’s payment of $843.86, only $343.86 would go to paying down the loan and $500.00 go toward paying for interest. The final month’s loan payment $839.66 would go toward paying off the loan and only $4.20 would go toward paying interest.”
Amount Financed – This is the total amount of money you are receiving when you take out a loan. You will be paying back a much larger amount through interest, especially with a home loan.
Example: “If the amount financed is $100,000 with a 15 year payment plan at a 6% interest rate you will eventually pay back a total of $151,864.23 by the end of the loan”
Annual Percentage Rate (APR) – This is the yearly interest rate of a loan which is regulated by federal law. If you take out a loan the APR is the percentage that you pay in interest for a year. To get an idea how much a loan will actually cost you take into to account the APR.
Example: “If a credit card company charges 2% per month their APR would be 24% because 2% x 12 months = 24%”
Appraisal –A professional assessment of the value of an object usually compared to the surrounding marketplace. It is also sometimes confused with an opinion of how much an object is worth.
Example: “A company was hired to do a property appraisal of your home. They found the property to be worth $125,000”
Arrears – Past due payments on a loan. When payments are missed on a home loan, taxes, interest, insurance, and debt collection costs are accumulated. The arrears is the total amount past due. To bring a mortgage current, arrears must be paid.
Example: “After paying $4,000 in arrears John Doe became current with his mortgage and the foreclosure lawsuit was dropped.”
Assignee – A person or company that has been given title of a mortgage (mortgage assignee)
Assignee Liability – When an assignee is liable for unlawful acts that were performed by the original lender. This can become useful when a lawsuit is filed against the foreclosing party that alleges the lender was predatorily lending and violated state or federal laws. This is more common in nonjudical states.
Example: “Even though the foreclosing party was not the original lender, John Doe was able to accuse them of predatory lending through assignment liability.”
Assignment – A legal document that shows the title of a mortgage and promissory note has been moved from the original owner to a new owner (the assignee). Basically this is the paper that proves the title was transferred to a new owner. There are certain cases where there is no paper assignment. Companies like MERS make assignments electronically which can complicate things when a lender is trying to foreclose. If the lender is unable to locate the assignment paperwork that shows they have standing to foreclose, the lawsuit may be thrown out.
Example: “The foreclosing party may have a more difficult time foreclosing on a home if they are unable to produce the mortgage assignment.”
Attachment – The legal procedure that permits a lender to attach a lien to an item that you own due to a contract that you signed and agreed to. If there is a lien attached you your car because you financed it, the lender can take your car if you fail to make payments. The same thing is true for foreclosure.
Example: “When John Doe financed his home, the lender drafted a mortgage with a lien attachment to the property. This prevents John from selling the home without the approval of the lender.”
Automatic Stay – A court order that is automatically issued when someone files for bankruptcy. The bankruptcy court prevents just about all collection activities from creditors. While there is an automatic stay any pending lawsuits are placed on hold, no payment demands can be made, and they cannot report to the credit bureaus for debt.
Example: “When John Doe filed for bankruptcy, the court issued what is known as an “automatic stay” which is used to prevent all creditors from collecting payment from you. This included his home foreclosure.”
Balloon Payment – When a loan requires a large final payment at the end of a loan that covers the rest of the principal. The average home owner is usually unable to make this payment before the end of the loan. The main benefit of a balloon payment loan is usually lower interest rates/ lower monthly payments. Often times the borrowers will either sell the home or attempt to refinance prior to the end of the loan.
Example: “If you take out a 10 year $100,000 loan the lender may require you to pay back $85,000 over a period of 10 years. The last payment will cover the $15,000”
Bankruptcy Code – This follows US Code Title 11 of Federal Law that directs how bankruptcy should be handled in court.
Bankruptcy Petition Preparer (BPP) – A person or business, who is not a lawyer, that prepares the legal paperwork for filing bankruptcy. The advantage to using a BPP is they are usually less expensive than attorneys. The disadvantage is they cannot offer you legal advice about what debts you should and should not include when filing for bankruptcy nor can they represent you in court.
Certificate of Sale – Legal paperwork awarded to the bidder who won the auction at a foreclosure sale. This document shows the new owner’s claim to the property after the original borrower’s redemption period has expired (if there was one.)
Chapter 7 Bankruptcy – When a person or company files chapter 7 bankruptcy they allow the property be auctioned off to cover debt they owe to collectors. Some property can be exempt from auction. Chapter 7 is more often used by larger companies with assets.
More info on filing chapter 7: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx
Chapter 13 Bankruptcy – Meant for individuals, chapter 13 bankruptcy allows people with a consistent income to create a plan to pay back all or a part of their debt. The borrower submits a repayment plan to creditors with a strategy to repay the debt over the next 3 to 5 years (depending on the individuals income). During the bankruptcy period, debt collectors are not allowed to attempt to collect payment form the individual who file chapter 13.
Example: “After John Doe had exhausted all of his other foreclosure defense options, he filed for Chapter 13 bankruptcy to stop the sale of his home for a few more months”
Collateral – An asset that a borrower puts up for security in order to obtain a loan. An example of collateral would be a car, boat, or real estate property. The borrower permits the lender to place a lien on the asset to help pay for the loan if the borrower stops making payments. If the borrower does default on the loan, the lender can auction off the asset to pay for the loan.
Example: “In 2006, Ford motor company put up its logo and just about all of its assets as collateral to obtain a $23.5 billion dollar loan to rebuild the company”
Complaint – The legal paperwork that starts a lawsuit. This is what the party being sued is served with. It contains the individually numbered complaints against the party that is being sued.
Confirmation Hearing – When the debtor presents their formal Chapter 13 plan to the bankruptcy judge in court. The judge then determines if the debtor’s plan meets bankruptcy code and is practical.
Conforming Loan – A small mortgage loan (currently less than $417,000 as of December 2014) that is eligible to be purchased by Fannie Mae or be backed by the FHA.
Conventional Loan – When a borrower has an awesome credit rating and income they are usually eligible for a conventional loan.
Cramdown – This is what happens during Chapter 13 bankruptcy when a debtor is permitted to keep their assets as long as they offer a repayment plan for fair market value of the asset. Cramdown allows you to reduce the principal balance of the loan to the actual value of the property.
Example: “Say John Doe has a car loan balance of $20,000 but his car is only worth $9,000 when he files for Chapter 13 bankruptcy. Cramdown permits John Doe to reduce his car payments to match the current market value of his car. The other $11,000 gets rolled in with any other unsecured debt he has. John will only have to pay a percentage of the unsecured debt at a later date.”
Credit Bid – When the lender bids on the home it is foreclosing on at a public auction. The bid has to be less than or equal to what is currently owed on the loan. When the bank bids the amount owed it is the same as another buyer bidding with cash.
Creditor – The person or company that money is owed to.
Current Market Value – How much the property could potentially be sold for. You want to get the property appraised to find out how much it will most likely sell for.
Debt Consolidation – When you take some or all of your current debts and take a single loan out to pay for them. It’s convenient because it reduces the number of bills you have to a single payment. When a home owner takes short term debt (credit card debt) and uses the home as collateral to secure the new loan. If the borrower defaults on the consolidated loan they could potentially lose the home.
Debtor – Anyone who owes money to another person or company.
Example: “If John Doe takes out a car loan for $10,000 he is now considered a debtor until he pays the loan back.”
Deed – Signed legal paperwork that permits property to be transferred from own person to another.
Example: “John Doe decided to deed one of his properties to his son after he turned 30.”
Deed in Lieu of Foreclosure – When the homeowner deeds the mortgage over to the bank to avoid foreclosure. Basically the borrower gives the home to the lender in exchange for the lender agreeing to void the mortgage. (The borrower will not owe any more money to the lender) A deed in lieu may be difficult to pull off without an attorney as banks prefer cash over real estate.
Deed of Trust – When a loan is backed by property that was financed. Deeds of Trust usually have a written agreement that allows the lender to sell the property at auction if the borrower stops making payments. A lender does not typically need to go through the court system to foreclose on a home with a Deed of Trust. Florida is not a state that uses deed of trust for home loans, they use mortgages.
A 3rd party holds onto the deed until the loan is paid off in full.
Default – When the borrower does not meet the contractual requirements of the lender, usually by missing payments. If the borrower defaults on a home loan the lender will eventually foreclose on them.
Default Rate – Sometimes known as the default interest rate, this is the interest rate the lender charges a borrower when payments for a loan are past due. The interest rate is generally much higher and will be applied to the amount the borrow is behind. A default rate is usually written in the contract at the beginning of the loan.
Deficiency – This is the amount of money the borrower still owes if a property is sold at foreclosure auction for less then what was owed on it. If permitted by the state, the lender wants they can file another lawsuit to obtain a deficiency judgement against the borrower.
Example: “John Doe still owes $100,000 on his home when the lender forecloses
Deferred Balance Mortgage
Deficiency Judgment – An unsecured money judgment brought against a borrower by the lender if the home was sold for less than what was owed at a foreclosure auction. If a deficiency judgment is entered against the borrower, the lender can garnish wages, place bank levys, and even auction personal property to cover the debt owed. Not all states permit deficiency judgments.
Deficiency Waiver – When the lender signs a written agreement not to saying they will not hold the borrower responsible for the deficiency if a property is sold for less than what was owed. Deficiency waivers are useful for short sales, deed in lieu, and foreclosures.
Example: If the borrower has a left over deficiency of $25,000 the lender provides a written deficiency waiver that says the lender agrees to writes off the $25,000 debt and it is no longer owed
Discharge – A legal requirement that removes the debtor’s responsibility for debts that were discharged at the end of a Chapter 13 bankruptcy. They no longer are required to pay that particular debt.
Discharged Debt – Any debt that is removed at the end of a bankruptcy case.
Example: Let's say you finance a home for $150,000 and after five years you manage to pay down the principal of the loan to $100,000. If the housing market stays the same and you sell your home for exactly what you bought it for ($150,000) the bank would get back the $100,000 you still owe them and you would keep the equity you had of $50,000.
Example 2: Another example of equity would be if the same home went up in value after you purchased it. Let's say after five years you manage to sell the home for $200,000. Your equity would be the $100,000 you get to keep.
Note: A lender is more likely to approve your home loan if there is positive equity in the home you are financing. So if you are buying a home that is below current market value the bank will be more inclined to approve your loan due to less risk. The same goes for if you were to make a larger down payment.
Negative Equity – This is when the current market value of your home drops below what you financed it for. Let’s say you took out a $150,000 mortgage to buy a home at its current market value. A few years go by and you pay the $20,000 toward the principal of the loan, meaning you still owe $130,000 on the loan. When you check the current market value of your home, the value has dropped to $100,000. This means if you were to try to sell the home, you would probably not get more than $100,000 for it. The $30,000 difference is the negative equity, meaning that $30,000 of the loan is not backed by the worth of the home if it was sold at the current market value.
Fannie Mae – Short for Federal National Mortgage Association, Fannie Mae is a government assisted program that purchases mortgages from lenders and sets them up for private investment. The idea is the capital created from the investments will allow more money for new home loans, therefor letting the housing market continue to grow.
Federal Housing Administration – FHA for short, this government agency provides insurance for mortgage lenders who follow their regulations. If a borrower defaults on a loan insured by the FHA, the FHA can cover the lender’s losses. The FHA also provides certifications for not for profit housing counselors.
Foreclosure – The procedure where a creditor with a lien on a property forces the sale of that property in order to satisfy a debt. This usually only happens after a borrower has defaulted on a loan. There is either a judicial foreclosure or a nonjudicial foreclosure depending on what state you live in.
Forgiven Debt (wiped debt) – Debt that a lender writes off as uncollectable. Forgiven debt is taxable income.
For example: John Doe’s home has been in foreclosure for the past year because his attorney has prevented the lender from foreclosing. After much negotiation, John’s lender allows him to sell the home in a short sale and agrees to forgive the leftover debt.
Forbearance Agreement -
Example: Say your mortgage payment is $1,000 a month. You lose your job and set up a forbearance agreement with your lender for 2 months. The bank allows you to not make any payments for 2 months as long as you agree to make full payments again after that.
Month 1: $1,000 (job loss, enter forbearance agreement with bank for 2 months)
Month 2: $0 —–– > still owe $1,000 for this month
Month 3: $0 —–– > still owe $1,000 for this month
Month 4: $1,000 + $500
Month 5: $1,000 + $500
Month 6: $1,000 + $500
Month 7: $1,000 + $500 — > Payments finally caught up
Month 8: $1,000
Short Sale -
Freddie Mac – Short for Federal Home Mortgage Corporation, Freddie Mac is a government sponsored program that purchases mortgages from original lenders and organizes them for private investors.
More to come soon!
Foreclosure Terms Glossary
Created by Attorney Michael Stites & contributing editor Jared Speck