Glossary

Foreclosure and loss mitigation terms, defined

Servicers, trustees, and notices use precise language, and the difference between reinstatement and payoff or between a servicer and a beneficiary can determine what you should do next.

20 of 20 terms

Arrears: The total amount past due on a loan, including missed principal and interest payments, late charges, escrow advances, and any foreclosure fees and costs the servicer has advanced.
Beneficiary: The party entitled to payment under a deed of trust — generally the lender or the investor that owns the loan. The beneficiary instructs the trustee to initiate or halt foreclosure.
Deed in Lieu of Foreclosure: A voluntary transfer of title to the lender in exchange for release from the mortgage obligation, used when retention and sale are both unworkable.
Deed of Trust: The security instrument used in California mortgages. It involves three parties — borrower, lender, and trustee — and contains the power of sale that permits nonjudicial foreclosure.
Dual Tracking: A servicer advancing foreclosure while a complete loss mitigation application is pending. Restricted under California and federal servicing rules.
Forbearance: A temporary suspension or reduction of mortgage payments during a short-term hardship. Payments are deferred rather than forgiven, so an exit plan is required.
Loan Modification: A permanent change to one or more terms of an existing mortgage — rate, term, or treatment of arrears — intended to create a sustainable payment.
Loss Mitigation: The umbrella term for all alternatives to foreclosure, including retention options such as modification and forbearance and liquidation options such as short sale and deed in lieu.
Notice of Default (NOD): The first recorded step in a California nonjudicial foreclosure. Recording it starts a statutory period of at least three months before a Notice of Trustee Sale may be recorded.
Notice of Trustee Sale (NOTS): The recorded notice setting the date, time, and location of the auction. The sale may generally occur no sooner than twenty days after the notice is given.
Payoff: The total amount required to retire the loan in full, including principal, accrued interest, fees, and costs. Larger than the reinstatement amount.
Reinstatement: Curing the default by paying all past-due amounts plus fees and costs, restoring the loan to its original terms. Generally available until five business days before the sale.
Servicer: The company that collects payments, administers escrow, and evaluates loss mitigation applications. Often not the owner of the loan.
Short Sale: A sale of the property for less than the total secured debt, requiring servicer and investor approval to accept less than full payoff.
Single Point of Contact: Servicer personnel assigned to a delinquent borrower to provide continuity of contact and access to information about the loss mitigation review.
Surplus Proceeds: Funds remaining after a trustee sale when the sale price exceeds the total debt and costs. Claimed through the trustee and, in some cases, the court.
Trial Period Plan: A short probationary phase, commonly three months, during which the borrower makes the proposed modified payment. Successful completion precedes permanent modification documents.
Trustee: The neutral third party named in the deed of trust who conducts the nonjudicial foreclosure sale. The trustee controls the sale calendar and issues reinstatement figures after a NOD is recorded.
Trustee's Deed Upon Sale: The instrument conveying title to the purchaser after a foreclosure auction. Delivery generally makes the sale final, and recording creates a presumption of validity.
Trustee Sale: The public auction at which the property is sold to the highest bidder, conducted by the trustee under the power of sale in the deed of trust.