Industry Terms and Definitions:
See also:
FAQ
ADJUDICATION
A judicial determination
BANKRUPTCY
A proceeding in U.S. District Court wherein debtors who cannot meet the claims
of their creditors may be adjudged bankrupt by the court. There are three different
types of bankruptcy proceedings.
BENEFICIARY ("Bene")
One for whose benefit a trust is created; a lender secured by a deed of trust.
BID
Foreclosure sales are conducted by verbal bid, with the agent starting at
a minimum bid provided by the foreclosing attorney (total of all monies due the beneficiary)
on behalf of the beneficiary and then opening the bidding to qualified bidders.
BONA FIDE PURCHASER
A buyer in good faith, for fair value and without notice of any off-record adverse
claim or right of third parties, and who consequently, takes title free of such defects.
BUSINESS DAY
Any day except Sunday or the following business holidays: New Years Day,
Washington's Birthday, Cesar Chavez Day (California Only), Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving, and Christmas.
CASHIER'S CHECK
A check drawn on the issuing bank's funds and guaranteed payable, except in
instances where it is lost or stolen).
CHAPTER 7
"Debtor Wipeout, Chapter 11 - This is a business reorganization proceeding, Chapter
13 - "Debtor Workout".
CONSTRUCTIVE NOTICE
Notice imparted by the public records (e.g. the county recorder's records). The
law presumes that one has knowledge of instruments that are properly recorded.
CREDIT BID
The opening bid at a foreclosure sale, made on behalf of the foreclosing
beneficiary. If it is less than or equal to the total amount of money owed to the beneficiary
it will be made on a credit basis. But once the bid surpasses the total payoff amount
the beneficiary must begin to bid with cash at hand, just like all other bidders.
DATE-DOWN
Indicates the date a document was executed (signed), rather than the date of
recording (recording date).
DECLARATION
A non-notarized statement made under of penalty of perjury.
DECREE
A judgment by court.
DEED OF TRUST (TRUST DEED)
A three party security instrument conveying the legal title to real property as
security for the repayment of a loan. The owner is called the "trustor". The neutral
third party to whom the bare legal title is conveyed (and who is called on to liquidate
the property if need be) is the "trustee". The lender is the "beneficiary." When
the loan is paid off the trustee is directed by the beneficiary to issue a deed
of reconveyance to the trustor, which extinguishes the trust deed lien.
DEFAULT
Failure to make loan payments as agreed in the promissory note.
DOCUMENTARY TRANSFER TAX
A local tax levied on recorded transfers of title to real property. The
tax declaration is generally found on the face of the deed.
EASEMENT
A right of way allowing someone to cross over another's property for a limited,
specific purpose. A typical example is an easement granted to a utility company.
ENCUMBRANCE
Is the legal right, claim or lien upon real property that diminishes the owner's
equity or the land's value. Typical encumbrances are trust deeds, judgments, assessments,
mechanic's liens, Covenants, Conditions, and Restrictions (C C & R's), easements,
etc.
FORBEARANCE AGREEMENT
A formal agreement between a borrower and a lender to temporarily postpone
an ongoing foreclosure.
FORECLOSURE
The forced sale of property pledged as security for a debt that went into
default.
"FORTY THIEVES"
The local group of professional foreclosure speculators working in concert at the
foreclosure sales rather than in direct competition. Their orchestrated sideline
bidding activity acts to keep bidding levels down, resulting in reduced over-bids
going to junior interest holders.
INSTITUTIONAL LENDERS
Banks, savings & loan associations, and insurance companies who lend out
depositors' money, as contrasted with private individuals lending out personal funds.
JUDICIAL FORECLOSURE
A judicial foreclosure is a foreclosure that's processed via a court action.
Usually limited to a collection action on an involuntary judgment lien that automatically
attached against a debtor's real property by operation of law, such as a recorded abstract
of judgment.
JUNIOR LIEN
A lien that does not have first claim on the property by which it is secured
because it was recorded later than a competing lien secured by the same property.
LEGAL DESCRIPTION
A formal description of real property sufficient to locate it by reference to
government surveys or approved recorded maps. There are five common forms of legal descriptions:
1) Lot, Block & Subdivision; 2) Metes & Bounds; 3) Sectionalized; 4) Ranchos;
and 5) Condominiums.
LIS PENDENS
Recorded notice indicating a lawsuit is in progress that could affect the title to a piece
of property.
MORTGAGE
A written pledge of property that is put up as security for the repayment of
a loan. The lender is the mortgagee and the property owner is the mortgagor.
NOTICE OF DEFAULT
A notice that is filed to show that the borrower, under a mortgage or deed
of trust, is in default. This is usually the first step in the foreclosure process.
NOTICE OF TRUSTEE'S SALE
A notice prepared and recorded by the foreclosing trustee that recites the
legal description of the property being foreclosed upon and gives the date, time, and place
of the pending foreclosure sale. The publication phase varies per state.
PARCEL
Any area of land contained within a single description.
PERSONAL PROPERTY
This is property that is movable or harvestable, i.e. securities,
furniture, cars, promissory notes, clothing, intangibles, etc.
POSTING
Providing notice by physically attaching it to a prescribed post, wall,
or bulletin board and/or attaching it to the affected property itself.
POSTPONEMENT
An announcement, made in lieu of a scheduled trustee's sale, that reschedules
the pending sale. The rescheduled sale will always be at the same location unless it's
changed by recording a new Notice of Trustee's sale that recites a different sale locale.
Postponed sales may also be re-published, depending on the length of time the foreclosure is
on hold.
PUBLICATION
The act or process of publishing printed matter; or an issue of printed
materials offered for sale or distribution. It is a means of communicating information to
the public.
QUALIFYING
The process of providing the referee with the ability to bid before the
foreclosure sale by showing the referee the sufficient amount of certified funds required
by law or indicated by the trustee before bidding.
R.E.O.
Real Estate Owned by a beneficiary/lender because
it wasn't bought by an outside bidder at the foreclosure sale.
RECONVEYANCE
A recorded document issued by a trustee that extinguishes a trust deed lien when
the note it secured is paid off. The trustee will require the original note, a copy
of the deed of trust, a request for reconveyance, and their trustee's fee.
RECORDING
Filing a document with the county recorder to have it entered into the public
record, giving constructive notice to the public at large of its contents. Recording helps
establish priority amongst competing claims.
REINSTATEMENT RIGHT
The payment of a note, mortgage, deed of trust, etc, to bring it from
default to good standing.
RELIEF FROM STAY
An order from the bankruptcy court allowing a lender to proceed with his default
remedies (e.g. foreclosure sale) against a debtor, exempt from the automatic, protective shield
of the bankruptcy court.
TITLE SEARCH
This is a review of all recorded documents affecting a specific piece of property
to determine the present condition of title.
TRUSTEE
One who is appointed, or required by law to execute a trust; one who holds title
to real property under the terms of a deed of trust.
TRUSTEE'S DEED
The deed issued by a trustee to the highest bidder at a foreclosure sale. The deed
discloses on its face what the opening or minimum bid and the final, winning bid was at the
sale.
TRUSTEE'S SALE
This is a non-judicial auction of real property, conducted by a trustee in
exercise of the power of sale clause, pursuant to the terms of the defaulted deed of trust.
TRUSTEE'S SALE GUARANTEE (TSG)
A special title report, for trustees only, that discloses all items pertaining to
the ownership interests and encumbrances on a property in foreclosure. Also included
is a list of all parties who recorded a special request to be notified if any NOD
or NTS is filed against the particular trust deed in foreclosure. Furthermore it
gives the trustee a list of all the local publications that qualify to advertise
the Notice of Trustee's Sale (once a week for three consecutive weeks). It's also
a contract of indemnification that protects the trustee and the beneficiary from
the consequences of any title record error in their foreclosure proceeding.
TRUSTOR
The property owner who voluntarily puts a deed of trust against his/her
property.
WARRANTY DEED
Conveyance of land in which grantor guarantees title to grantee.
WORKOUT
Process in which borrower comes to a mutually acceptable financial
arrangement with the lender to avoid impending foreclosure.