Foreclosure Terms

A foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership of the property securing the loan. The foreclosure process begins when the borrower defaults on loan payments and the lender files a public default notice.

The foreclosure process can end one of four ways:

The borrower pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure.
The borrower sells the property to a third party during pre-foreclosure, allowing the borrower to pay off the loan and avoid having a foreclosure on his or her credit history.
A third party buys the property at a public auction at the end of the pre-foreclosure period.
The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower during pre-foreclosure or by buying back the property at the public auction.

Some common terms used in the foreclosure process are:

Lis pendens - Latin for “lawsuit pending”
Refers to the legal process of foreclosure.

NOD - Notice of Default.
This is the first official stage in the foreclosure process. The lender has a right to file the NOD at the very first late payment. In reality it’s usually two to four late payments before it’s done.

NOT/NTS - Notice of Trustee’s sale
A recorded notice that a trustee’s sale has been scheduled. If all late payments, fees, and penalties aren’t satisfied the property will be auctioned off to the highest all-cash bidder.

NFS - Notice of Foreclosure Sale
The public notice of an upcoming foreclosure auction.

REO - Real Estate Owned by the Lender
Many properties don’t sell at the auction so they go to the Lender and become REOs.

Find out how short sales can help you, as a homeowner needing help or as an investor.

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