Acceleration Clause
A provision in a mortgage that allows the lender to demand full repayment of the remaining loan balance if the borrower defaults. When triggered, the entire loan becomes due immediately rather than in monthly installments.
Anti-Deficiency Laws
California laws that protect homeowners from being sued for the difference between what they owe and what their home sells for at foreclosure. California Civil Code Section 580b protects purchase money loans; Section 580d protects any loan foreclosed through non-judicial (trustee sale) process.
Automatic Stay
A legal protection that immediately stops all collection actions, including foreclosure, when someone files for bankruptcy. In Chapter 13 bankruptcy, the automatic stay allows the homeowner to catch up on missed payments over 3-5 years while keeping their home.
Beneficiary
In California real estate, the beneficiary is the lender or entity that holds the beneficial interest in a deed of trust. The beneficiary has the right to foreclose if the borrower defaults.
Borrower
The person or entity who takes out a mortgage loan and is obligated to repay it. Also called the "trustor" in California deed of trust terminology.
California Homeowner Bill of Rights (HBOR)
A set of California laws enacted in 2013 that protect homeowners facing foreclosure. Key protections include: prohibition of dual tracking (foreclosure while loan modification is pending), single point of contact requirement, written denial explanations, and appeal rights for denied modifications.
Cash for Keys
An agreement where the lender or new property owner pays the former homeowner money in exchange for voluntarily vacating the property in good condition. This avoids the time and cost of formal eviction.
Chapter 7 Bankruptcy
A form of bankruptcy that discharges most unsecured debts but does not allow you to catch up on missed mortgage payments. The automatic stay temporarily stops foreclosure, but unless you can reinstate or modify the loan, foreclosure will eventually proceed.
Chapter 13 Bankruptcy
A form of bankruptcy that allows you to keep your home while catching up on missed mortgage payments over 3-5 years through a court-approved repayment plan. Creates an automatic stay that stops foreclosure immediately.
Cure Period
The time allowed to fix (cure) a default by paying all past-due amounts. In California, the cure period is 90 days after a Notice of Default is recorded. You can also reinstate until 5 business days before the foreclosure sale.
Deed in Lieu of Foreclosure
A transaction where the homeowner voluntarily transfers ownership of the property to the lender in exchange for release from the mortgage debt. This avoids formal foreclosure proceedings and may have less credit impact than a completed foreclosure.
Deed of Trust
The security instrument used in California (instead of a traditional mortgage) that gives the lender the right to foreclose if the borrower defaults. Involves three parties: borrower (trustor), lender (beneficiary), and neutral third party (trustee).
Default
Failure to meet the terms of a mortgage agreement, most commonly by missing monthly payments. Default can also occur by failing to pay property taxes, letting insurance lapse, or violating other loan terms.
Deficiency
The difference between what you owe on your mortgage and what your home sells for at foreclosure or short sale. California's anti-deficiency laws protect most homeowners from being liable for this amount.
Deficiency Judgment
A court order requiring the borrower to pay the deficiency amount. In California, deficiency judgments are prohibited for purchase money loans and any loan foreclosed through non-judicial foreclosure (trustee sale).
Dual Tracking
The illegal practice (in California) of a lender continuing foreclosure proceedings while simultaneously reviewing a homeowner's loan modification application. Prohibited by the California Homeowner Bill of Rights.
Equity
The difference between your home's current market value and the amount you owe on all mortgages and liens. Positive equity means your home is worth more than you owe; negative equity (being "underwater") means you owe more than it's worth.
Escrow
A neutral third party that holds funds and documents during a real estate transaction. Also refers to the portion of your monthly mortgage payment that goes toward property taxes and insurance.
Forbearance
A temporary agreement with your lender to reduce or suspend mortgage payments for a specific period. Unlike loan modification, forbearance is temporary and you'll need to repay the missed amounts through a repayment plan, lump sum, or loan modification.
Foreclosure
The legal process by which a lender takes ownership of a property after the borrower fails to make mortgage payments. In California, most foreclosures are non-judicial (trustee sale), meaning they don't go through the court system.
Foreclosure Auction
A public sale where a foreclosed property is sold to the highest bidder. In California, also called a "trustee sale." Typically held at the county courthouse or a designated public location.
Hardship Letter
A written explanation of the financial circumstances that caused you to fall behind on your mortgage. Required when applying for loan modification, short sale, or other loss mitigation options. Should explain what happened, what you've done to address it, and why you can now afford a modified payment.
HELOC (Home Equity Line of Credit)
A revolving line of credit secured by your home's equity. A HELOC is typically a junior lien, meaning it's paid after the first mortgage in foreclosure. HELOC lenders may still pursue collection even after first mortgage foreclosure.
HUD-Approved Housing Counselor
A counselor certified by the U.S. Department of Housing and Urban Development to provide free foreclosure prevention advice. They can help you understand your options, communicate with your lender, and avoid scams.
Judicial Foreclosure
A foreclosure that goes through the court system. Rare in California, where most foreclosures are non-judicial (trustee sale). Judicial foreclosure takes longer but may allow the lender to pursue a deficiency judgment.
Junior Lien
A mortgage or lien that is subordinate to (paid after) the first mortgage. Includes second mortgages, HELOCs, and other liens. In foreclosure, junior liens are typically wiped out, but the lender may still pursue the debt personally.
Lien
A legal claim against a property that must be paid when the property is sold. Mortgages are voluntary liens; tax liens, mechanic's liens, and judgment liens are involuntary liens.
Lis Pendens
Latin for "suit pending." A recorded notice that a lawsuit affecting the property has been filed. In judicial foreclosure, a lis pendens is recorded to provide public notice of the pending action.
Loan Modification
A permanent change to one or more terms of your mortgage to make payments more affordable. Can include reduced interest rate, extended loan term, principal forbearance, or capitalization of past-due amounts.
Loan Servicer
The company that collects your mortgage payments, manages your escrow account, and handles day-to-day loan administration. May be different from the actual owner of your loan. Your servicer is your primary contact for loss mitigation options.
Loss Mitigation
Options offered by lenders to help borrowers avoid foreclosure. Includes loan modification, forbearance, repayment plans, short sale, and deed in lieu of foreclosure.
Mortgage
A loan used to purchase real estate, with the property serving as collateral. In California, the security instrument is technically a "deed of trust" rather than a mortgage, though the terms are often used interchangeably.
Non-Judicial Foreclosure
A foreclosure process that doesn't go through the court system. The standard method in California, conducted by a trustee through a trustee sale. Faster than judicial foreclosure (typically 120-200 days) and doesn't allow the lender to pursue a deficiency judgment.
Notice of Default (NOD)
A formal document filed by the lender with the county recorder that marks the official start of foreclosure in California. Typically filed after 3-4 missed payments. Gives the homeowner 90 days to cure the default before the lender can proceed to Notice of Sale.
Notice of Trustee Sale (NOS)
A document recorded after the 90-day Notice of Default period expires, setting the date for the foreclosure auction. Must be recorded at least 21 days before the sale, published in a newspaper, and posted on the property.
Pre-Foreclosure
The period between when a borrower first defaults on their mortgage and when the foreclosure sale occurs. During pre-foreclosure, homeowners can explore options like loan modification, short sale, or selling the property.
Principal
The amount of money borrowed, not including interest. Your mortgage payment typically includes both principal and interest. Principal forbearance is when a portion of the principal is set aside and not included in your monthly payment.
Purchase Money Loan
A loan used to purchase a property (as opposed to a refinance or home equity loan). California's anti-deficiency laws provide strong protection for purchase money loans on owner-occupied properties.
Redemption Period
A period after foreclosure sale during which the former owner can reclaim the property by paying the full amount owed. California does NOT have a redemption period for non-judicial foreclosure - once the property is sold at trustee sale, the sale is final.
Refinance
Replacing your existing mortgage with a new one, typically to get a lower interest rate, change loan terms, or access equity. Difficult to do once you're behind on payments or in foreclosure.
Reinstatement
Bringing your loan current by paying all past-due amounts, including missed payments, late fees, and costs. In California, you have the right to reinstate until 5 business days before the foreclosure sale.
REO (Real Estate Owned)
Property owned by a lender after an unsuccessful foreclosure auction where no third party bid enough to cover the debt. REO properties are often sold at a discount.
Repayment Plan
An agreement with your lender to catch up on missed payments by adding extra amounts to your regular monthly payment over a set period (typically 6-12 months).
Short Sale
A sale of a property for less than the amount owed on the mortgage, with the lender agreeing to accept the proceeds as full satisfaction of the debt. Requires lender approval. Less credit damage than foreclosure and allows you to avoid having foreclosure on your record.
Single Point of Contact (SPOC)
Required by California's Homeowner Bill of Rights, a single person or team assigned to handle your loan modification or loss mitigation case. They must be accessible, knowledgeable about your case, and able to make decisions.
Subordinate Lien
A lien that is junior to (paid after) another lien. Second mortgages and HELOCs are subordinate to first mortgages.
Trial Payment Plan (TPP)
A temporary payment arrangement (typically 3-4 months) that you must complete successfully before receiving a permanent loan modification. Missing a trial payment can disqualify you from the modification.
Trustee
In California real estate, the neutral third party named in a deed of trust who holds legal title and conducts the foreclosure sale if the borrower defaults. The trustee acts on behalf of the lender (beneficiary).
Trustee Sale
The California term for a non-judicial foreclosure auction. The trustee sells the property to the highest bidder to satisfy the mortgage debt. Also called a "foreclosure auction."
Trustor
The California term for the borrower in a deed of trust arrangement. The trustor is the person who owes money and whose property secures the debt.
Underwater Mortgage
When you owe more on your mortgage than your home is currently worth. Also called "negative equity" or being "upside down." Common after housing market declines. Short sale may be an option for underwater homeowners.
Unlawful Detainer
The legal eviction process in California. After foreclosure, the new owner must file an unlawful detainer lawsuit to legally remove occupants who don't leave voluntarily. Former owners typically have 3 days to vacate after receiving notice.