Arrears: Money that is owed from missed payments.
BPO: “Brokers Price Opinion” Report from a real estate agent giving their opinion of the sale value of the property.
CFPB: “Consumer Federal Protection Bureau” Regulates how lenders collect debt from borrowers.
CMA: “Comparative Market Analysis” A report typically put together by a real estate agent comparing the property to recent sales and curent listings in the area and giving a recommendation for a sale price of the property.
Deed in Liu: When a borrower voluntarily transfers title to the lender in liu of foreclosure.
Deed of Trust: The document that pledges the property as security for the loan and allows the lender to foreclose if the borrower does not make their payments. A deed of trust involves three parties the borrower, the lender, and the trustee. I states that use a deed of trust the trustee holds title until the loan has been paid in full.
Deficiency Judgement: A judgment against the borrower when the foreclosure sale did not produce the funds to pay off the promissory note.
Emotional Equity: A measure of how emotionally attached is the borrower to the property, how likely they are to try to keep it. Are they keeping the property up, Or letting it go? Is it clean, landscaped and well maintained, or falling apart and overgrown? Are other loans on the property and the property taxes being paid? Does the borrower work close by or commute? Doe their children go to school in the area? Emotional equity should be given special attention when there is little or negative equity in the property, and when dealing with second mortgages.
Forbearance: Temporary postponement of mortgage payments. Lenders will sometimes grant a forbearance to avoid the cost of having to foreclose.
O&E Report: “Ownership and Encumbrance Report” Non insurance title report to check for leins against the property.
Servicing: A servicing company acts like a property management company for the note. They receive the payments from the borrower and will be able to verify the payment status when you resell a note. Servicing companies can also deal with the foreclosure or Reinstatement process on behalf of the borrower.
Tax Lein State: If taxes are not paid a lein on the property is sold at an auction. The property owner must make payments to the lein holder with interest or the lein holder can cease the property. Laws vary by state and county.
Tax Deed State: If taxes are not paid the deed to the property is sold at a tax auction. Laws vary by state and county.
UPB – “Un-Paid Balance”: The amount the borrower still owes on the property.
Joker Broker: Someone who pretends to own notes for but doesn’t really own the notes and is just trying to play the middle man.
Judicial State/ Nonjudicial State: In a judicial State the foreclosure goes through a judicial process in other states the lender can foreclose without going through the court system. Nonjudicial States have shorter simpler forclosures.
Loss Mitigation: The process of working with borrowers who are behind on payments.
LTV – “Loan to Value”: The ratio of the loan to the property value. The lower the LTV the more secure the note is because the borrower has more equity in the property and thus is more likely to continue making their payments to keep the property.
Mortgage: The document that pledges the property as security for the loan and allows the lender to foreclose if the borrower does not make their payments. In some states a “Deed of Trust” is used rather than a mortgage.
NPL – “Non-Preforming Loan”: Loan where the borrower has stopped making payments and gone into default.
Preforming Loan: Loan where borrower is making their payments on time.
Reinstatement: When a borrower catches up on their payments and late fees to become current again and avoid foreclosure.
RPL “Reperforming loan”: Loan where the borrower had stopped making payments for at least 90 days but has resumed making payments on the loan. After being seasoned these loans may be worth as much as preforming loans.
Seasoned Loan: A loan that has been paid for a long enough time, typically one year, to where the lender is confident that the borrower will continue to make their payments. Loans that have been seasoned longer are worth more.
Short Sale: When the proceeds from selling a property fall short of the lein(s) against the property and the lein holder(s) agrees to to accept less than is owed.
Sub-Performing: A loan where the payments are being made but require constant follow up with the borrower. Payments may be 15 to 60 days late.
Title Report: A title report from a title company that reveals liens against the property and is typically accompanied by title insurance that will require the insurance to protect the buyer from any lien that may not have been caught on the title report.
Warranty Deed: A deed where the seller garuntees a clean title (free of any liens) to the buyer.
Yield: The investors return on what they paid for the note. Yields can be considerably higher than the interest rate when you acquire a note at a discount to the un-paid balance. For example, if you bought a non-preforming 10 year note for $65K with a $100K unpaid balance at a 6% interest rate and got it preforming again from the interest and principle of 100K your yield would be 16.53% over the 10 years!