Definitions

In some of my blog posts, I'll refer to some terms that may be new to you. If the term has a link that you can click on, it will take you to this post, where you can find the term and see what it means.

90 Day Notice - In New York, it's a statutory (RPAPL 1304) requirement that a lender, servicer, assignee, etc. send a notice with specific language to borrowers of a home loan with the names and contact information of at least five HUD-approved housing counseling agencies that service the borrower's area. It has to be sent by both regular mail and certified or registered mail at least 90 days before a foreclosure action is commenced.

Balloon payment - Some loans have a balloon payment, which may or may not accrue interest, that is due at the end of the loan term. The effect of this is that the borrower's monthly payment will be reduced, but at the end of the term, the borrower will likely have to take out another loan to repay the balloon.

Default rate of interest - Some loans carry a default rate of interest, which increases the rate of interest the lender charges once a condition of default is met. The most common condition of default is when a borrower misses a mortgage payment. There must be a default interest clause or rider in the note or mortgage for the lender to charge default interest. Under certain specific circumstances, default interest can sometimes be illegal.

Equity - Equity is the amount of money you would walk away with after you pay your creditors what you owe. For example, your house is worth $400,000. You have a mortgage with a balance of $320,000. If your house sells for $400,000, you’ll have to pay 6% ($24,000) in broker’s commissions and another $1,600 in transfer taxes (in NY) in addition to paying off your mortgage. Your equity is going to be $400,000 – ($320,000 + $24,000 + $1,600), which equals $54,400. There will be some other incidentals, like moving expenses, but that’s your ballpark estimate.

Foreclosure - Foreclosure is the process by which a bank, lender, servicer, or assignee of a mortgage enforces a debt. In New York, a bank, lender, servicer or assignee must commence an action in court to accomplish this. The result is that the collateral (your home) which secures the debt is sold to the highest bidder at a public auction.

Judgment of foreclosure and sale - usually the final court order in the foreclosure action, this order will confirm the amount that the referee reported that a borrower owes to the plaintiff and will direct that the property be sold at public auction. The order will state where the notice of sale must be published.

Maintenance - a monthly payment made by a tenant or co-op owner to a board to cover charges for the building like property taxes, doorman, trash pickup, water, building amenities, or other shared charges.

Modification - Sometimes, a lender will modify the terms of your loan to make it easier to repay. Modifications usually involve taking your arrears (how much money you're behind in paying) and adding it to the total amount you owe. Then, the term of the mortgage can be extended, the interest rate can be lowered, and in some cases, the lender may forgive some of the debt.

Partition - a kind of court proceeding where real property is apportioned between those that have an interest in it. A referee is appointed to hear evidence from both sides and from experts and report to the court how the property should be apportioned. At the end, the property will be sold at auction and the proceeds from that auction will be divided pursuant to the referee's report, which will be made into a court order.

Reinstatement - When the borrower pays the lender back all of the arrears, and can proceed with resuming their regular mortgage payments as if no default occurred. Sometimes, people confuse making all of their missed payments as reinstatement. If not caught soon enough, a lender can impose default interest, late fees, and attorneys' fees onto a reinstatement quote.

Refinance - When a borrower takes out another loan which will repay the same borrower's existing loan against the same property. Many times, borrowers will refinance when interest rates drop or when they want to pull equity out of the property for investment elsewhere.

RJI - Request for judicial intervention. In order to get a judge assigned to a case, or to have the court schedule a settlement conference, a party will have to file a RJI with the court. Usually the plaintiff's attorney will file the RJI.

Settlement conference - required by CPLR 3408 for home loan foreclosures where the borrower resides in the property as his principal residence. The borrower, the bank attorney, and a court attorney referee or judge will be present. At the conference, the parties will work towards a settlement via modification or forbearance.

Short sale - where you sell your property for less than what is owed on the mortgage. In order for such a sale to go through, the bank has to agree to accept less than what is owed, and therefore, the seller needs the bank's permission to do a short sale.

Stay - a court-ordered stopping of the collection proceedings, usually obtained by a borrower when a foreclosure auction is imminent.

Summons and complaint - This is the first set of pleadings in a foreclosure action. A foreclosure summons has specific foreclosure language, but it basically says that you have to answer the complaint within a certain amount of time. The complaint will set forth a cause of action for foreclosure with some details about the loan and the default. The summons and complaint have to be served upon a borrower in accordance with the law in order to be effective to confer the court's jurisdiction over a borrower.