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Foreclosure Terms

1. Foreclosure: This is the process whereby the party holding a mortgage initiates a proceeding to obtain a court order to sell the property. At the end of the process the lender can sell the property and keep the proceeds to pay the mortgage off and the lender’s legal expenses.

2. Acceleration of mortgage: The acceleration of a mortgage occurs when the financial institution or individual holding the mortgage calls the entire balance immediately due and payable. The acceleration clause in the mortgage is usually triggered by non-payment of the monthly mortgage payments. By way of example, for a period of three months or more if you have a $200,000.00 mortgage that requires you to make monthly payments of $1,500.00 a month and you miss three of the mortgage payments the bank can accelerate the mortgage and demand immediate payment of the entire $150,000.00. The mortgage is accelerated before a foreclosure proceeding is initiated by the financial institution. Once the mortgage has been accelerated the bank won’t accept payment from you. The entire mortgage amount is due and payable.

3. Title Search: Before a financial institution initiates a foreclosure proceeding a search is conducted at the county clerk’s office in the county in which the house is located (in the City of New York the search is conducted at the registration of deeds office). The purpose of the search is to see what liens, judgments or other incumbrances may be on the property. All individuals who have liens or judgments on the property are also named in the foreclosure lawsuit.

4. Foreclosure Auction: In the State of New York after a judgment of foreclosure is rendered, a referee is appointed and the referee sells the foreclosed property on the courthouse steps. The sale on the courthouse steps is referred to as the foreclosure auction.

The following is an explanation of many of the commonly used mortgage terms in the State of New York:

1. Fixed rate mortgage: This refers to a conventional type of mortgage which has a specific interest rate and a uniform monthly payment. The term of these mortgages are usually either fifteen or thirty years. Fixed rate mortgages are considered to be the safest types of mortgages.

2. Adjustable rate mortgage: This refers to a mortgage that has a interest rate that adjusts or fluctuates periodically. The fluctuation is related to interest rates in general. Adjustable rate mortgages are more likely to adjust upwards and become more expensive then adjusting downward and becoming less expensive. Adjustable rate mortgages are referred to as ”ARMs.” This type of mortgage is a good choice if you plan on owning the home for a short period of time. This will enable you to sell the home prior to the mortgage adjusting upward.

3. Interest only mortgage: This is a type of mortgage loan where the principal amount that is due in owing never changes. The borrower only pays the interest on the loan.

4. Jumbo loan: This refers to ”jumbo mortgage.” This is a term referred to by Fannie Mae and Freddie Mac for what is considered to be non-conforming mortgage loans. They are generally mortgage loans of a very substantial nature.

5. Amortization: This refers to a schedule of loan payments. It also refers to as an amortization schedule. It shows the monthly mortgage payments that are due and owing on the indebtedness over a long period of time.

6. Equity: This is the actual value of your home. The equity is the market value of your home less what is due and owing on your mortgage or mortgages. The equity in a home is subject to the appreciation or depreciation of a home depending on market values in your neighborhood.

7. Credit Score: This is a scoring system used by financial institutions and creditors to determine an individuals credit worthiness. An individual’s credit score is determined by credit bureaus such as Equifax, Experian and Transunion. The actual score itself is based on a formula that involves an analysis of an individuals financial situation based on how and when they pay their bills and their payment habits. When bills are paid on a timely basis the credit scores are high. When bills are not paid on a timely basis or not paid at all the credit scores are lower.

8. Home Equity loan: This is a loan secured by the equity or value in your house.

9. Home Equity Line of Credit: This is a line of credit, the amount of money you can borrow, that is secured by a loan on your home. Funds may be borrowed by using checks or debit cards.

10. Loan origination fee or points: Each point or loan originating fee is equal to 1% of the amount of your loan. Example: If you borrow $100,000.00 a and you pay one point that point would be $1,000.00. If you paid two points it would be $2,000.00. This is also referred to as mortgage points.

11. Principal: The principal in general refers to the amount you owe on your loan. Each month when you make a loan payment a portion of it goes to pay off the interest on your loan and the remainder pays off principal. When a loan is initially taken out almost all of your payment goes towards interest payments. As years go by the mortgage payments on your loan are reallocated to pay off a great portion of the principal that is due and owing. Towards the end of the term of the loan the large majority of your payments each month goes towards paying off the principal.

12. Refinancing: This is the process involving obtaining a new mortgage to pay off an old mortgage.

13. Lock In: This refers to the period of time in which the lender has agreed to be obligated to provide a perspective purchaser with a mortgage at a specific interest rate. Mortgage loans are said to be “locked in” for a specific period of time usually from thirty to sixty days. Lenders sometimes charge a locking in fee.

The Law Offices of Elliot S. Schlissel

Contact us for a free consultation to discuss your case and our qualifications to represent you. Feel free to call toll free any time, day or night, at 1-800-344-6431, or in Queens, Kings, Richmond and the Bronx at 718-350-2802. You can also reach us in Nassau County or Suffolk County, NY at 516-561-6645. We welcome your inquires.

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