Glossary

Housing, and the community land trust world in particular, can seem confusing just because the vocabulary isn’t familiar. For communities to be empowered over our own homes, we want to make it accessible to everyone. Below are definitions some common words that you’ll come across.

Foreclosure Terms:

FORECLOSURE PETITION - The filing in state land court of a foreclosure petition is the first public, legal step in the foreclosure process in Massachusetts, and is the first indication that the property is in distress. This filing is required to fulfill the federal Service members Civil Relief Act of 2003 and its predecessor, the Soldiers' and Sailors' Civil Relief Act of 1940. Only those covered by this act (active duty service personnel) may register objections to the proceedings. If the Land Court receives no objections, it will rule that the lender may proceed with the remainder of the foreclosure process.

FORECLOSURE AUCTION -In Massachusetts, in order to complete the foreclosure process, the lender must, in advance and according to state guidelines, advertise and complete a foreclosure auction. The auction is held in front of the property.

FORECLOSURE DEED - A foreclosure deed is filed with the Registry of Deeds at the completion of the foreclosure process, after an auction is held. At this time, the property may be deeded to the lender as an REO property (see below definition), or to a new owner, depending on the outcome of the auction. 

DEED IN LIEU (OF FORECLOSURE) - A deed in lieu of foreclosure is when the homeowner forfeits a home to the lender, instead of going through the foreclosure auction process. The lender takes possession of the property, and the former homeowner's credit history is negatively affected. 

REO -a "Real Estate-Owned" property. Property which is in the possession of a lender as a result of a foreclosure auction or forfeiture.

SHORT SALE - A short sale is a sale of real estate in which the lender agrees to let the homeowner sell the property for less than the outstanding mortgage debt on the property. A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower, though a short sale, like a foreclosure, often results in a negative credit report against the property owner. Click here for more information.

CASH FOR KEYS - When lenders offer tenants a cash payout in exchange for their rapid departure of a bank owned home. Click here for more information.

INVESTOR - An individual or organization who has purchased a property with no intent to use it as their own home, or for a relative.

Mortgage Terms:

PRIME MORTGAGE - A prime mortgage is a mortgage loan made to an individual or individuals who qualify for a mortgage using standard ("traditional") underwriting guidelines including those with high credit scores, overall good credit histories, low debt-to-income ratios, stable and well documented employment/income, and higher downpayments. Interest rates are lower for these mortgages than for sub-prime mortgages, but they can have either a fixed or adjustable interest rate. 

SUB-PRIME MORTGAGE - A sub-prime mortgage is a mortgage loan with a higher interest rate, intended for homeowners considered to be a higher risk for default due to any one or more of a number of reasons, including: low credit score, lack of income verification, poor credit history, bankruptcy, a high debt-to-income ratio, or low or no downpayment. Sub-prime mortgages, however, were also given to borrowers who could qualify for traditional ("prime") mortgages, and fraudulent underwriting practices placed many families in mortgages they could not afford. A sub-prime mortgage could have either a fixed or adjustable interest rate, though most were adjustable rate mortgages.

FIXED (INTEREST) RATE MORTGAGE - A mortgage with an interest rate that does not change over the life of the mortgage. Payments remain the same for the life of the mortgage, usually 15 or 30 years.

ADJUSTABLE (INTEREST) RATE MORTGAGE - A mortgage with an interest rate that changes periodically according to an index that is selected when the mortgage is issued. The initial interest rate is lower than that of a fixed rate mortgage, but monthly payments can go up or down as the rate is adjusted.

UNDERWATER MORTGAGE - An owner is considered to be "underwater" when the outstanding mortgage debt on a property exceeds the current market value of the property. 

Program and Other Terms:

FRAGILE STREET -Several conditions may be considered when defining a street as "fragile." These conditions include: 1. The street has had three or more foreclosed properties over a three-year period. 2. The street is experiencing other stressors and signs of decline such as high foreclosure petition rates, low owner occupancy, high rates of crime, large numbers of vacant and uncared-for lots, high levels of property abandonment, low levels of property upkeep and/or large numbers of building code violations, sharp property value declines, etc.

ATTORNEYS' GENERAL SETTLEMENT WITH THE COUNTRY'S FIVE LARGEST LENDERS - In February 2012, 49 state attorneys general and the federal government announced joint state-federal $25 billion settlement with the country's five largest mortgage servicers: Ally/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo. The settlement provides relief to distressed borrowers and direct payments to states and the federal government. The agreement settles state and federal investigations finding that the country's five largest mortgage servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law. The settlement provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service (www.nationalmortgagesettlement.com). Click here for more information. This settlement only addresses problems in servicing loans during the foreclosure process, not complaints or issues related to the mortgage origination.

NATIONAL COMMUNITY STABILIZATION TRUST - Formed in 2008, the Stabilization Trust is sponsored by six leading national organizations in the housing and community development field. The Trust was created to assist government agencies and non-profits revitalize distressed neighborhoods by providing efficient and streamlined access to vacant and abandoned properties from financial institutions and flexible financing for neighborhood stabilization activities. Click here for more information.

NEIGHBORHOOD STABILIZATION PROGRAM -The Neighborhood Stabilization Program (NSP) was established by the US Department of Housing and Urban Development for the purpose of stabilizing communities that have suffered from foreclosures and abandonment. NSP funds assist with the purchase and redevelopment of foreclosed and abandoned homes and residential properties in distressed neighborhoods. Click here for more information.

FIRST LOOK PROGRAM - U.S. Housing and Urban Development (HUD) entered into an agreement with the nation's top mortgage lenders to offer selected state and local governments, and nonprofit organizations a "first look" or right of first refusal to purchase foreclosed homes before making these properties available to private investors. In collaboration with national servicers, Fannie Mae, and Freddie Mac, the First Look program is intended to give communities participating in HUD's Neighborhood Stabilization Program (NSP) a brief exclusive opportunity to purchase bank-owned properties in certain neighborhoods so these homes can either be rehabilitated, rented, resold or demolished. Click here for more information.

MULTIPLE LISTING SERVICE (MLS) - The MLS is a local or regional service that compiles available real estate for sale by member brokers along with detailed information brokers and agents can access online.