On this website we provide a lot of information on how to stop foreclosure specifically using a loan modification. This article will go over the terminology of several loan modification and foreclosure terms that are used throughout the website.
Loan Modification:
A change to an existing loan made by a lender in response to a borrower’s long-term inability to repay the loan. Loan modifications usually involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might modify a loan because the cost of doing so is less than the cost of foreclosure.
A.R.M:
Short for adjustable-rate mortgage
Teaser Rate:
The initial rate on an adjustable-rate mortgage (ARM). This rate will typically be below the going market rate, and is used by lenders to entice borrowers to choose ARMs over traditional mortgages. The teaser rate will be in effect for only a few months, at which point the rate will gradually climb until it reaches the full indexed rate.
Pre-payment Penalty:
A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. This can be a certain monetary figure or a percentage of the loan.
Principle:
The base amount of the loan – not including interest.
Loan Servicer:
A loan servicer is a public or private entity that handles. Collecting, monitoring and reporting loan payments, handling property tax, handling insurance escrows, or closing defaulted loans, handling late payments and other delinquencies, remitting payments. A servicer earns a servicing fee in return for performing the administration functions described above, typically a percentage of the loan’s Unpaid Principal Balance.
loan-servicer
Debt to Income Ratio:
A ratio that indicates what portion of a person’s monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments, taxes and insurance, credit-card payments, child support and other loan payments.
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