Foreclosure and Subprime Lending Glossary

Definitions of common foreclosure and subprime lending terms.

Distressed Sale: A distressed sale is a non-foreclosure sale that occurs while the property is in the foreclosure process. If a property is sold within a year of the property owner's last foreclosure notice, but not through a trustee's deed sale, we record this as a distressed sale. This category can include sales by the owner, short sales, and deed-in-lieu of foreclosure. Unfortunately, we do not have any reliable means of distinguishing between these different types of property transfers.

Foreclosure: A legal process for ending an owner's title to a property to satisfy an outstanding mortgage debt.

Foreclosure Avoided: There is no administrative record to indicate when an owner has cured a mortgage default or has otherwise successfully avoided a foreclosure. Therefore, if no foreclosure or other sale has been reported within one year of receiving the last foreclosure notice, we record this as a foreclosure avoided.

High Interest Rate Loans: High interest rate mortgage loans are a type of subprime loan. In the Home Mortgage Disclosure Act data, high interest rate loans have annual percentage interest rates exceeding the comparable U.S. Treasury yield by 3 percentage points or more, for first liens, and by 5 points or more, for second liens.

In Foreclosure / Foreclosure Inventory: Properties currently in the foreclosure process, that is, a notice of foreclosure sale has been sent to the property owner but no foreclosure sale has yet been completed and the owner still retains title to the property. Property owners who received a foreclosure notice within the past year, but for which no other final outcome (such as a foreclosure sale) has been reported, are recorded as being in the foreclosure inventory.

New Foreclosure Start: Recorded when the owner of a property receives the first foreclosure notice. Owners may receive multiple notices throughout the foreclosure process, either from different lenders (if there are multiple liens on the property) or from the same lender who is keeping the foreclosure process active for a homeowner. We only report the first notice issued against a property owner as a new foreclosure start.

Notice of Foreclosure Sale: In the District of Columbia, a legal notice that initiates a foreclosure against a homeowner. The mortgage lender, or the lender's agent, must send a notice of foreclosure sale, by certified mail, return receipt requested, to the property owner at the owner's last known address. A copy of this notice must also be sent to the D.C. Recorder of Deeds. The foreclosure sale may not take place less than 30 days after the notice has been received by the Recorder of Deeds.

Real Estate Owned (REO) Property: When ownership of a foreclosed property reverts to the lender because no acceptable buyer can be found, this is refered to as an REO property.

Subprime Lenders: The U.S. Department of Housing and Urban Development (HUD) classifies mortgage lenders as subprime specialists if subprime loans account for at least half of their conventional (i.e., not government-backed or insured) business. HUD also uses feedback from lenders, policy analysts, and housing advocacy groups to update the list of subprime lenders.

Subprime Loans: Mortgage loans that have higher costs (such as higher interest rates) than prime loans. Subprime loans are intended for applicants with poor credit histories, high loan-to-value ratios, or other credit risk characteristics that would disqualify them from lower cost, prime-rate loans.

Trustee's Deed Sale / Foreclosure Sale: In the District of Columbia, a notice filed with the Recorder of Deeds when a property is sold through a trustee's deed sale. This sale indicates that the foreclosure process has been completed and that the property owner has lost title to the home. The proceeds of the foreclosure sale are applied to the former owner's outstanding mortgage debt.

Last Updated: 10/28/2009