Short sale, loan modification and BPO terms in plain English: glossary

An approved temporary pause or reduction in payments. Missed amounts are generally still owed; confirm how repayment will work.

A repayment plan spreads missed amounts over scheduled payments. A deferral moves eligible amounts to a later repayment event under program terms.

An approved change to loan terms intended to address repayment problems. Possible changes depend on the loan and program.

A voluntary transfer of ownership to the lender or its designee as an alternative to foreclosure. Debt treatment and other liens require review.

A financial circumstance affecting the borrower’s ability to pay, and the written explanation or certification supporting it.

The financial information and supporting documents required for review. Submission does not mean the servicer considers the application complete.

The borrower’s permission for a designated person to communicate with the servicer. It does not automatically authorize signing documents or making decisions.

A designated servicing contact or person coordinating review. A negotiator may need additional investor or insurer approval.

The submission requested for a short-sale review, often including borrower financials, authorization, listing, offer, valuation support and estimated settlement figures.

A transaction between independent parties acting in their own interests. Disclose relationships and follow any required affidavit and investor restrictions.

Written terms authorizing an accepted reduced payoff. Review the approved buyer, price, net proceeds, costs, deadline and treatment of remaining debt.

Approval is time-limited. A requested extension is not granted until confirmed by the approving party; changed terms may require another review.

The property’s value is below the debt secured by it. Negative equity alone does not establish short-sale eligibility.

Net proceeds are funds remaining after transaction costs and adjustments. A net sheet estimates them; the amount available to each creditor depends on approved allocations.

Debt remaining after applicable sale proceeds or credits are applied. Whether it can be collected depends on law, documents and written agreements.

An agreement giving up collection of an unpaid balance. Confirm the exact written scope for each creditor.

A document clearing a secured claim from title. A lien release alone does not necessarily eliminate personal liability for unpaid debt.

A creditor may request cash or a separate promise to repay part of the shortage. Refer the proposed obligation for legal review before acceptance.

An agreement addressing a subordinate lien, often with an approved payment for release. Resolve both title release and remaining liability.

Coverage protecting the loan holder against certain losses. An insurer’s approval may be required; mortgage insurance is not homeowners insurance.

A title search examines recorded ownership and claims. A commitment states conditions and exceptions for issuing a title policy; it is not the final policy.

An association lien secures qualifying unpaid obligations. Some laws give part of certain liens special priority; obtain file-specific title and legal guidance.

Documents showing closing charges and disbursements. The required form depends on the transaction; use the form accepted by the closing agent and approving creditor.

Form 1099-C reports certain canceled debt. Cancellation can have tax consequences; exclusions depend on the taxpayer and current law. Refer to a tax professional, without promising tax-free treatment.

A workout addresses a troubled loan. Retention options aim to keep ownership; liquidation options resolve the loan through sale or transfer of the property.

A temporary payment arrangement used in certain modification reviews. Successful trial payments do not by themselves prove that permanent modification documents have been completed.

Adding eligible unpaid amounts to principal under an approved agreement. It can raise the balance even when the monthly payment falls.

A term extension lengthens repayment. Maturity is when the remaining obligation becomes due under the loan; it is not necessarily the next payment date.

A reduction lowers the interest rate. A step-rate structure changes it at specified intervals; verify later payment changes.

Forbearance sets aside repayment of specified principal under agreed terms. Forgiveness cancels principal. A deferred balance may still be due later.

A balloon is a large scheduled payment. A deferred balance is postponed debt that may become due at sale, payoff, refinance or another event specified by the agreement.

In certain government loan programs, an eligible amount is addressed through a separate subordinate obligation or claim mechanism. Repayment terms and eligibility are program-specific.

Monthly debt obligations divided by qualifying monthly income. Front-end and back-end ratios measure different expense groups; confirm the program’s income and debt definitions.

A method comparing projected future cash flows in today’s dollars. Some workout reviews use an NPV model; an agent’s net sheet is a different calculation.

A complete package contains all required items. Documents become stale when too old for the review; refreshing updates them to the required period.

An appeal asks for review of a decision where available. Reapplication submits a new request. Redefault is a new failure after a cure or workout.

An early program or pricing authorization, subject to its written terms. It does not necessarily approve a future buyer, contract, net or closing date.

The amount an approving creditor requires from closing. A higher purchase price can still fail review if costs reduce the creditor’s net below its requirement.

Consent from the loan owner or applicable mortgage insurer. A servicer recommendation may still require these additional decisions.

A counteroffer changes proposed terms. A value dispute challenges the valuation with relevant evidence; it does not authorize inaccurate or selectively misleading comps.

A financial statement summarizes income, expenses, assets and debts. A profit-and-loss statement shows business income and expenses for a stated period.

Evaluation of whether the borrower must contribute funds, considering program rules and documented resources. Available account balances do not alone establish an approved contribution.

Allocation determines who receives closing funds. Side payments or disbursements outside approved terms can jeopardize the transaction; disclose and obtain required written consent.

A release gives up specified claims against a person. A reservation preserves identified rights. Read both alongside the lien-release language.

Recourse permits personal collection as allowed by law and agreement. Nonrecourse limits recovery in specified ways. Classification depends on the actual loan and applicable law.

A legal restriction on collecting certain remaining debt. Coverage can turn on loan type, property use, foreclosure method, transaction details and state law.

Cancellation eliminates qualifying debt. For tax purposes, insolvency generally measures liabilities exceeding asset value immediately before cancellation; a tax professional must apply the rules.

Forms concerning acquisition or abandonment of secured property, cancellation of debt and certain debt-discharge tax exclusions or adjustments. They serve different purposes and require tax review.

The subject is the property being valued. A comparable is a similar property used to support the price opinion.

An interior BPO includes authorized interior observations. An exterior or drive-by BPO relies on exterior observations and other data; disclose interior limitations.

An agent’s analysis of competing listings and sales, often used to guide listing or offer pricing. A client-ordered BPO typically follows a specific reporting format.

An appraisal is a professional valuation developed under applicable appraisal requirements. An automated valuation model uses data and statistical methods to estimate value.

As-is reflects present condition. As-repaired assumes specified repairs are completed. ARV usually means after-repair value; define the assumed work and client terminology.

Market value uses a defined valuation standard. Probable sale price estimates a likely sale outcome. List price is an asking or marketing figure; identify which the assignment requests.

Closed sales show completed transactions. Active listings show competition. Pending listings show properties under contract; the final price may be unknown.

Adjustments account for meaningful differences between comps and the subject. Bracketing selects comps above and below important subject features where available.

Days on market and cumulative days on market. MLS definitions and rules for relisting vary; check the data source.

GLA is measured living area under the applicable standard. Price per square foot is a comparison tool, not a complete valuation method; use consistent area data.

Deferred maintenance is postponed upkeep. A repair estimate projects costs. Functional obsolescence is a loss of utility from design or layout shortcomings.

Trend describes price or activity direction. Absorption measures selling pace; state the formula and period. Reconciliation weighs the evidence into the final supported opinion.