The borrower may also be called a mortgagor or a trustor, depending on your state. The lender may also be called a mortgagee or the beneficiary, depending on your state. The trustee is the person appointed under a deed of trust to hold legal title to the real estate. The trustee may sell the property after a default. In the alternative, the trustee must transfer title to the borrower after all the loan payments have been made.
The servicing company collects mortgage payments, makes sure taxes and insurance payments are made under budget mortgages, interacts with the borrower, and distributes mortgage payments to various investors according to its instructions. Mortgage Electronic Registration System (MERS) acts as the nominee for mortgage loan owners. In that way, the loan can be sold several times without constantly having to update real estate records with the names of the new owners.
The Federal Housing Administration (FHA) insures mortgages that meet its underwriting guidelines. If the borrower defaults, the FHA will either pay off a claim to the lender or it will buy the mortgage loan and proceed with foreclosure. The Veterans Administration (VA) guarantees mortgages for borrowers who meet its eligibility requirements. If the borrower defaults, the VA will either pay off the claim to the lender, or it will buy the mortgage loan and proceed with foreclosure.
Mortgage Guaranty Insurance Corporation is the largest and oldest of the private mortgage insurance (PMI) companies. It performs the same function as the FHA, except for loans that do not meet the FHA requirements. Investment trust is an entity that may own many millions of dollars of mortgage loans it purchased on the secondary market. The investment trust usually issues bonds that are backed by those mortgages. Bond purchasers can be individuals, retirement plans, insurance companies, large investment firms, and even banks and mortgage companies.
The Financial Accounting Standards Board establishes accounting rules that impact the amount of discretion servicing companies have when dealing with defaulted loans or loans that might go into default. The Internal Revenue Service (IRS) is charged with collecting the nation's taxes. It seizes real estate when those taxes are not paid. The IRS also takes the position that debt forgiveness is the same thing as income and is therefore taxable. Foreclosure investors who are able to buy properties at discounts from lenders before foreclosure usually also obtain debt forgiveness for the borrower. As a result, the borrower might owe additional income taxes. There is a move to change this law because of its oppressive consequences.
The real estate broker is the licensed professional who is supposed to market foreclosed real estate for the owner, handle negotiations within the limits of his or her authority and seek additional authority when warranted, and secure the highest price on the best terms for the property. Lienholders are other parties who have claims against the property as a result of some sort of debt or court order. Liens can arise as a result of other mortgages, unpaid taxes, unpaid condo or subdivision dues and assessments, court judgments by creditors, liens by repair persons, divorce orders, and a wide variety of other methods.With the exception of real estate taxes and the liens by repairpersons, liens must be recorded in the real estate records to be effective.
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