Distressed Borrower

AAA

DEFINITION of 'Distressed Borrower'

A borrower who is unable to fully repay his or her debt due to financial difficulties - difficulties either created by personal circumstance or the terms of the loan which he or she did not fully understand or was not able to meet when originally agreeing to the loan. The term "distressed borrower" is most commonly used to refer to homeowners at risk of foreclosure.

INVESTOPEDIA EXPLAINS 'Distressed Borrower'

Lenders have several options when working with a distressed borrower. The most common alternatives for distressed homeowners are:

- Forbearance: allowing the borrower to reduce or suspend their payments for a specified period of time and then agreeing to another option to "get current" on their current repayment amount.

- Reinstatement: allowing the borrower to pay the delinquent amount in one lump sum payment to get current on the balance amount.

- Loan modification: permanently restructuring the terms of the loan to either lower the total repayent amount required by the borrower or extend the length of time given to repay the full loan amount.

- Short sale: selling the home for less than the unpaid balance (UPB) on the loan and the lender forgives the remaining amount.

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Subprime Borrower

    A person who is considered a higher-than-normal credit risk. ...
  4. Bank

    A financial institution licensed as a receiver of deposits. There ...
  5. Past Due

    A loan payment that has not been made as of its due date. A borrower ...
  6. Forbearance

    A temporary postponement of mortgage payments.
Related Articles
  1. Purchasing A Short-Sale Property
    Home & Auto

    Purchasing A Short-Sale Property

  2. 5 Signs That You're Living Beyond Your ...
    Budgeting

    5 Signs That You're Living Beyond Your ...

  3. Homeowners, Beware These Scams!
    Home & Auto

    Homeowners, Beware These Scams!

  4. Short Sell Your Home To Avoid Foreclosure
    Options & Futures

    Short Sell Your Home To Avoid Foreclosure

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center