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A

ABSTRACT
ACCELERATION
ACCELERATION CLAUSE
ACCRETION
ACKNOWLEDGEMENT
ACRE
ADEQUATE PROTECTION ORDER
ADJUSTABLE RATE MORTGAGE (ARM)
ADJUSTMENT INTERVAL
ADMINISTRATOR
ADVERSE POSSESSION
AGENCY
AGENT
AGREEMENT
AMORTIZATION
AMORTIZED LOAN
AMOUNT FINANCED
ANNUAL CAP
ANNUAL PERCENTAGE RATE (A.P.R.)
APPRAISAL
APPRAISED VALUE
APPROVED ATTORNEY
APPURTENANCE
ARBITRAGE
ARM’S LENGTH TRANSACTION
ASSESSED VALUE
ASSESSMENT
ASSIGN
ASSIGNEE
ASSIGNMENT OF MORTGAGE
ASSIGNOR
ASSOCIATE BROKER
ASSUMPTION AGREEMENT
ASSUMPTION FEE
ASSUMPTION OF A MORTGAGE
ATTACHMENT
ATTORNEY IN FACT

B

BALLOON (PAYMENT) MORTGAGE
BALLOON PAYMENT
BANKRUPTCY
BASIS POINT
BELLY UP
BENCHMARK
BENEFICIARY
BI-WEEKLY MORTGAGE
BID
BINDER
BLANKET MORTGAGE
BOND
BORROWER (MORTGAGOR)
BREACH OF CONTRACT
BROKER
BUILDING RESTRICTION LINE
BUY-DOWN
BY-LAWS

C

CALL
CALL PROVISION
CAPITAL GAINS
CAPITALIZATION
CAPS (INTEREST)
CAPS (PAYMENT)
CASHFLOW
CAVEAT EMPTOR
CERTIFICATE OF ELIGIBILITY ,
CERTIFICATE OF OCCUPANCY
CERTIFICATE OF REASONABLE VALUE (CRV)
CERTIFICATE OF SALE
CERTIFICATE OF SATISFACTION
CERTIFICATE OF TITLE
CERTIFICATE OF VETERAN STATUS
CERTIFIED MORTGAGE BANKER (CMB)
CHAIN OF TITLE
CHAPTER 11
CHAPTER 13
CHAPTER 7
CHATTEL
CLASS ACTION
CLEAR TITLE
CLOSED-END MORTGAGE
CLOSING
CLOSING COSTS
CLOUD ON TITLE
CMBS
COINSURANCE
COLLATERAL
COMMITMENT
COMPARABLES
CONDEMNATION
CONDITIONAL COMMITMENT
CONDOMINIUM
CONSERVATOR
CONSTRUCTION LOAN
CONTESTED FORECLOSURE
CONTRACT
CONTRACT FOR DEED
CONTRACT SALE OR DEED:
CONVENTIONAL LOAN
CONVERGENCES
CONVERTIBLE MORTGAGE
CONVERTIBLE STANDBY COMMITMENT
COOPERATIVE
CORRESPONDENT
COST APPROACH
COTENANCY
COVENANT
COVENANTS, CONDITIONS, AND RESTRICTIONS.
CREDIT LIFE
CREDIT REPORT

D

DEBT COVERAGE RATIO
DEBT SERVICE
DEBT-TO-INCOME RATIO
DEED
DEED IN LIEU
DEED OF TRUST
DEFAULT
DEFERRED INTEREST
DEFICIENCY JUDGMENT
DELINQUENCY
DELIVERY
DEPARTMENT OF VETERANS AFFAIRS (VA)
DEPOSIT
DISCHARGE
DISCOUNT
DISCOUNT POINT
DOWER
DOWN PAYMENT
DUAL AGENCY
DUE ON SALE CLAUSE

E

EARNEST MONEY
EASEMENT
ECOA
ECONOMIC LIFE
EFFECTIVE AGE
EMINENT DOMAIN
ENCROACHMENT
ENCUMBRANCE
ENDORSEMENT
ENTITLEMENT
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
EQUITY
EQUITY SHARING
ESCHEAT
ESCROW
ESCROW ACCOUNT
ESCROW AGENT
ESCROW ANALYSIS
ESCROW COMPANY
ESCROW CONTRACT
ESCROW OVERAGE OR SHORTAGE
ESCROW PAYMENT
EVICTION
EXECUTED SALES CONTRACT
EXECUTOR

F

FACE VALUE
FAIR MARKET VALUE
FANNIE MAE
FARMERS HOME ADMINISTRATION (FMHA)
FDIC
FEDERAL HOME LOAN BANK BOARD (FHLBB)
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) ALSO CALLED FREDDIE MAC,
FEDERAL HOUSING ADMINISTRATION (FHA)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ALSO KNOW AS FANNIE MAE
FEE SIMPLE
FHA LOAN
FHA MORTGAGE INSURANCE
FHLMC
FIDUCIARY
FIDUCIARY RELATIONSHIP
FINANCE CHARGE
FINANCING STATEMENT
FIRM COMMITMENT
FIRST MORTGAGE
FIXED RATE MORTGAGE
FIXTURE
FLOATING RATE OF INTEREST
FLOOD INSURANCE
FNMA
FORBEARANCE
FORECLOSURE
FORWARD COMMITMENT
FORWARD DELIVERY
FREDDIE MAC
FREE-MARKET SYSTEM AUCTION
FULL DISCLOSURE
FULLY INDEXED NOTE RATE

G

GENERAL WARRANTY DEED
GESTATION REPO
GIFT LETTER
GINNIE MAE
GOING LONG
GOING SHORT
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GRADUATED PAYMENT MORTGAGE (GPM)
GRANTEE
GRANTOR
GROSS INCOME
GROSS MARGIN
GROUND LEASE
GUARANTEED COUPON
GUARANTEED MORTGAGE CERTIFICATE (GMC)
GUARANTY
GUARDIAN

H

HAZARD INSURANCE
HEDGING
HIATUS
HOME EQUITY LOAN
HOMESTEAD DEED
HOUSING EXPENSES-TO-INCOME RATIO
HOUSING RATIO

I

IMPOUND
INCOME APPROACH
INDEMNITY
INDEX
INGRESS AND EGRESS
INITIAL NOTE RATE
INSTITUTIONAL LENDER
INSURABLE TITLE
INSURED CLOSING LETTER
INSURED MORTGAGE
INTEREST
INTEREST RATE
INTERIM FINANCING
INTERNAL RATE OF RETURN
INTESTATE
INVESTOR

J

JOINT OWNERSHIP AGREEMENT
JOINT TENANTS
JUDGMENT LIEN
JUMBO LOAN
JUNIOR MORTGAGE

K

KICKER

L

LAND CONTRACT
LATE CHARGE
LEASE HOLD ESTATE
LENDER
LETTER OF CREDIT
LIEN
LIFE CAP
LIFE ESTATE
LINE OF CREDIT
LIQUIDITY
LIS PENDENS
LOAN APPLICATION
LOAN FEE
LOAN GUARANTY CERTIFICATE
LOAN TERM
LOAN-TO-VALUE RATIO (LTV)
LOCK-IN PERIOD
LOSS MITIGATION

M

MAJORITY
MARGIN
MARGIN CALL
MARK TO THE MARKET
MARKET APPROACH TO VALUE
MARKET VALUE
MARKETABLE TITLE
MATURITY DATE
MECHANIC’S LIENS
METES AND BOUNDS
MIP (MORTGAGE INSURANCE PREMIUM)
MONTHLY HOUSING ALLOWANCE
MORTGAGE
MORTGAGE BANKER
MORTGAGE BANKING
MORTGAGE BROKER
MORTGAGE INSURANCE
MORTGAGE PORTFOLIO
MORTGAGE REVENUE BOND
MORTGAGE-BACKED SECURITIES
MORTGAGEE
MORTGAGOR

N

NEGATIVE AMORTIZATION
NEGOTIABLE INSTRUMENT
NET EFFECTIVE INCOME
NET WORTH
NON ASSUMPTION CLAUSE
NOTARY PUBLIC
NOTE

O

OBLIGATIONS
OFFER
Office of the Comptroller of the Currency (OCC)
OPEN-END MORTGAGE
OPTION
ORIGINATION FEE
ORIGINATOR
OWNER OF RECORD

P

PAR
PARCEL
PARTITION
PAY-OFF AMOUNT
PAYOFF SCHEDULE
PER-DIEM INTEREST
PERMANENT LOAN
PIGGYBACK FINANCING
PIPELINE
PIPESTEM LOT
PITI
PLAT
PLEDGED ACCOUNT MORTGAGE (PAM):
POINTS (LOAN DISCOUNT POINTS)
POWER OF ATTORNEY
PRE-APPROVAL
PRE-FORECLOSURE SHORT SALE
PREPAID EXPENSES
PREPAID FINANCE CHARGE
PREPAYMENT
PREPAYMENT CLAUSE
PREPAYMENT PENALTY
PRIMARY MORTGAGE MARKET
PRIME RATE
PRINCIPAL
PRIVATE MORTGAGE INSURANCE (PMI)
PRO FORMA STATEMENT
PROBATE
PROMISSORY NOTE
PROPERTY PRESERVATION
PRORATE
PROSPECTUS
PUBLIC RECORDS
PUBLIC SALE
PUNCH LIST
PURCHASE AGREEMENT
PURCHASE CAPITAL
PURCHASE MONEY MORTGAGE (PMM)
PUT

Q

QUIET TITLE
QUIT CLAIM DEED

R

RATE LOCK
REAFFIRMATION AGREEMENT
REAL ESTATE
REAL ESTATE INVESTMENT TRUST (REIT)
REALTOR
REASONABLE INVESTIGATION
REASSESSMENT
RECISION
RECONCILED VALUE
RECORDING
RECORDING FEES
REDLINING
REFINANCE
REINSTATEMENT
REISSUE RATE
REMAINDER
RENEGOTIABLE RATE MORTGAGE
REPURCHASE AGREEMENT
RESPA
RETIRE A DEBT
REVERSE ANNUITY MORTGAGE (RAM)
REVERSE REPURCHASE AGREEMENT
REVERSION
RIPARIAN RIGHTS
ROLLOVER
ROLLOVER MORTGAGE

S

SBA
SECOND MORTGAGE
SECONDARY FINANCING
SECONDARY MARKET
SECONDARY MORTGAGE MARKET
SECURED PARTY
SECURITIES AND EXCHANGE COMMISSION (SEC)
SECURITY
SECURITY INSTRUMENT
SELF-AMORTIZING LOAN
SENSITIVITY ANALYSIS
SERVICE OF THE COMPLAINT
SERVICING
SERVICING AGREEMENT
SERVICING INCOME
SERVICING RUNOFF
SETTLEMENT STATEMENT
SETTLEMENT/SETTLEMENT COSTS
SHARED APPRECIATION MORTGAGE (SAM)
SIMPLE INTEREST
SINKING FUND
SITE ASSESSMENT
SOFT DOLLARS
SPECIAL ASSESSMENT
SPECIAL WARRANTY DEED
SPECIFIC PERFORMANCE
STANDBY COMMITMENT
STANDBY CONTRACT
STANDBY FEE
STANDING MORTGAGE
STATUTE OF LIMITATIONS
SUBDIVISION
SUBJECT TO
SURVEY
SWEAT EQUITY

T

TAX LIEN
TENANTS BY THE ENTIRETY
TENANTS IN COMMON
TERM
TESTATE
TESTATOR
TITLE
TITLE INSURANCE
TITLE SEARCH
TOTAL OF PAYMENTS
TRUST
TRUST DEED
TRUSTEE
TRUTH-IN-LENDING
TWO-STEP MORTGAGE

U

UNDERWRITING
UP-FRONT COSTS
USURY

V

VA LOAN
VA MORTGAGE FUNDING FEE
VALUATION
VARIABLE RATE MORTGAGE (VRM)
VERIFICATION OF DEPOSIT (VOD)
VERIFICATION OF EMPLOYMENT (VOE)
VESTED INTEREST

W

WAIVER
WAREHOUSE FEE
WAREHOUSING
WARRANTY DEED
WRAPAROUND
WRAPAROUND MORTGAGE

Y

YIELD

Z

ZONING


ABSTRACT

The notes made by a title examiner based on his examination of the land records. These notes are a concise summary of the transactions affecting the property. The title agency produces a BINDER from the information in the abstract.

ACCELERATION

The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.

ACCELERATION CLAUSE

A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as the sale of the property, or a delinquency in the repayment of the note.

ACCRETION

The buildup of land from natural forces such as wind or water.

ACKNOWLEDGEMENT

As a verb, the confirmation by a party executing a legal document that this is his signature and voluntary act. This confirmation is made to an authorized officer of the Court or notary public who signs a statement also called an acknowledgment.

ACRE

43,560 square feet of land.

ADEQUATE PROTECTION ORDER

Forces trustees to release Post petition payments being held prior to the Chapter 13 Confirmation Hearing.

ADJUSTABLE RATE MORTGAGE (ARM)

Is a mortgage in which the interest rate is adjusted periodically based on a preselected index. Also sometimes known as the re negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

ADJUSTMENT INTERVAL

On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

ADMINISTRATOR

A person appointed by the Court to settle the estate of a person who dies without a will. The feminine form is Administratrix. Compare, EXECUTOR.

ADVERSE POSSESSION

A claim made against land titled in another person based on open, notorious and hostile possession and use of the land to the exclusion of the titled owner.

AGENCY

A relationship in which the agent is given the authority to act on behalf of another person (Principal).

AGENT

One who legally represents another, called a principal, from whom authority has been derived.

AGREEMENT

A change to the correct or alteration to the original document/agreement without changing its principal essence.

AMORTIZATION

Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

AMORTIZED LOAN

A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity.

AMOUNT FINANCED

The amount applied for less the prepaid finance charges. Prepaid finance charges can be found on the Good Faith Settlement Statement (HUD1 or HUD1A). For example, if the borrower’s Note is for $100,000 and the prepaid finance charge total is $5,000, the Amount Financed would be $95,000. The Amount Finance is the amount on which the Annual Percentage Rate (APR) is calculated.

ANNUAL CAP

The limit on the amount an adjustable rate mortgage’s interest rate can change over a 12-month period. An annual cap prevents your payments from changing too dramatically, even if the factors that determine changes in an adjustable mortgage’s rate rise or fall sharply during that period.

ANNUAL PERCENTAGE RATE (A.P.R.)

This is not the Note rate for which the borrower applied. It is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs, such as private mortgage insurance, loan discount, origination fees, and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

APPRAISAL

An estimate of the value of property, made by a qualified professional called an appraiser. Most states require licenses. Various lenders have their own lists of approved appraisers.

APPRAISED VALUE

An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.

APPROVED ATTORNEY

An attorney authorized by a title insurance company to handle closings and render title opinions.

APPURTENANCE

Anything attached to the land or used with it passing to the new owner.

ARBITRAGE

In mortgage banking, the simultaneous purchase and sale of mortgages, futures contracts, or mortgage backed securities in different markets to profit from differences in price.

ARM’S LENGTH TRANSACTION

A transaction in which the parties involved are entirely independent of each other, deal with each other as strangers, and have no reason for collusion.

ASSESSED VALUE

The determination, for tax purposes, of how much a home and the property it occupies is worth.

ASSESSMENT

A local tax levied against a property for a specific purpose, such as a sewer or street lights.

ASSIGN

To transfer interest.

ASSIGNEE

One who receives an assignment or transfer of rights. An assignment of a contract transfers the right to buy property.

ASSIGNMENT OF MORTGAGE

A document that evidences a transfer of ownership of a mortgage from one party to another.

ASSIGNOR

The one who assigns to another person.

ASSOCIATE BROKER

A person who has qualified as a real estate broker but works for a particular broker licensed in the state.

ASSUMPTION AGREEMENT

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, possibly higher, market-rate interest charges will apply.

ASSUMPTION FEE

The fee paid to a lender resulting from the assumption of a mortgage.

ASSUMPTION OF A MORTGAGE

Assumption by a purchaser of the primary liability for a payment of an existing mortgage or deed of trust. The seller remains secondarily liable unless specially released by the lender.

ATTACHMENT

Seizure of property through Court process to repay a debt.

ATTORNEY IN FACT

A type of agency relationship where one person holds a POWER OF ATTORNEY allowing him to execute legal documents on behalf of another. Decisions made by the attorney in fact are binding on the principal.

BALLOON (PAYMENT) MORTGAGE

Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

BALLOON PAYMENT

The unpaid principal amount of a mortgage or other long-term loan due on a specified date in the future. Usually the amount that must be paid in a lump sum at the end of the term.

BANKRUPTCY

A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy Court and is relieved of the future obligation to repay his unsecured debts. A Trustee in Bankruptcy administers the assets, selling them to pay as much of the debt as possible. If your seller is in bankruptcy, the Trustee in Bankruptcy owns the property and is the party to sign the contract and make decisions. After bankruptcy, the debtor is discharged and his unsecured creditors may not pursue further collection efforts against him. Secured creditors, those holding deeds of trust or judgment liens, continue to be secured by the property but they may not take other action to collect from the debtor.

BASIS POINT

One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages.

BELLY UP

Term used to describe a failed real estate project.

BENCHMARK

A permanent reference mark for surveyors.

BENEFICIARY

A person named to receive a benefit from a TRUST. A contingent beneficiary has conditions attached to his rights, usually someone else must die first.

BI-WEEKLY MORTGAGE

A mortgage with payments due every two weeks totaling 26 payments a year.

BID

An offer.

BINDER

A title insurance binder is the written commitment of a title insurance company to insure title to the property subject to the conditions and exclusions shown on the binder.

BLANKET MORTGAGE

A mortgage covering at least two pieces of real estate as security for the same mortgage. This sort of loan is more common for commercial property or special case loans.

BOND

An amount of money, often posted with the Court, to guarantee against loss as a result of a possible claim. For example, if there is a LIEN against the property, the owner may post a bond and the lien is removed from the property and the parties argue over the money rather than the property.

BORROWER (MORTGAGOR)

One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full

BREACH OF CONTRACT

Failure to perform provisions of a contract.

BROKER

An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

BUILDING RESTRICTION LINE

A required set-back a certain distance from the road within which no building may take place. This restriction may appear in the original plat of subdivision, restrictive covenants or by building codes and zoning ordinances.

BUY-DOWN

When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. These are sometimes used to qualify borrowers for a loan amount that they would not otherwise qualify for but will be able to pay in subsequent years as their income increases.

BY-LAWS

Rules and regulations governing an association or corporation.

CALL

An option to buy a specific security at a specified price within a designated time.

CALL PROVISION

In a mortgage or deed of trust, it refers to the mortgagee’s or beneficiary’s ability to speed up payment of the obligation under certain conditions. In bonds, it refers to the right to redeem the bond before maturity.

CAPITAL GAINS

Profit earned from a sale of real estate.

CAPITALIZATION

A method used to estimate value of a property based on the rate of return on investment.

CAPS (INTEREST)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

CAPS (PAYMENT)

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

CASHFLOW

The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)

CAVEAT EMPTOR

Buyer beware. The buyer must inspect the property and satisfy himself it is adequate for his needs. The seller is under no obligation to disclose defects but may not actively conceal a known defect or lie if asked.

CERTIFICATE OF ELIGIBILITY ,

The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility)

CERTIFICATE OF OCCUPANCY

A certificate issued by a local governmental body stating that the building is in a condition to be occupied.

CERTIFICATE OF REASONABLE VALUE (CRV)

An appraisal issued by the Veterans Administration showing the property’s current market value

CERTIFICATE OF SALE

A certificate issued to the buyer of real property at a judicial sale.

CERTIFICATE OF SATISFACTION

A document signed by the Noteholder and recorded in the land records evidencing release of a DEED OF TRUST, MORTGAGE or other lien on the property.

CERTIFICATE OF TITLE

A written opinion by an attorney setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was negligent. Compare, TITLE INSURANCE.

CERTIFICATE OF VETERAN STATUS

The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

CERTIFIED MORTGAGE BANKER (CMB)

A professional designation of the mortgage banking industry.

CHAIN OF TITLE

The series of transactions from GRANTOR to GRANTEE as evidenced in the land records.

CHAPTER 11

Business re-organization, similar to a Chapter 13 personal bankruptcy.

CHAPTER 13

Wage Earner Plan (Voluntary) All payments delinquent at the time of filing a chapter 13 bankruptcy (Pre-Petition Payments) are scheduled for repayment over a period of time, often 60 months. All payments due after the date of filing must be paid on time to the mortgagee. Foreclosure is not permitted unless mortgagor defaults in payments due after the bankruptcy is filed (Post Petition Payments).

CHAPTER 7

Insolvency (Involuntary) Unsecured debts are extinguished. Secured creditors may continue to be paid, or they may force the trustee to sell the secured property to receive payment, or they may obtain permission to foreclose, depending on circumstances and equity.

CHATTEL

Personal property.

CLASS ACTION

A claim brought up on behalf of a group of people.

CLEAR TITLE

Title not encumbered or burdened with defects.

CLOSED-END MORTGAGE

A fixed amount mortgage where the debt cannot be increased. It is the opposite of an open-end mortgage.

CLOSING

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.

CLOSING COSTS

The fees and charges a buyer and seller must pay at the time of closing on a home sale. These can include, among other things, broker commissions, lender discount points, insurance premiums, and attorney’s fees.

CLOUD ON TITLE

An evidence of encumbrances.

CMBS

Acronym for conventional mortgage-backed securities whose underlying pool of mortgages have no federal guarantees or insurance.

COINSURANCE

When more than one insurance company shares the risk of a particular transaction or series of transactions. Lenders may require co-insurance on large commercial projects.

COLLATERAL

Property pledged to secure a loan.

COMMITMENT

A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

COMPARABLES

Properties used as comparisons to determine the value of a specified property.

CONDEMNATION

Taking of private property for a public use through exercise of the power of EMINENT DOMAIN. The Constitution protects against taking without fair compensation.

CONDITIONAL COMMITMENT

During HUD/FHA mortgage insurance processing, it indicates the satisfactory completion of technical processing involving the estimated costs of the project, the as-is value of the site, the detailed estimate of the operating expenses and taxes, the supportable costs, the financial and credit capacity of the sponsors, financial requirements, and mortgage amounts.

CONDOMINIUM

A system of individual FEE SIMPLE ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may sell or encumber his own unit. Compare, COOPERATIVE.

CONSERVATOR

Also called a Committee or Guardian, a person designated by the Court to protect and preserve the property of someone who is not able to manage their own affairs. Examples include the mentally incompetent, minors and incarcerated persons.

CONSTRUCTION LOAN

A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses. These are generally done by lenders with offices local to the site of the construction. This enables the lender or their agent to monitor the progress of the construction.

CONTESTED FORECLOSURE

When a mortgagor responds (answers) a Foreclosure Complaint disagreeing with some of the facts contained in the complaint. If the disagreement is not considered to be factual, the court may issue a Summary Judgement in favor of the mortgagee. If the answer disputes facts stated within the complaint, the court may order a hearing to determine the facts. If the mortgagor asserts new matters in the answer, this may be a Counter Complaint and may also result in Summary Judgement or a hearing.

CONTRACT

A legally enforceable agreement between two parties.

CONTRACT FOR DEED

Also known as a Land Contract or Land Installment Contract. A method of financing where title remains in the Seller’s name until the Buyer has paid the full purchase price. A Contract for Deed will normally trigger the DUE ON SALE CLAUSE in a DEED OF TRUST or MORTGAGE but Veterans Administration regulations specifically allow Contracts for Deed without invoking the DUE ON SALE CLAUSE.

CONTRACT SALE OR DEED:

A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

CONVENTIONAL LOAN

A mortgage not insured by FHA or guaranteed by the VA.

CONVERGENCES

The reduction or disappearance of the difference between the cash and futures prices as the delivery date in a futures contract approaches.

CONVERTIBLE MORTGAGE

An adjustable rate mortgage where the mortgagor can convert the mortgage to a fixed rate mortgage during a predetermined time period.

CONVERTIBLE STANDBY COMMITMENT

FNMA mortgage purchase that may be converted to the same yield as offered in the most recent Free Market Auction.

COOPERATIVE

A system of individual ownership of stock in a corporation that in turn, owns the structure. Each owner has an exclusive right to use his individual unit and must pay his portion of the debt encumbering the entire building. Compare, CONDOMINIUM.

CORRESPONDENT

An abbreviated term meaning mortgage loan correspondent. A mortgage banker who services mortgage loans as an agent for the owner of the mortgage or investor. Also applies to the mortgage banker in the role of originator of mortgage loan for an investor.

COST APPROACH

A method used by an appraiser to estimate replacement cost of improvements less depreciation.

COTENANCY

Ownership in the same land by more than one person. See, TENANTS IN COMMON, JOINT TENANTS, TENANTS BY THE ENTIRETY.

COVENANT

A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner’s association.

COVENANTS, CONDITIONS, AND RESTRICTIONS.

The basic rules establishing the rights and obligations of owners of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

CREDIT LIFE

Declining term life insurance taken out by a borrower as added security for repayment of a loan.

CREDIT REPORT

A report documenting the credit history and current status of a borrower’s credit standing.

DEBT COVERAGE RATIO

The ration of effective annual net income to annual debt service.

DEBT SERVICE

A borrower’s periodic payment comprising repayment of principal plus payment of interest on the unpaid balance.

DEBT-TO-INCOME RATIO

The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.

DEED

The written document conveying real property. The Deed must be executed (signed), ACKNOWLEDGED, and DELIVERED to the Grantee. Once recorded at the Courthouse, the original piece of paper is not needed to convey title in the future.

DEED IN LIEU

A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.

DEED OF TRUST

A type of security instrument conveying title in trust to a third party covering a particular piece of property. It is used to secure the payment of a note. Compare, MORTGAGE. In some states, this document is used in place of a mortgage to secure the payment of a note.

DEFAULT

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

DEFERRED INTEREST

When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization

DEFICIENCY JUDGMENT

If the foreclosure sale does not bring sufficient proceeds to pay the costs of sale and the note in full, the holder of the note may obtain a judgment against the maker for the difference.

DELINQUENCY

Failure to make payments on time. This can lead to foreclosure.

DELIVERY

The final, unconditional and absolute transfer of a DEED to the Grantee so that the Grantor may not revoke it. A Deed, signed but held by the Grantor, does not pass title.

DEPARTMENT OF VETERANS AFFAIRS (VA)

An independent agency of the federal government that guarantees long-term, low-or no-down payment mortgages to eligible veterans.

DEPOSIT

A sum of money given to bind a sale of real estate, or a sum of money given to assure payment, or an advance of funds in the processing of a loan. Also known as earnest money.

DISCHARGE

Unsecured debts are extinguished and the bankruptcy is closed.

DISCOUNT

In loan origination, a discount refers to an amount withheld from loan proceeds by a lender. In a secondary marketing sale, a discount is the amount by which the sale price of a note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upward, either in lieu of interest or in addition to interest. The rate of the amount of the discount depends on money market conditions, the credit of the borrower, and the rate or terms of the note.

DISCOUNT POINT

The amount of money you can choose to pay when you first get a loan to reduce its overall interest rate. Discount points are usually a small fraction of the total amount of your loan i.e., 1, 2, or 3% and can lower the interest rate for the entire life of the loan, or just part of it. See Point

DOWER

A spouse’s interest in the property of a deceased spouse.

DOWN PAYMENT

Money paid to make up the difference between the purchase price and the mortgage amount.

DUAL AGENCY

Representation of opposing parties (buyer and seller) at the same time in the same transaction. This situation most often refers to cases where the Realtor is the agent for both parties.

DUE ON SALE CLAUSE

A clause in the MORTGAGE that makes the loan non-assumable by providing the noteholder may call the loan immediately due and payable upon a sale or conveyance of an interest in the property. The FNMA/FHLMC form provides that a lease of more than three years or a lease with an option to buy also triggers this provision.

EARNEST MONEY

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment. A good faith deposit.

EASEMENT

The right to use the land of another for a specific limited purpose. Examples include utility lines, driveways, and INGRESS AND EGRESS. Easements can be temporary or permanent.

ECOA

Equal Credit Opportunity Act. ECOA is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt from public assistance programs.

ECONOMIC LIFE

The estimated period of time during which a property can be utilized profitably.

EFFECTIVE AGE

For purposes of an appraisal, the physical age given to a building based on its present condition, which may be longer or shorter than its actual age.

EMINENT DOMAIN

The power of the state to take private property for public use upon payment of just compensation.

ENCROACHMENT

The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line.

ENCUMBRANCE

Any lien, liability or charge against a property.

ENDORSEMENT

A writing on a negotiable instrument by which title to a property mentioned therein is assigned and transferred. A notation added to an instrument after execution to change or clarify its contents. In insurance, coverage may be restricted or enlarged by endorsing a policy. In FHA loans, a notation placed on the note by the FHA indicating that the loan is insured under the National Housing Act.

ENTITLEMENT

The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

EQUAL CREDIT OPPORTUNITY ACT (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

EQUITY

The difference between the fair market value and current indebtedness, also referred to as the owner’s interest. The value an owner has in real estate over and above the obligation against the property. When you first buy a home, your ownership equals your down payment; your mortgage lender owns the rest. To figure out your equity, subtract the amount you owe on your loan from your home’s current market value.

EQUITY SHARING

A form of joint ownership between an owner/occupant and an owner/investor. The investor takes depreciation deductions for his share of the ownership. The occupant receives a portion of the tax write-offs for interest and taxes and a part of his monthly payment is treated as rent. The co-owners divide the profit upon sale of the property. Compare, JOINT OWNERSHIP AGREEMENT.

ESCHEAT

Property that reverts to the state when an individual dies without heirs and without a will.

ESCROW

A bank account where you deposit money that will be used to pay charges that come with your purchase of a house. An escrow account is sort of a neutral area between you and your mortgage lender that stores money you’ve deposited until you need it to pay for certain aspects of your loan, like closing costs, taxes or insurance fees.

ESCROW ACCOUNT

The segregated trust account in which escrow funds are held.

ESCROW AGENT

The person or organization having a fiduciary responsibility to both the buyer and seller (Or lender or borrower) to see that the terms of the purchase/sale (or loan) are carried out.

ESCROW ANALYSIS

The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay tax, insurance, and other bills when due.

ESCROW COMPANY

An organization established to act as an escrow agent.

ESCROW CONTRACT

A three-party agreement between the buyer, seller, and the escrow agent specifying the rights and duties of each.

ESCROW OVERAGE OR SHORTAGE

The difference determined by escrow analysis, between the escrow funds on deposit and the escrow funds required.

ESCROW PAYMENT

The portion of a mortgagor’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known is impounds or reserves in some states.

EVICTION

Also know as Ejectment in some jurisdictions, the legal removal of former property owners, tenants or squatters from a foreclosed property.

EXECUTED SALES CONTRACT

A contract where all the terms have been successfully completed by the buyer and the seller.

EXECUTOR

A person named in a will to carry out its terms and administer the estate. The feminine form is Executrix. Compare, ADMINISTRATOR.

FACE VALUE

Par value; the principal or nominal value of a bond, note, mortgage, etc.. The amount of principal the issuer contracts to pay.

FAIR MARKET VALUE

A term that refers how much a home or property is worth, given the current conditions of the local real estate market. The fair market value of a home is usually used in conjunction with the amount of tax its owner must be charged.

FANNIE MAE

See Federal National Mortgage Association.

FARMERS HOME ADMINISTRATION (FMHA)

Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FDIC

Federal Deposit Insurance Corporation. Originally established by the Banking At of 1933 to insure the deposits of all banks entitled to federal deposit insurance.

FEDERAL HOME LOAN BANK BOARD (FHLBB)

The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of the Comptroller of the Currency.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)

A affiliate of the Federal Home loan Bank which creates a secondary money market in conventional residential loans and in FHA and VA loans by purchasing mortgage loans from members of the Federal Reserve System and the Federal Home Loan Bank Systems. Also known as Freddie Mac.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) ALSO CALLED FREDDIE MAC,

Is a quasi-governmental agency that specializes in purchasing mortgage loans, primarily from savings and loans associations. Freddie Mac is run by the United States government, with assistance from private sector professionals.

FEDERAL HOUSING ADMINISTRATION (FHA)

A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ALSO KNOW AS FANNIE MAE

A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA to add cash to the mortgage market. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

FEE SIMPLE

The absolute total interest in real property. Compare, LIFE ESTATE, REVERSION.

FHA LOAN

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($155,250 as of 1/1/96), they are generous enough to handle moderately-priced homes almost anywhere in the country.

FHA MORTGAGE INSURANCE

Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FHLMC

The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans by purchasing their conventional loans. Also known as Freddie Mac.

FIDUCIARY

One who acts in a capacity of trust and confidence for another.

FIDUCIARY RELATIONSHIP

A relationship of trust and confidence between principal and agent; lawyer and client; doctor and patient; etc.

FINANCE CHARGE

The amount of interest, prepaid finance charge, and certain insurance premiums (if any) which the borrower will be expected to pay over the life of the loan.

FINANCING STATEMENT

Lenders record financing statements to evidence personal property, such as a new furnace, siding or windows, is subject to a lien.

FIRM COMMITMENT

A promise by FHA to insure a mortgage loam for a specified property and borrower. A promise from a lender to make a mortgage loan.

FIRST MORTGAGE

A real estate loan that creates a primary lien against real property.

FIXED RATE MORTGAGE

The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.

FIXTURE

An item of personal property attached to real property so that it can not be removed without damage to the real property. A FIXTURE becomes part of the real property.

FLOATING RATE OF INTEREST

An interest rate that instead of being a fixed percent is stated as an amount above or below another rate, usually the prime rate, so that as the prime rate moves up and down the interest rate moves with it.

FLOOD INSURANCE

An insurance policy that covers damage your home may receive due to flooding. If the home you’re buying is in an area prone to flooding, then you may be required by your home loan provider to get flood insurance. To establish whether or not your home is in such an area, a land survey must be done at the expense of the person selling the home at least fifteen days before the date you close on the home purchase.

FNMA

The Federal National Mortgage Association is a secondary mortgage institution, which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as Fannie Mae.

FORBEARANCE

Formal or informal agreement the mortgagee will forebear (withhold) legal action permitting the mortgagor an extended period of time to catch up on delinquent payments.

FORECLOSURE

A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property. Under a DEED OF TRUST, foreclosure is by public auction after appropriate advertisement. A MORTGAGE may require the lender to obtain Court approval prior to sale.

FORWARD COMMITMENT

A commitment made by the lender to make or purchase a loan in the future.

FORWARD DELIVERY

The delivery of mortgages or mortgage-backed securities to satisfy cash or future market transactions on an earlier date.

FREDDIE MAC

See Federal Home Loan Mortgage Corporation

FREE-MARKET SYSTEM AUCTION

A periodic auction conducted by the Federal National Mortgage Association, at which commitments to purchase mortgages are issued. Approved lenders specify a dollar amount and yield to FNMA.

FULL DISCLOSURE

A legal requirement that says a person selling a home must inform a potential buyer of everything they know about the home’s physical and economic condition.

FULLY INDEXED NOTE RATE

As related to adjustable rate mortgages, the index value at the time of application plus the gross margin stated in the note.

GENERAL WARRANTY DEED

The Grantor warrants title against all claims.

GESTATION REPO

A repurchase agreement covering the time between the date an issuer submits documents to the Government National Mortgage Association for final pool approval and the date the new security is actually issued (usually 20 calendar days).

GIFT LETTER

A form stating that a relative is giving you money to help you buy a home, and that they will not ask you to it pay back. The letter also provides proof, by referring to bank statements and other records, that the relative does, in fact, have enough money to cover the amount of the gift, and that the money has been transferred to your possession.

GINNIE MAE

See Government National Mortgage Association.

GOING LONG

A strategy wherein loans are originated before an attempt is made to sell them to investors.

GOING SHORT

A strategy wherein investor commitments are obtained before loans are originated against commitments.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

On September 1, 1968, Congress enacted legislation to partition FNMA into two continuing corporation entities. GNMA has assumed responsibility for the special assistance loan programs. Also, GNMA administers the mortgage-backed securities programs that channel new sources of funds into residential financing through the sale of privately issued securities carrying the GNMAS guaranty.

GRADUATED PAYMENT MORTGAGE (GPM)

A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

GRANTEE

The person receiving an interest in property. Compare, GRANTOR

GRANTOR

The person granting, selling or giving up an interest in property. Compare, GRANTEE.

GROSS INCOME

Income before expenses.

GROSS MARGIN

With regard to an adjustable rate mortgage, an amount expressed as percentage points, stated in the note which is added to the current index value on the rate adjustment date to establish a new note rate.

GROUND LEASE

The owner grants a long term lease of the land (usually 99 years) and allows the lessee to build and use the land as agreed. At the end of the term, the land and all improvements revert to the owner.

GUARANTEED COUPON

A term in a contract for the purchase or sale of mortgage-backed securities that states the securities to be delivered will bear an agreed upon interest rate.

GUARANTEED MORTGAGE CERTIFICATE (GMC)

A bond-like instrument issued by the Federal Home Loan Mortgage Corporation that represents ownership in a large pool of residential mortgages. Principal is returned annually and interest is paid semiannually.

GUARANTY

A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract

GUARDIAN

One appointed by the Court to administer the affairs of a minor. A guardian ad litem is appointed to protect one’s interest in a particular legal action. See, CONSERVATOR.

HAZARD INSURANCE

A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

HEDGING

The matching of assets to liabilities of a similar nature; the assumption of one risk is calculated to offset another. In mortgage banking, the purchase or sale of mortgage futures contracts to offset market transactions to be made at a later date.

HIATUS

A gap or space left between two parcels of land and not included in the legal description of either parcel. Similar terms are Gaps and Gores.

HOME EQUITY LOAN

A loan that lets you borrow back money against the difference of what you own on your current home loan and the home’s estimated sales price. People generally use home equity loans to get cash for large expenses like education, home improvement, or health care.

HOMESTEAD DEED

A declaration filed in the land records that an individual is asserting his homestead exemption. That exemption allows one to protect some assets (amount varies by state) against the claims of creditors.

HOUSING EXPENSES-TO-INCOME RATIO

The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.

HOUSING RATIO

The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.

IMPOUND

That portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

INCOME APPROACH

A method used by an appraiser to estimate the value of a property by calculating it’s generated income.

INDEMNITY

A protection against actual loss or damage as a result of the matter mentioned. An indemnity is not an absolute guarantee that something won’t happen, it states the terms under which an actual loss will be compensated.

INDEX

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

INGRESS AND EGRESS

Applied to EASEMENTS, meaning the right to go in and out over a piece of property but not the right to park on it.

INITIAL NOTE RATE

With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from and is usually less than the fully indexed rate.

INSTITUTIONAL LENDER

A financial institution that invests its own funds or funds it is managing in real estate. Mutual savings banks, life insurance companies, commercial banks, pension and trust funds, and savings and loan associations are examples.

INSURABLE TITLE

Title subject to a defect or claim which a title insurance company is willing to insure against. Compare, MARKETABLE TITLE.

INSURED CLOSING LETTER

An Indemnity given to a lender from a title insurance company, agreeing to be responsible if the closing agent does not follow the lender’s instructions or misappropriates the loan proceeds. Lenders usually require an insured closing letter be on file for each settlement.

INSURED MORTGAGE

A mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.

INTEREST

The amount of money a lender charges you to borrow money to buy a home. The interest you pay is a percentage of your total loan, and is paid over time.

INTEREST RATE

The percentage of an amount of money which is paid for its use for a specified time. Usually expressed as an annual percentage.

INTERIM FINANCING

A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

INTERNAL RATE OF RETURN

A method of determining investment yield over time assuming a set of income, expense, and property value conditions. It combines the present worth of the right to receive future income streams with the present worth of the right to receive a particular profit when the property is sole.

INTESTATE

An estate without a Will. Compare, TESTATE

INVESTOR

A money source for a lender.

JOINT OWNERSHIP AGREEMENT

An agreement between owners defining their rights, ownership, monetary obligations and responsibilities. This could be between and investor and an occupant or the occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant’s payment is deemed rent for tax purposes. Compare, EQUITY SHARING.

JOINT TENANTS

Two or more persons own a property. Joint tenants with the common law right of survivorship means the survivor inherits the property without reference to the decedent’s will. Creditors may sue to have the property divided to settle claims against one of the owners. Compare, TENANTS IN COMMON, TENANTS BY THE ENTIRETY.

JUDGMENT LIEN

A judgment is a lien against all real property owned by the judgment debtor in the county where the judgment is docketed (recorded).

JUMBO LOAN

A loan which is larger (more than $214,600 as of 1/1/97) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

JUNIOR MORTGAGE

Mortgage of lesser priority than the prior recorded mortgage.

KICKER

A term describing any benefit to a lender above ordinary fixed interest payments. It may be an equity position in a property or a percentage participation in the income stream.

LAND CONTRACT

See CONTRACT FOR DEED.

LATE CHARGE

An additional charge a borrower is required to pay as penalty for failure to pay a regular installment when due.

LEASE HOLD ESTATE

Tenants right of possession for a specific period of time under a lease agreement. (Common in Hawaii.)

LENDER

A financial institution, like a bank, that loans you money to buy a home, and expects you to pay the money back to them in a stated period of time, usually with interest.

LETTER OF CREDIT

A letter authorizing a person or company to draw on a bank or stating that the bank will honor their credit up to the stated amount.

LIEN

A claim upon a piece of property for the payment or satisfaction of a debt or obligation. Property is said to be encumbered by a lien and the lien must be removed to clear title.

LIFE CAP

With regard to an adjustable rate mortgage, a ceiling the note rate cannot exceed over the life of the loan.

LIFE ESTATE

The right to use, occupy, and own for the life of an individual. Compare, FEE SIMPLE.

LINE OF CREDIT

An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

LIQUIDITY

Cash position based upon assets that can readily be converted to cash.

LIS PENDENS

Recorded document showing a pending litigation filed in the court. These show up on the preliminary title report and must be dealt with when transferring ownership or refinancing.

LOAN APPLICATION

The loan application is the source of information on which the lender bases a decision to make the loan; defines the term of the loan, gives the name(s) of the borrower(s) , place of employment, salary, bank accounts and credit references, and describes the real estate that is to be mortgaged. It also stipulates the amount of the loan being applied for and the repayment terms.

LOAN FEE

The charge made for negotiating a loan, in addition to interest; sometimes used in reference to an additional fee paid directly to a lender either for a commitment or at the time advances are made.

LOAN GUARANTY CERTIFICATE

VA document stating that portion of a loan that is guaranteed.

LOAN TERM

The total amount of time you are given by a lender to pay off your home loan. Loan terms vary, but are generally set at 15 or 30 years.

LOAN-TO-VALUE RATIO (LTV)

The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

LOCK-IN PERIOD

That portion of the term of a mortgage loan during which the loan cannot be prepaid.

LOSS MITIGATION

Mortgagees attempt to devise a delinquency resolution without having to resort to lengthy and expensive litigation (foreclosure). Loss Mitigation methods include: Creative Forbearance Plans, Pre-Foreclosure Short Sales, Deed-in-Lieu of Foreclosure, Deferments, Modifications, Refinances.

MAJORITY

The age at which a person may handle his or her own affairs.

MARGIN

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

MARGIN CALL

A call for the deposit of additional funds or collateral to offset trading losses on an outstanding position that is subject to margin.

MARK TO THE MARKET

The daily adjustment of margin accounts to reflect the market gain or loss on the position relative to the daily settlement price.

MARKET APPROACH TO VALUE

In appraising, the market value estimate is predicated upon actual prices paid in market transactions. It is a process of correlation and analysis of similar recently sold properties.

MARKET VALUE

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MARKETABLE TITLE

Title without defects or claims so as to be readily accepted without fair or reasonable doubt. Compare, INSURABLE TITLE.

MATURITY DATE

The scheduled date for your final payment on a loan. After making the payment on a loan’s maturity date, you assume complete ownership of your home from the lender.

MECHANIC’S LIENS

The right of an unpaid contractor, laborer or supplier to file a lien against property to recover the value of his work

METES AND BOUNDS

A means of describing land by directions and distances rather than reference to a lot number. Generally used when land has not been subdivided into lots.

MIP (MORTGAGE INSURANCE PREMIUM)

An insurance from FHA to the lender against incurring a loss on account of the borrower’s default.

MONTHLY HOUSING ALLOWANCE

The percentage of a person’s income they can comfortably use each month to pay for where they live with enough left over to spend on food, clothing, and other luxuries. As the result of a series of mind-numbing calculations, mortgage experts have determined that most folks can spend approximately 28% of their total income on housing.

MORTGAGE

A voluntary lien filed against property to secure a debt, usually a loan. It states that if you don’t make your payments on the loan in a timely fashion, you may lose your rights to ownership of the home. To foreclose, the lender must often institute a court action and the borrower may have the right to reclaim the property after foreclosure. Compare, DEED OF TRUST.

MORTGAGE BANKER

A firm or individual who originates loans for sale to other investors. The mortgage banker generally continues to service the loans.

MORTGAGE BANKING

The packaging or mortgage loans secured by real property to be sold to a permanent investor with servicing retained for the life of the loan for a fee. The origination, sale, and servicing of mortgage loans by a firm or individual. The investor-correspondent system is the foundation of the mortgage banking industry.

MORTGAGE BROKER

A firm or individual who brings the borrower and lender together, receiving a commission if a sale results. A mortgage broker does not retain servicing.

MORTGAGE INSURANCE

Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.

MORTGAGE PORTFOLIO

The aggregate of mortgage loans held by an investor, or serviced by a mortgage banker.

MORTGAGE REVENUE BOND

Bonds issued by public entity payable from revenues derived from repayments of interest on mortgage loans that were financed from the proceeds of bonds.

MORTGAGE-BACKED SECURITIES

Bond-type investment securities representing an undivided interest in a pool of mortgages or trust deeds. Income from the underlying mortgages is used to pay of the securities.

MORTGAGEE

The lender

MORTGAGOR

The borrower or homeowner

NEGATIVE AMORTIZATION

Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

NEGOTIABLE INSTRUMENT

Under the Uniform Commercial Code, an instrument that meets certain legal requirements and can be transferred by endorsement or delivery.

NET EFFECTIVE INCOME

The borrower’s gross income minus federal income tax.

NET WORTH

The difference between total assets and total liabilities.

NON ASSUMPTION CLAUSE

A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note.

NOTARY PUBLIC

One authorized by law to acknowledge and certify documents and signatures.

NOTE

A written promise to pay a certain sum of money at a certain time. A negotiable note starts Pay to the order of and is transferable by endorsement similar to a check.

OBLIGATIONS

The things you have to pay for consistently each month, excluding housing costs. Obligations include things like car loans, credit card bills, student loans, and alimony or child support.

OFFER

A proposal; after acceptance it becomes a contract.

Office of the Comptroller of the Currency (OCC)

The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank Board.

OPEN-END MORTGAGE

A mortgage with a provision that the outstanding loan amount may be increased upon mutual agreement of the lender and the borrower.

OPTION

A right given for a consideration to keep an offer to purchase or lease open for specific time.

ORIGINATION FEE

The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

ORIGINATOR

A person who solicits builders, brokers, and others to obtain applications for mortgage loans. Origination is the process by which a mortgage banker or direct lender brings into being a mortgage secured by real property.

OWNER OF RECORD

The actual owner of a property, according to public records.

PAR

A situation where the face value of a mortgage (or bond) principal equals its actual selling price — that is, with no discount or premium.

PARCEL

A piece of land or property under one ownership. Parcels are created when a single large property is sub-divided into many smaller pieces of property.

PARTITION

The forced division of land among parties who were formerly co-owners. A partition suit may ask to divide the land or if that is not practical, sell the land and divide the proceeds.

PAY-OFF AMOUNT

A total balance, mount of a full payment on existing loan or lien.

PAYOFF SCHEDULE

The dollar figure in the Payment Schedule represent the principal, interest, plus Private Mortgage Insurance (if applicable) over the life of the loan. These figures will not reflect taxes and insurance escrows or any temporary buydown payments contributed by the seller.

PER-DIEM INTEREST

Interest charges that cover the period of time usually a matter of days, or a few weeks between when you close on your home, and the first day of the first month of your regular loan payments.

PERMANENT LOAN

A long term mortgage, usually ten years or more. Also called an end loan.

PIGGYBACK FINANCING

Two different mortgagors participating in the same loan.

PIPELINE

Term used to express loan applications in process up until closing or until the mortgage is sold; used when analyzing mortgage loan inventory or commitment coverage.

PIPESTEM LOT

A lot connected to a public street by a narrow strip of land. Usually several adjacent pipestems are combined to form one driveway with each owner having a mutual-reciprocal easement to use and maintain the driveway to the street.

PITI

Principal, Interest, Taxes and Insurance. Also called monthly housing expense.

PLAT

A map showing the division of piece of land with lots, streets and, if applicable, common area.

PLEDGED ACCOUNT MORTGAGE (PAM):

Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

POINTS (LOAN DISCOUNT POINTS)

Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

POWER OF ATTORNEY

A written document authorizing another to act on his behalf as an ATTORNEY IN FACT. One does not need to be a licensed attorney to act as an attorney in fact but, power of attorney forms are powerful legal documents that should be used only under advice of a licensed attorney at law.

PRE-APPROVAL

A way you can establish your ability to get a home loan worth a certain amount of money, even before you’ve found the home you want to buy. The pre-approval process is done in conjunction with a specific lender; the results are based on the total income of your household, the amount of your monthly debt, as well as other factors depending on your situation as a home buyer.

PRE-FORECLOSURE SHORT SALE

Mortgagor may sell the secured property for an amount that will produce insufficient proceeds to pay the mortgagee in full. The Mortgagee agrees to accept a payoff which is short of the full amount in lieu of incurring the expense and time of foreclosing. Pre-foreclosure Short Sales are usually the product of a reduced market value.

PREPAID EXPENSES

Necessary to create an escrow account or to adjust the seller’s existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

PREPAID FINANCE CHARGE

Certain charges made in connection with the loan and which must be paid upon closing. The charges are defined by the Federal Reserve Board in Regulation Z and the charges must be paid by the borrower. Examples include, loan origination fees, points, PMI, and tax service fees. Prepaid finance charges are totaled and then subtracted from the Loan Amount. The net figure is the amount financed.

PREPAYMENT

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

PREPAYMENT CLAUSE

A condition written into a mortgage that gives a borrower the privilege of paying off a loan in full before the final scheduled payment date. The borrower usually must agree to pay a pre-determined fee to do so.

PREPAYMENT PENALTY

An additional charge imposed by the lender for paying off a loan before the due date. Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.

PRIMARY MORTGAGE MARKET

Lenders making mortgage loans directly to borrower’s such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA, etc.

PRIME RATE

The most favorable interest rate charged by lenders on a short term loans to qualified customers.

PRINCIPAL

The amount of debt, not counting interest, left on a loan.

PRIVATE MORTGAGE INSURANCE (PMI)

In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment – as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on you loan’s structure.

PRO FORMA STATEMENT

Latin word meaning according to form; a projection of anticipated income, expenses, and cash flow from an investment enterprise.

PROBATE

Court process to prove a valid will.

PROMISSORY NOTE

A written unsecured note promising to pay a specified amount of money on demand, transferable to a third party.

PROPERTY PRESERVATION

Taking adequate steps to preserve a vacated property from casual entry and inclement weather such as changing locks, repairing/replacing/boarding windows or doors, fixing leaking roofs and general maintenance and upkeep.

PRORATE

To divide in proportionate shares, such as taxes, insurance, rent, or other items which the buyer and seller share as of the time of closing, or other agreed upon time.

PROSPECTUS

A proposal or offering in conjunction with the sale of improved or unimproved property that outlines all aspects of the offer. Regulations of the Securities and Exchange Commission require many real estate offerings to be described by a detailed prospectus.

PUBLIC RECORDS

The documents that are evidence of real estate transactions, which are usually stored at the county courthouse and are accessible, by law, to the general public.

PUBLIC SALE

Sale, auction open to the public.

PUNCH LIST

A written inventory of things that need to be done to a home in order to meet the requirements of a sales contract.

PURCHASE AGREEMENT

An unconditional sales contract that defines the terms and conditions under which real property is conveyed.

PURCHASE CAPITAL

The total amount of money a person uses to buy a home, regardless of the source.

PURCHASE MONEY MORTGAGE (PMM)

Seller financing as a part of the purchase price.

PUT

An option to sell a specific security at a specified price within a designated period.

QUIET TITLE

A suit brought to remove a claim or objection on title.

QUIT CLAIM DEED

A deed releasing whatever interest you may hold in a property but making no warranty whatsoever. Compare, SPECIAL WARRANTY DEED and GENERAL WARRANTY DEED

RATE LOCK

A way you can establish that the interest rate on your loan remains the same between the time of your application, and when you qualify for the loan. When applying for a loan, you can lock the interest rate for a specific amount of time; depending on the length of the lock, this feature may cost as much as 1% of the total value of the loan, although often it is offered free of charge by the lender.

REAFFIRMATION AGREEMENT

Debtor who has filed bankruptcy reconfirms the promise to pay a debt after filing bankruptcy.

REAL ESTATE

Land and anything permanently affixed to the land, and those things attached to the building.

REAL ESTATE INVESTMENT TRUST (REIT)

An investment vehicle established for the benefit of a group of real estate investors and managed by one or mire trustees who hold title to the assets for the trust and control its acquisitions and investments.

REALTOR

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

REASONABLE INVESTIGATION

Statutory process in some foreclosure court jurisdictions mandating the procedures required to certify to the court that the defendant (mortgagor) cannot be found for the purpose of serving (hand delivering) a notice of a complaint in foreclosure, thereby permitting alternate service, usually publication of the complaint in an approved newspaper or nailing it to the door of the property which is called Posting.

REASSESSMENT

The process of updating the understood value of a property for tax purposes.

RECISION

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

RECONCILED VALUE

The Fair Market Value of a property as determined by the weighted analysis of different types of opinions of value such as an Appraisal, BPO (Broker’s Price Opinion), CMA (Comparative Market analysis), Property Inspections, Electronic Data, and other methodology such as interviews with the producers of these products and corporate field inspections.

RECORDING

The noting in the registrar’s office of the details of a property executed legal document, such as a deed, mortgage, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

RECORDING FEES

Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

REDLINING

The practice of restricting or denying mortgage loans for certain areas in a discriminatory pattern.

REFINANCE

Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.

REINSTATEMENT

The curing of all defaults by a borrower; the restoration of a loan to current status through payment of arrearages.

REISSUE RATE

A discounted rate for title insurance when the title was previously insured with an owner’s title insurance policy issued within the last ten years.

REMAINDER

An interest in land that is postponed until the termination of some other interest such as a LIFE ESTATE. Compare, FEE SIMPLE.

RENEGOTIABLE RATE MORTGAGE

A loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.

REPURCHASE AGREEMENT

An agreement to sell mortgage-backed securities to a party with a simultaneous agreement by the purchaser to resell them to the original party at a specified future date and price.

RESPA

Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.

RETIRE A DEBT

When you pay off your home loan completely, thereby fulfilling your obligation under the loan contract.

REVERSE ANNUITY MORTGAGE (RAM)

A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loam is paid in full. Also called a release of mortgage.

REVERSE REPURCHASE AGREEMENT

An agreement to purchase mortgage-backed securities from a party with a simultaneous agreement to resell them at a specified future date and price.

REVERSION

A provision in a conveyance that the land will return to the grantor upon the happening of an event or contingency. Compare, FEE SIMPLE.

RIPARIAN RIGHTS

The rights of an owner of land adjacent to water.

ROLLOVER

Renewal of a loan at the time of maturity; Reinvestment of the proceeds of the sale of a housing unit into another, which defers payment of the tax on the gain from the sale.

ROLLOVER MORTGAGE

A mortgage that provides for renegotiation of the interest rate and payment terms, typically at each five-year period of its term. Sometimes referred to as a Canadian rollover mortgage.

SBA

Small Business Administration.

SECOND MORTGAGE

A mortgage recorded after a First mortgage, ranks second in priority.

SECONDARY FINANCING

A loan secured by a second mortgage on a property, sometimes used to refer to any financing technique other that equity or first-mortgage debt.

SECONDARY MARKET

A market for the purpose of purchase and sale of existing mortgages usually at discounted prices to provide greater liquidity to the mortgagee/lender.

SECONDARY MORTGAGE MARKET

The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

SECURED PARTY

The party holding a security interest or lien; may be referred to as a mortgagee, the conditional seller, or the pledge.

SECURITIES AND EXCHANGE COMMISSION (SEC)

The federal agency which regulates securities and the securities business. It is involved in real estate and mortgage lending when MBS are issued.

SECURITY

Real or personal property pledged by a borrower, as additional protection for the lender’s interest.

SECURITY INSTRUMENT

The mortgage or trust deed evidencing the pledge of real estate security as distinguished from the note or other credit instrument.

SELF-AMORTIZING LOAN

A loan that gets paid back through regular monthly installments, each of which is a combination of a pay-backs to the principal of the loan, and its interest charges.

SENSITIVITY ANALYSIS

A method of valuation of the rate of return on an investment which changes with a single factor.

SERVICE OF THE COMPLAINT

Hand delivery of a Complaint in Mortgage Foreclosure to all mortgagors of a mortgage being foreclosed. Service is usually perfected (completed) by a Sheriff, Deputy Sheriff, or authorized process server. Foreclosure cannot be continued until such time as the complaint has been served and the mortgagor has had the prescribed time to reply, usually 21 days.

SERVICING

All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

SERVICING AGREEMENT

A written agreement between an investor and mortgage servicer stipulating the rights and obligations of each party.

SERVICING INCOME

Income derived from servicing.

SERVICING RUNOFF

The dollar amount of principal paid off on a mortgage or mortgage portfolio.

SETTLEMENT STATEMENT

A statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale.

SETTLEMENT/SETTLEMENT COSTS

See closing/closing costs

SHARED APPRECIATION MORTGAGE (SAM)

A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.

SIMPLE INTEREST

Interest which is computed only on the principle balance.

SINKING FUND

A fund that, with interest, will serve as payment for future replacements required for an income property.

SITE ASSESSMENT

A mandatory environmental inspection that checks for the existence of hazardous waste on the premises of a home that’s being sold.

SOFT DOLLARS

The amount invested in the development of a purchase of a property that is immediately deductible for tax purposes, such as prepaid interest and fees.

SPECIAL ASSESSMENT

Additional tax imposed by the local government for public improvements such as new streets, etc..

SPECIAL WARRANTY DEED

The seller warrants he has done nothing to impair title but makes no warranty before his ownership. Compare, GENERAL WARRANTY DEED and QUITCLAIM DEED.

SPECIFIC PERFORMANCE

A legal action to complete the performance of a contract.

STANDBY COMMITMENT

A commitment to purchase a loan or loans with specified terms, both parties understanding that delivery is not likely unless circumstances warrant. The commitment is issued for a fee with willingness to fund in the event that a permanent loan is not obtained. Such commitments are typically used to enable the borrower to obtain construction financing at a lower cost on the assumption that permanent financing of the project will be available on more favorable terms when the improvements are completed and the project is generating income.

STANDBY CONTRACT

An option to sell a specified amount of mortgages or mortgage-backed securities by or on a specified date at a specified price.

STANDBY FEE

A nonrefundable fee paid by a borrower to a lender for a standby commitment.

STANDING MORTGAGE

A loan where no amortization payments are required and the entire loan comes due at maturity. Interest is normally paid at periodic intervals while the loan is standing.

STATUTE OF LIMITATIONS

The time period to file a law suit to enforce a claim or it is barred by law.

SUBDIVISION

Dividing land into lots and streets. The owner signs a PLAT and Deed of Resubdivision which is recorded among the land records. The state and county have strict requirements for subdivision of land.

SUBJECT TO

Taking title to property with a lien but not agreeing to be personally responsible for the lien. If the holder who forecloses the lien can take the property but may not collect any money from the owner who took subject to. Compare, ASSUMPTION.

SURVEY

A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to know points, its dimensions, and the location and dimensions of any buildings.

SWEAT EQUITY

Equity created by a purchaser performing work on a property being purchased.

TAX LIEN

A claim against property for the amount of its due and unpaid taxes.

TENANTS BY THE ENTIRETY

A husband and wife own the property with the common law right of survivorship so, if one dies, the other automatically inherits. One may not sue the other to PARTITION the property. A creditor of one may not claim the property or the proceeds of sale. Compare, TENANT IN COMMON, JOINT TENANTS.

TENANTS IN COMMON

Two or more persons own the property with no right of survivorship. If one dies, his interest passes to his heirs, not necessarily the co-owner. Either party, or a creditor of one, may sue to PARTITION the property. Compare, TENANTS BY THE ENTIRETY, JOINT TENANTS.

TERM

The period of time between the commencement date and termination date of a note, mortgage, legal document, or other contract.

TESTATE

To die with a Will. Compare, INTESTATE.

TESTATOR

One who makes out a last will and testament. The feminine form is Testatrix.

TITLE

The legal, written evidence that identifies the owner of a home or piece of property, and outlines that person’s rights as owner. At the time of a home sale, the title passes from the seller to the buyer and the lender who is providing the buyer’s home loan. The buyer gets the title when their home loan is paid back in full.

TITLE INSURANCE

A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller. Policies are also available to protect the lender’s interests. Title insurance covers mistakes made during a TITLE SEARCH as well as matters which could not be found or discovered in the public records such as missing heirs, mistakes, fraud and forgery. Compare, CERTIFICATE OF TITLE.

TITLE SEARCH

An examination of the public records, including court decisions, to disclose facts concerning the ownership of real estate. The title examiner prepares an ABSTRACT and the title agent prepares a BINDER, but decisions regarding the legal sufficiency of title or questions requiring legal interpretation must be resolved by a licensed attorney at law.

TOTAL OF PAYMENTS

The total of all payments made toward principal, interest, and mortgage insurance (if applicable) over the life of the loan.

TRUST

A right to or in property held for the benefit of another. A trust may be written or implied. An implied trust is called a Constructive Trust.

TRUST DEED

The instrument given by a borrower (trustor) to a trustee vesting title to a property in the trustee as security for the borrower’s fulfillment of an obligation.

TRUSTEE

One who holds property in Trust for another. Appointee of the Bankruptcy Court to act as a court officer in charge of a debtor’s assets until such time as the court determines how those assets will be liquidated.

TRUTH-IN-LENDING

A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan. Also known as Regulation Z.

TWO-STEP MORTGAGE

A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often five or 7), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. the lender sometimes has the option to call the loan due with 30 days notice at the end of five or 7 years.

UNDERWRITING

The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

UP-FRONT COSTS

The total amount of cash you need to pay when you buy a home, minus the amount of your loan. Up front costs include your down payment, any closing fees you must pay like broker’s commissions or insurance charges and the discount points you can use to lower your overall interest rate.

USURY

Charging more than the maximum legally permitted rate of interest.

VA LOAN

A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA MORTGAGE FUNDING FEE

A premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

VALUATION

Estimation of value or price through appraisal.

VARIABLE RATE MORTGAGE (VRM)

See Adjustable Rate Mortgage

VERIFICATION OF DEPOSIT (VOD)

A document signed by the borrower’s financial institution verifying the status and balance of his/her financial accounts.

VERIFICATION OF EMPLOYMENT (VOE)

A document signed by the borrower’s employer verifying his/her position and salary.

VESTED INTEREST

A fixed right to the enjoyment of real estate by a specified person, subject to termination of a previous estate.

WAIVER

Relinquishment of a right.

WAREHOUSE FEE

Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans, the mortgage firm has an economic loss which is offset by charging a warehouse fee.

WAREHOUSING

The borrowing of funds by a mortgage banker on a short-term basis using permanent mortgage loans as collateral. This form of interim financing is used until the mortgages are sold to a permanent investor.

WARRANTY DEED

A deed conveying the title to a property with a warranty of clean, clear marketable title

WRAPAROUND

The debt secured includes an existing debt already on the property. The payments made to the holder of the wraparound include payments due on the existing loan and the holder must forward the appropriate portion of each payment to the existing noteholder. Often used to avoid a PREPAYMENT PENALTY or a DUE ON SALE CLAUSE. Can refer to a wraparound DEED OF TRUST or CONTRACT FOR DEED.

WRAPAROUND MORTGAGE

Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

YIELD

The ratio of investment income to the total investment amount over a given period of time.

ZONING

Regulation of private land use and development by local government