ABSTRACT Back to
Top...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 CLAUSE Back
to Top...
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 Back to Top...
The buildup of land from natural forces such as wind or water.
ACKNOWLEDGEMENT Back to
Top...
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.
ACQUISITION COST Back to Top...
Under an FHA loan, the purchase price or appraised value of the property
plus the estimated costing costs
ACRE Back to Top...
43,560 square feet of land.
ADDENDUM Back to Top...
A form/document added to a contract or agreement also known as a Rider.
ADJUSTABLE RATE MORTGAGE (ARM) Back to Top...
An ARM is a variable interest rate loan. The lender may change the interest
rate on this mortgage, within limitations, to follow a specified index to more
readily reflect market rates.
ADJUSTMENT DATE Back to Top...
The date the interest rate changes on an ARM (adjustable rate mortgage).
ADJUSTED BOOK BASIS Back to Top...
The purchase price of a property plus any capital improvements less accrued
depreciation, if any, to the date of the sale
ADJUSTMENT INTERVAL Back to
Top...
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 Back to
Top...
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
Back to Top...
A claim made against land titled to another person based on open, notorious
and hostile possession and use of the land to the exclusion of the titled
owner.
AGENCY Back to Top...
A relationship in which the agent is given the authority to act on
behalf of another person (Principal).
AGREEMENT Back to
Top...
A meeting of minds.
AIR RIGHTS Back to Top...
The right to the air space above the real property.
ALTA OWNER'S POLICY (American Land Title Association )
Back to Top...
A typeof title insurance policy issued by title insurance companies
whichexpands the risks normally insured against under the standard typepolicy
to include unrecorded mechanic's liens; unrecorded physicaleasements; facts a
physical survey would show ; water and mineralrights; and rights of parties in
possession, such as tenants and buyers rights under unrecorded instruments.
AMENDMENT Back to Top...
A change to the correct or alteration to the original document/agreement
without
changing its principal essence.
AMORTIZED LOAN Back to Top...
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.
AMORTIZATION Back
to Top...
The periodic principal pay down of a loan.
AMORTIZATION SCHEDULE Back to Top...
A schedule which shows how much of each payment is applied to the
principal and how much is applied to the interest during the term of the loan,
showing the balance until it reaches zero.
ANNUAL PERCENTAGE RATE (A.P.R.)
Back to Top...
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 point and other credit costs.
The APR allows home buyers to compare different types of mortgages based on
the annual cost for each loan.
ANNUITY Back to Top...
A series of income payments of receipts over a period of years
APPLICATION Back to Top...
A mortgage application requires borrowers to submit information regarding
their income, savings, assets, debts, and more.
APPRAISAL Back to
Top...
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.
APPRECIATION Back to Top...
Increases in property value due to fluctuations in the market, inflation,
et al.
APPROVED ATTORNEY
Back to Top...
An attorney authorized by a title insurance company to handle closings and
render title opinions.
APPURTENANCE Back to
Top...
Anything attached to the land or used with it passing to the new owner.
ASSET Back to Top...
Valuable items, encumbered or not, owned by a person, corporation, or
entity.
ASSESSMENT Back to Top...
A local tax levied against a property for a specific purpose, such as a
sewer or street lights.
ASSIGN Back to Top...
To transfer interest.
ASSIGNEE Back to Top...
One who receives an assignment or transfer of rights. An assignment of a
contract transfers the right to buy property.
ASSIGNOR Back to Top...
The one who assigns to another person.
ASSUMABLE MORTGAGE Back to Top...
A mortgage that provides for a buyer to "assume" all outstanding payments
when a home is sold. The buyer usually must meet qualification standards to
assume a loan.
ASSUMPTION Back to Top...
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 costs and new, possibly higher, market-rate interest
charges will apply.
ATTACHMENT Back to Top...
Seizure of property through Court process to repay a debt.
ATTORNEY IN FACT Back
to Top...
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
Back to Top...
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.
BANKRUPTCY Back to Top...
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.
BENCHMARK Back to Top...
A permanent reference mark for surveyors.
BENEFICIARY Back to Top...
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.
BEST FAITH ESTIMATEBack to Top...
An estimate of the total costs for securing a real estate loan, that is
given to borrowers prior to closing.
BID Back to Top...
An offer.
BILL OF SALEBack to Top...
A written document that transfers a title to personal property.
BINDER Back to Top...
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.
BIWEEKLY MORTGAGE Back to Top...
Mortgage loan payments that requires a payment twice monthly, yielding
thirteen payments per year instead of twelve. This significantly reduces the
time a principal is paid off.
BLANKET MORTGAGE Back to Top...
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 Back to Top...
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.
BOOK VALUE Back to Top...
Acquisition costs less any accrued depreciation.
BREACH OF CONTRACT Back to
Top...
Failure to perform provisions of a contract.
BRIDGE LOAN Back to Top...
An equity loan secured to solve short-term financing problem.
BROKER Back to Top...
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.
BUDGET MORTGAGE Back to Top...
A mortgage that /includes a portion for taxes and insurance as well as
principal and interest.
BUILDING RESTRICTION LINE
Back to Top...
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 Back to Top...
When the lender and/or the home builder subsidized 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 Back to Top...
Rules and regulations governing an association or corporation.
CALLABLE DEBT Back to Top...
A debt security in where the issuer has the right to redeem the security at
a specified price on or after a specified date, but prior to its stated final
maturity date.
CAPITAL GAINS Back to
Top...
Profit earned from a sale of real estate.
CAPITALIZATION Back to
Top...
A method used to estimate value of a property based on the rate of return
on investment.
CAPS Back to Top...
A set percentage amount by which an ARM may adjust each adjustment period.
It is usually given in a format as such: 3/6. The first number indicates how
much a loan may adjust at an adjustment period (3%), and the second number
indicates how much a loan may adjust over its lifetime (6%).
CARRYBACK LOAN Back to Top...
A loan in which a seller agrees to finance a buyer in order to complete a
property sale.
CASHFLOW Back to Top...
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 Back to
Top...
Buyer beware. The buyer must inspect the property and satisfy himself that
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
Back to Top...
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
Back to Top...
A certificate issued by a local governmental body stating that the building
is in a condition to be occupied.
CERTIFICATE OF REASONABLE VALUE (CRV)Back to Top...
An appraisal that has been performed on a property that is being paid for a
VA loan. After the property has been appraised, the Veterans Administration
issues a CRV.
CERTIFICATE OF SATISFACTION
Back to Top...
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
Back to Top...
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.
CHAIN OF TITLE Back to
Top...
The series of transactions from GRANTOR to
GRANTEE as evidenced in the land records.
CHATTEL Back to Top...
Personal property.
CLASS ACTION Back to
Top...
A claim brought up on behalf of a group of people.
CLEAR TITLEBack to Top...
A title that is free of liens or any legal question as to the ownership of
the property.
CLOSING Back to Top...
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 and
notary fees.
CLOSING COSTS Back to Top...
Closing costs are fees paid by the borrower when a property is purchased or
refinanced. Costs incurred include a loan origination fee, discount points,
appraisal fee, title search, title insurance, survey, taxes, deed recording
fee, and credit report charges. All closing costs are separated into
"non-recurring," and "pre-paid." Non-recurring charges are any items that are
paid only once because a loan was obtained or a property bought, such as a
loan origination fee. Pre-paid charges are those that recur over time, like
insurance and property taxes. These are summarized in the Good Faith Estimate.
CLOUD ON TITLE Back to Top...
An evidence of encumbrances.
CONDEMNATION Back to
Top...
A judicial proceeding through which a governmental body takes a private
property for a public use.
CC&R's Back to Top...
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.
COINSURANCE Back to Top...
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 Back to Top...
Property pledged to secure a loan.
CONDEMNATION Back to
Top...
Taking of private property for a public use through exercise of the power
of EMINENT DOMAIN. The Constitution
protects against taking without fair compensation.
CONDOMINIUM Back to Top...
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 Back to Top...
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
Back to Top...
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.
CONTRACT Back to Top...
A legally enforceable agreement between two parties.
CONTRACT FOR DEED
Back to Top...
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.
CONVENTIONAL LOAN
Back to Top...
A mortgage not insured by FHA or guaranteed by the VA.
COOPERATIVE Back to Top...
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.
COST APPROACH Back to
Top...
A method used by an appraiser to estimate replacement costs of improvements
less depreciation.
COTENANCY Back to Top...
Ownership in the same land by more than one person. See,
TENANTS IN COMMON,
JOINT TENANTS,
TENANTS BY THE ENTIRETY.
COVENANT Back to Top...
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.
CREDIT LOANBack to Top...
A credit loan is a mortgage that is issued on only the financial strength
of a borrower, without great regard for collateral.
CREDIT-LOSS RATIO Back to Top...
The ratio of credit-related losses to the dollar amount of MBS outstanding
and total mortgages owned by the corporation.
CREDIT RATING Back to Top...
Used by lenders to assess borrowers' credit-worthiness or risk profile. A
credit rating is expressed as letter grades, such as A, B+, or C-, etc.
Ratings are based on factors such as payment history, bankruptcies, and
charge-offs.
CREDIT-RELATED EXPENSES Back to Top...
The sum of foreclosed property expenses plus the provision for losses.
CREDIT-RELATED LOSSES Back to Top...
The sum of foreclosed property expenses plus charge-offs.
CREDIT REPORT Back to
Top...
A report documenting the credit history and current status of a borrower's
credit standing.
DEBT-TO-INCOME RATIO
Back to Top...
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 Back to Top...
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 OF TRUST Back to
Top...
A voluntary lien to secure a debt deeding the property to Trustees who
foreclose, sell the property at public auction, in the event of default on the
Note the Deed of Trust secures. Compare, MORTGAGE.
DEFAULT Back to Top...
Failure to meet legal obligations in a contract, specifically, failure to
make the monthly payments on a mortgage.
DEFERRED INTEREST
Back to Top...
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
Back to Top...
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 Back to Top...
Late- or non-payments of principal, interest, taxes, or insurance.
DELIVERY Back to Top...
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.
DEPOSIT Back to Top...
A lump sum given in advance as security. A deposit is always paid of a
larger amount to be paid in the future. In mortgage and real estate terms,
this is called the "earnest money deposit."
DEPRECIATION Back to Top...
In real estate and mortgage terms, the decline in the property value.
DISCOUNT Back to Top...
Difference between the face amount of a note or mortgage and the price at
which the instrument is sold in the secondary market
DISCOUNT POINTS Back to Top...
A term used in government subsidized loans, such as FHA and VA loans.
Refers to any "points" (one percent of the loan amount) paid in addition to
the one percent loan origination fee.
DOWER Back to Top...
A spouse's interest in the property of a deceased spouse.
DOWN PAYMENT Back to
Top...
Money paid to make up the difference between the purchase price and the
mortgage amount.
DUAL AGENCY Back to Top...
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
Back to Top...
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 Back to
Top...
A good faith deposit.
EASEMENT Back to Top...
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.
EMINENT DOMAIN Back to
Top...
The power of the state to take private property for public use upon payment
of just compensation.
ENCROACHMENT Back to
Top...
The physical intrusion of a structure or improvement on the land of
another. Examples include a fence or driveway over the property line.
ENCUMBRANCE Back to Top...
Any lien, liability or charge against a property.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
Back to Top...
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 of income from public
assistance programs.
EQUITY Back to Top...
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.
EQUITY SHARING Back to
Top...
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.
ESCALATOR CLAUSE Back to Top...
A clause in a loan providing for increases in payments or interest based on
pre-determined schedules or on a specific economic index, such as the consumer
price index.
ESCHEAT Back to Top...
Property that reverts to the state when an individual dies without heirs
and without a will.
ESCROW Back to Top...
A disinterested third party holds funds or documents on behalf of others
and subject to their instructions.
ESCROW ACCOUNT (IMPOUND ACCOUNT) Back to Top...
An account that a borrower can hold with a lender once a purchase
transaction is closed. This requires borrowers to pay more than the principal
and interest each month. The overage is put into escrow, which the lender uses
to pay items like property taxes and homeowner's insurance when they are due.
This eliminates the actual number of payments that a homeowner has to worry
about, but not the amount that has to actually be paid.
ESCROW ANALYSIS Back to Top...
An analysis performed by a lender each year to escrow accountholders to
ensure that the correct amount of money is being collected to cover
anticipated payments.
ESTATE Back to Top...
The ownership interest an individual holds in real property. This is also
the sum total of all the real property and personal property owned by an
individual at time of death.
EVICTION Back to Top...
The legal removal of real property occupants for unlawful actions carried
out by those occupants.
EXECUTOR Back to Top...
A person named in a will to carry out its terms and administer the estate.
The feminine form is Executrix. Compare,
ADMINISTRATOR.
FANNIE MAE'S COMMUNITY HOME BUYER'S PROGRAM Back to
Top...
A program that offers flexible underwriting guidelines to subsidize a low-
to moderate-income family's purchase of a home. The program usually decreases
the total amount of cash needed to purchase a home.
FEDERAL HOUSING ADMINISTRATION (FHA) Back to Top...
An agency under the U.S. Department of Housing and Urban Development (HUD),
it insures loans made by approved lenders to qualified borrowers, in
accordance with its regulations
FEE SIMPLE Back to Top...
The absolute total interest in real property. Compare,
LIFE ESTATE,
REVERSION.
FEDERAL HOME LOAN MORTGAGE CORPORATION
Back to Top...
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.
FHA MORTGAGE Back to Top...
A mortgage that is insured by the FHA, and will be referred to as a
government loan
FIDUCIARY RELATIONSHIP
Back to Top...
A relationship of trust and confidence between principal and agent; lawyer
and client; doctor and patient; etc.
FIRM COMMITMENT Back to Top...
A lender's agreement to provide a loan to a specific borrower on a specific
property.
FIRST MORTGAGE Back to Top...
A mortgage that has priority over other mortgages.
FIXED-RATE MORTGAGE Back to Top...
A mortgage where the interest rate remains the same during the entire term
of the loan.
FIXTURE Back to Top...
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.
FORBEARANCE Back to Top...
The postponement for a limited time of a portion or all the payments on a
loan when a borrower is delinquent.
401(K)/403(B) Back to Top...
An investment plan sponsored by employers that allows individuals to set
aside tax-deferred income for retirement or emergency purposes. A 401(k)
applies to private corporations, while a 403(b) applies to non-profit
organizations.
401(K)/403(B) LOAN Back to Top...
A loan that can be taken against the amount accumulated in the
401(k)/403(b) plans, if so allowed by the plan administrator. Loans against
these plans are an acceptable source of down payment for most types of other
loans.
FORECLOSURE Back to Top...
The process by which a lender sells property securing a loan in order to
repay the loan. 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.
FULLY INDEXED NOTE RATE
Back to Top...
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
Back to Top...
The Grantor warrants title against all claims.
GOOD FAITH ESTIMATE Back to Top...
An estimate of charges which a borrower is likely to incur in connection
with a loan closing.
GOVERNMENT LOAN Back to Top...
A type of mortgage insured by the FHA (Federal Housing Authority), VA
(Veteran's Administration), or RHS (Rural Housing Authority).
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GINNY MAE)
Back to Top...
Provides funds for government loans and takes over special assistance and
liquidation functions of Fannie Mae.
GRACE PERIOD Back to Top...
A time allowed, usually 15 days, for making late payments without a
penalty.
GRANTEE Back to Top...
The person receiving an interest in property. Compare,
GRANTOR
GRANTOR Back to Top...
The person granting, selling or giving up an interest in property. Compare,
GRANTEE.
GRADUATED PAYMENT MORTGAGE
(GPM) Back to Top...
A type of flexible-payment mortgage where the payments increase for a
specified period of time and then level off.
GROSS INCOME Back to
Top...
Income before expenses.
GROSS MARGIN Back to
Top...
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 Back to
Top...
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.
GUARDIAN Back to Top...
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.
GROSS INCOME Back to
Top...
Income before expenses.
HARD-MONEY MORTGAGE Back to Top...
Cash loan to a borrower
HAZARD INSURANCE Back
to Top...
A form of insurance in which the insurance company protects the insured
from specified losses, such as fire, windstorm and the like.
HIATUS Back to Top...
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 CONVERSION MORTGAGE (HECM) Back to Top...
Also known as the reverse annuity mortgage. This mortgage provides that
instead of making payments to a lender, the lender makes payments to the
individual. Older homeowners are able to convert home equity into cash this
way, in the form of monthly payments. Borrowers don't qualify on the basis of
income, but on the value of his or her home. Such a loan does not have to be
repaid until the borrower no longer occupies the property.
HOME EQUITY LINE OF CREDIT Back to Top...
A mortgage loan in second position that allows a borrower to obtain cash
drawn against home equity, up to a certain amount.
HOME INSPECTION Back to Top...
A thorough assessment by a professional regarding the structural and
mechanical condition of a property.
HOMEOWNER'S INSURANCE Back to Top...
An insurance policy that combines personal liability insurance and hazard
insurance for a home and its contents.
HOMEOWNER'S WARRANTY Back to Top...
An insurance policy that is purchased by a buyer that covers certain
repairs, should they be necessary over a certain period.
HOMESTEAD DEED Back to
Top...
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 RATIO Back to
Top...
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.
HUD Back to Top...
Department of Housing and Urban Development; regulates Fannie Mae and Ginny
Mae.
HYBRID FINANCING Back to Top...
The joining together of two forms of finance, such as combining a
convertible loan with a participation loan, under which the lender has the
right at loan maturity to convert the debt to a 50 percent ownership in the
property.
IMPOUND Back to
Top...
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 Back to
Top...
A method used by an appraiser to estimate the value of a property by
calculating its generated income.
INDEMNITY Back to Top...
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 Back to Top...
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
Back to Top...
Applied to EASEMENTS, meaning the right to go in and out over a piece of
property but not the right to park on it.
INSURABLE TITLE Back to
Top...
Title subject to a defect or claim which a title insurance company is
willing to insure against. Compare, MARKETABLE
TITLE.
INSURED CLOSING LETTER
Back to Top...
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.
INTEREST Back to Top...
Money ("rent") paid for the use of money
INTEREST ONLY Back to Top...
A term loan arrangement calling for payments of interest only, not to
include any amount for principal
INTEREST RATE SWAP Back to Top...
A transaction between two parties, in which each agrees to exchange
payments tied to different interest rates or indices for a specified period of
time
INTERIM FINANCING Back to
Top...
A construction loan made during completion of a building or a project. A
permanent loan usually replaces this loan after completion.
INITIAL NOTE RATE Back to Top...
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.
INTERMEDIATE-TERM MORTGAGE Back to Top...
A mortgage loan with a stated maturity at the time of purchase that it is
equal to or less than 20 years.
INTESTATE Back to Top...
An estate without a Will. Compare, TESTATE
JOINT OWNERSHIP AGREEMENT
Back to Top...
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 Back to
Top...
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 Back to
Top...
A judgment is a lien against all real property owned by the judgment debtor
in the county where the judgment is docketed (recorded).
JUDICIAL FORECLOSURE Back to Top...
A court procedure used by lenders to secure clear title to a property under
a defaulted real estate loan.
JUMBO LOAN Back to Top...
A loan which is larger (more than $207,000 as of 1/1/96) 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 Back to
Top...
Mortgage of lesser priority than the prior recorded mortgage.
LAND CONTRACT Back to
Top...
See, CONTRACT FOR DEED.
LEASE Back to Top...
A written agreement between a property owner and a tenant that stipulates
the payment and conditions under which the tenant may possess the real estate
for a specified period of time.
LEASE OPTION Back to Top...
A rental agreement indicating a tenant's option to purchase a property.
Monthly payments consists not only of rent, but an overage that can be applied
towards a down payment on an already established amount.
LEASE HOLD ESTATE
Back to Top...
Tenant's right of possession for a specific period of time under a lease
agreement. (Common in Hawaii.)
LEVERAGE Back to Top...
Using someone else's money for the purchase of property.
LIABILITY INSURANCE Back to Top...
Insurance that protects property owners against claims that alleges
negligence or inappropriate action that resulted in bodily injury or property
damage to another party.
LIEN Back to Top...
A claim or charge against property. Property is said to be encumbered by a
lien and the lien must be removed to clear title.
LIFE CAP Back to Top...
With regard to an adjustable rate mortgage, a ceiling the note rate cannot
exceed over the life of the loan.
LIFE ESTATE Back to Top...
The right to use, occupy and own for the life of an individual. Compare,
FEE SIMPLE.
LIS PENDENS Back to Top...
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 Back to Top...
The principal, or amount of total borrowed money, that is repaid with
interest.
LOAN APPLICATION Back
to Top...
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 OFFICER Back to Top...
An intermediary between lending institutions and borrowers, loan officers
solicit loans, represent creditors to borrowers, and represent borrowers to
creditors.
LOAN ORIGINATION Back to Top...
What the process of obtaining new loans is called.
LOAN SERVICING Back to Top...
A service performed by a lender to protect a mortgage investment, including
collecting monthly payments from borrowers and dealing with delinquencies.
LOAN-TO-VALUE RATIO (LTV)
Back to Top...
The relationship between the amount of the mortgage loan and the appraised
value of the property expressed as a percentage.
LOCK-IN CLAUSE Back to Top...
Clause in a loan agreement that states that the borrower cannot repay a
loan prior to a specified date.
MAJORITY Back
to Top...
The age at which a person may handle his own affairs.
MARGIN Back to Top...
The amount a lender adds to the index on an adjustable rate mortgage to
establish the adjusted interest rate.
MARKETABLE TITLE Back
to Top...
Title without defects or claims so as to be readily accepted without fair
or reasonable doubt. Compare, INSURABLE TITLE.
MARKET VALUE Back to
Top...
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.
MATURITY Back to Top...
Due date of a loan
MERGED CREDIT REPORT Back to Top...
A credit report that reports data from two or more major credit
repositories.
MECHANIC'S LIENS Back
to Top...
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 Back
to Top...
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.
MODIFICATION Back to Top...
any change to the original terms of a mortgage.
MORTGAGE Back to Top...
A voluntary lien filed against property to secure a debt, usually a loan.
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 Back to Top...
A financial intermediary that originates or funds loans, collects payments,
inspects the property, and forecloses if necessary. The main difference
between a mortgage banker and a loan officer is a banker funds their own loans
and sell them on the secondary market, usually to Fannie Mae, Freddie Mac, or
Ginny Mae.
MORTGAGE BROKER Back to Top...
A mortgage company that originates loans, joining the borrower and lender
for a real estate loan, earning a placement fee.
MORTGAGE CONSTANT Back to Top...
The factor used for rapid computation of the annual payment needed to
amortize a loan
MORTGAGE INSURANCE
Back to Top...
Money paid to insure the mortgage when the down payment is less than 20
percent. See private mortgage insurance, FHA mortgage insurance.
MORTGAGEE Back to
Top...
The lender
MORTGAGOR Back to Top...
The borrower or home owner.
MULTIDWELLING UNITS Back to Top...
Properties that provide separate housing units for more than one family,
although only a single mortgage is secured.
NEGATIVE AMORTIZATION
Back to Top...
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 home buyer ends
up owing more than the original amount of the loan.
NET EFFECTIVE INCOME
Back to Top...
The borrower's gross income minus federal income tax.
NET WORTH Back to Top...
The difference between total assets and total liabilities.
NON-ASSUMPTION CLAUSE
Back to Top...
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.
NON-PERFORMING LOAN
Back to Top...
A loan in default. A loan of which no payments are being made and in danger
of resulting in foreclosure.
NO CASH-OUT REFINANCE Back to Top...
A refinance transaction that is not intended to put cash in the hand of the
borrower, but instead calculates a new balance to cover the balance due on a
current loan and any costs with obtaining a new mortgage.
NO-COST LOAN Back to Top...
A no-cost loan can either be: 1) a loan that has no "lender costs"
associated with it or, 2) a loan that also covers purchases or refinancing
costs, which may be incurred in buying a home, obtaining and/or refinancing a
loan, but are not directly charged by the lender. The interest rate on this
type of loan is higher.
NOTE Back to Top...
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.
NOTE RATE Back to Top...
The stated interest rate on a mortgage note.
NOTARY PUBLIC Back to
Top...
One authorized by law to acknowledge and certify documents and signatures.
OFFER Back to Top...
A proposal; after acceptance it becomes a contract.
OPTION Back to Top...
A right given for a consideration to keep an offer to purchase or lease
open for specific time.
ORIGINATION FEE Back to Top...
On a conventional loan, it is the total number of points a borrower pays, a
point equaling one percent of the loan amount. On a government loan, it is one
percent of the loan amount.
OWNER FINANCING Back to Top...
A property purchase that is partly or wholly financed by the seller
OWNER'S TITLE POLICY Back to Top...
A policy protecting the buyer for the amount of the purchase price in the
event of a future title dispute.
PACKAGE MORTGAGE Back to Top...
A mortgage that /includes equipment and appliances located on the premises
in addition to the real property itself.
PARTIAL ENTITLEMENT Back to Top...
Under VA loans, the amount of guarantee still available to an eligible
veteran who has used his previous entitlement
PARTIAL PAYMENT Back to Top...
A payment that is not sufficient enough to cover the month payment. During
times of economic hardship, a borrower can make this request of the loan
servicing collection department.
PARTICIPATION FINANCING Back to Top...
A loan in which more than one mortgagee or more than one mortgagor harbors
an interest. It can also be a loan in which the mortgagee receives partial
ownership of the property being financed.
PARTITION Back to Top...
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.
PAYMENT CHANGE DATE Back to Top...
The date when a new monthly payment amount takes effect on an adjustable
rate mortgage (ARM) or a graduated payment mortgage (GPM). The payment change
date occurs the month immediately after the interest rate adjustment date.
PAY-OFF AMOUNT Back to
Top...
A total balance; amount of a full payment on existing loan or lien.
PERIODIC PAYMENT CAP Back to Top...
The limit on the amount that payments can increase or decrease during any
one adjustment period for an adjustable-rate mortgage (ARM) where the interest
rate and principal fluctuate independently of one another.
PERIODIC RATE CAP Back to Top...
The limit on the amount that payments can increase or decrease during any
one adjustment period in an ARM (adjustable rate mortgage), regardless of how
high or low the index fluctuates.
PERSONAL PROPERTY Back to Top...
Movable property that does not fit the definition of realty.
PITI Back to Top...
PITI stands for principal, interest, taxes, and insurance. An "impounded"
loan means that the monthly payment covers all of these, and perhaps mortgage
insurance, if your loan so calls for it. If one does not have an "impounded"
account, then the lender still calculates these amounts separately and uses it
as part of determining one's debt-to-income ratio.
PITI RESERVES Back to Top...
A cash amount that a borrower must have on hand after making a down payment
and paying all closing costs for the purchase of a home. The PITI (principal,
interest, taxes, and insurance) must equal the amount that the borrower would
have to pay for PITI for a determined number of months.
PLANNED UNIT DEVELOPMENT (PUD) Back to Top...
A type of ownership where individuals actually own the building or unit
they reside in, but shared areas are owned jointly with the other members of
the development or established association.
PLAT Back to Top...
A map showing the division of a piece of land with lots, streets and, if
applicable, common area.
PLEDGE ACCOUNT MORTGAGE (PAM) Back to Top...
Combines GPM (graduated payment mortgage) with a subsidizing savings
account to provide the borrower with a low payment plan, the lender with
amortizing payments and the seller with cash.
PIPESTEM LOT Back to
Top...
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 Back to Top...
Principal, Interest, Taxes and Insurance. Also called monthly housing
expense.
POINTS (loan discount points)
Back to Top...
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
Back to Top...
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 Back to Top...
A term used to mean that a borrower has completed a loan application and
provided debt, income, and savings information that has been reviewed and
pre-approved by an underwriter.
PRE-FORECLOSURE SALE Back to Top...
A procedure in which the borrower is allowed to sell his or her property
for an amount less that what is owed on it to avoid foreclosure, fully
satisfying the borrower's debt.
PRE-PAIDS Back to Top...
Expenses such as taxes, insurance, and assessments, which are paid in
advance of their due date, and on a prorated basis at closing.
PRE-PAYMENT Back to Top...
Any amount paid so as to reduce the principal before the due date.
PREPAYMENT PENALTY
Back to Top...
An additional charge imposed by the lender for paying off a loan before the
due date.
PRE-QUALIFICATION Back to Top...
After a loan officer has made inquiries about a borrower's debt, income,
and savings, he or she can write a written statement (pre-qualification) about
the borrower's chances for qualifying for a home loan.
PRIME RATE Back to Top...
The most favorable interest rate charged by lenders on short-term loans to
qualified customers.
PRINCIPAL Back to Top...
The amount borrowed less the interest rate incurred.
PRIVATE MORTGAGE INSURANCE (PMI)
Back to Top...
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
your loan's structure.
PROBATE Back to Top...
Court process to prove a valid will.
PROMISSORY NOTE Back to
Top...
A written unsecured note promising to pay a specified amount of money on
demand, transferable to a third party.
PRORATIONS Back to Top...
The allocation of charges and credits to the appropriate parties at a real
estate sale and/or loan closing at a real-estate sale and/or loan closing
PROMISSORY NOTE Back to Top...
A written promise to repay a specified amount over a specified period of
time
PUBLIC SALE Back to Top...
Sale, auction open to the public.
PURCHASE AGREEMENT Back to Top...
A written contract signed by the buyer and seller stating the terms and
conditions under which a property will be sold.
PURCHASE MONEY MORTGAGE (PMM)
Back to Top...
Seller financing as a part of the purchase price.
PURCHASE-MONEY TRANSACTION Back to Top...
The acquisition of property through the payment of money or its equivalent.
QUALIFYING RATIOSBack to Top...
Calculations that are used in determining whether a borrower can qualify
for a mortgage. The front-end ratio is the percentage of a borrower's gross
monthly income before taxes that would cover the cost of PITI (property,
interest, taxes, and insurance). The back-end ratio is the percentage of a
borrower's gross monthly income that would cover the cost of PITI plus any
other monthly debt payments, such as car or student loans.
QUIET TITLE Back to Top...
A suit brought to remove a claim or objection on title.
QUITCLAIM DEED Back to
Top...
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 Back to Top...
A commitment issued by a lender to a borrower or other mortgage originator
guaranteeing a specified interest rate for a specified period of time at a
specific cost.
REAL ESTATE Back to Top...
A portion of the earth's surface extending downward to the center to the
earth and upward into space, including all things permanently attached thereto
by nature or man and all legal rights therein.
REAL ESTATE AGENT Back to Top...
A person licensed to negotiate and transact the sale of real estate.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) Back to
Top...
An act requiring the revelation of all costs involved in a real estate
closing to all participants.
REAL PROPERTY Back to Top...
See real estate.
REALTOR Back to Top...
A member of the National Association of Realtors.
RECAST Back to Top...
To redesign an existing loan balance into a new loan for the same period or
longer, to reduce payments and help a distressed borrower.
RECISION Back to Top...
The cancellation of a contract. With respect to mortgage refinancing, the
law that gives the home owner three days to cancel a contract in some cases
once it is signed if the transaction uses equity in the home as security.
RECONCILIATION Back to Top...
Determining the final estimate of value by weighing the results of the
various approaches in an appraisal.
RECONVEYANCE CLAUSE Back to Top...
The clause in a trust deed that gives the title back to the borrower when
the loan is paid in full.
RECORDING Back to Top...
The formal filing of documents affecting a property's title.
RECORDING FEES Back to
Top...
Money paid to the lender for recording a home sale with the local
authorities, thereby making it part of the public records.
REFINANCE Back to Top...
Obtaining a new mortgage loan on a property already owned, often to replace
existing loans on the property.
REGULATION Z Back to Top...
A truth-in-lending provision that requires lenders to reveal the actual
costs of borrowing.
REFINANCING Back to Top...
The process of paying off one loan with the proceeds from a new loan, using
the same property as security
REISSUE RATE Back to
Top...
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 Back to Top...
An interest in land that is postponed until the termination of some other
interest such as a LIFE ESTATE. Compare,
FEE SIMPLE.
RENT-LOSS INSURANCE Back to Top...
Insurance that protects a landlord against loss of rent or rental value due
to fire or other casualty, resulting in the tenant being excused from paying
rent.
REPAYMENT PLAN Back to Top...
An agreement between a lender and a delinquent borrower regarding mortgage
payments, in which the borrower agrees to make additional payments to pay down
past due amounts while still making scheduled payments.
RESIDUAL QUALIFYING Back to Top...
Under a VA loan, using specified housing expenses to qualify for a loan
payment.
RESPA Back to Top...
Short for the Real Estate Settlement Procedures Act. RESPA is a federal law
that allows consumers to review information on known or estimated settlement
costs once after application and once prior to or at a settlement. The law
requires lenders to furnish the information after application only.
RESTRICTIONS Back to Top...
Rules imposed on the use of real estate in an effort to preserve property
values.
REVERSE ANNUITY MORTGAGE (RAM) Back to Top...
A system developed for an elderly property owner in which regular monthly
payments can be received from a lender. When the total reaches a
pre-determined amount, the owner begins repaying the loan or sells the
property.
REVERSION Back to Top...
A provision in a conveyance that the land will return to the grantor upon
the happening of an event or contingency. Compare,
FEE SIMPLE.
REVOLVING DEBT Back to Top...
A credit arrangement that allows a customer to borrow against a
pre-approved line of credit used to purchase goods and services. The borrower
is responsible for the actual amount borrowed plus any interest due.
RIGHT-OF-FIRST REFUSAL Back to Top...
A provision that states that a property to be first offered to a specific
person before it can be offered for sale or lease to other parties.
RIPARIAN RIGHTS Back to
Top...
The rights of an owner of land adjacent to water.
ROLLOVER LOAN Back to Top...
A loan that /includes a call date earlier than its normal amortization
period.
RULE OF 78 Back to Top...
Calculates proportionate amount of interest due on a loan being paid in
full before its maturity.
SALE-BUYBACK Back to Top...
A financing arrangement in which an investor buys property from a developer
and immediately sells it back under a long-term sales agreement, wherein the
investor retains legal title.
SALE-LEASEBACK Back to Top...
A financing arrangement whereby an investor purchases real estate owned and
used by a business corporation, then leases the property back to the business.
SBA Back to Top...
Small Business Administration.
SECONDARY MARKET Back
to Top...
A market for the purpose of purchase and sale of existing mortgages usually
at discounted prices to provide greater liquidity to the mortgagee/lender.
SECOND MORTGAGE Back to
Top...
A mortgage recorded after a First mortgage, ranks second in priority.
SECURED LOAN Back to Top...
A loan that is backed by collateral.
SECURITY Back to Top...
Something given, deposited, or pledged to make secure the fulfillment of an
obligation, usually the repayment of a debt.
SELLER CARRY-BACK Back to Top...
An agreement in which the owner of a property provides financing, often in
combination with an assumable mortgage.
SENIOR LOAN Back to Top...
A real estate loan in first priority position.
SERVICER Back to Top...
An organization that collects principal and interest payments from
borrowers and manages borrowers' escrow accounts. The servicer often services
mortgages that have been purchased by an investor in the secondary mortgage
market.
SERVICING Back to Top...
The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer.
SINKING FUND Back to Top...
Monies deposited in advance in anticipation of satisfying a debt in the
future.
SPECIAL ASSESSMENT
Back to Top...
Additional tax imposed by the local government for public improvements such
as new streets, etc.
SPECIAL WARRANTY DEED
Back to Top...
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
Back to Top...
A legal action to complete the performance of a contract.
STATUTE OF LIMITATIONS
Back to Top...
The time period to file a law suit to enforce a claim or it is barred by
law.
STOP DATE Back to Top...
Date on a term loan when the balloon payment is due.
SUBDIVISION Back to Top...
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 Back to Top...
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.
SUBORDINATE FINANCING Back to Top...
Any mortgage or other lien that has a priority lower than that of the first
mortgage, or senior loan. See second mortgage.
SURVEY Back to Top...
A drawing or map the shows the precise legal boundaries of a property, the
location of improvements, easements, rights of way, encroachments, and other
physical features.
SWEAT EQUITY Back to Top...
Increase in property value due to improvement by owners.
TAKEOUT MORTGAGE Back to Top...
A permanent mortgage, obtained by pre-arrangement between a builder and a
financial institution, to repay the interim mortgagee at the completion of
construction.
TENANTS BY THE ENTIRETY
Back to Top...
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
Back to Top...
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.
TESTATE Back to Top...
To die with a Will. Compare, INTESTATE.
TESTATOR Back to Top...
One who makes out a last will and testament. The feminine form is
Testatrix.
THIRD-PARTY ORIGINATION Back to Top...
A process by which a lender uses another party to completely or partially
originate, process, underwrite, close, fund, or package the mortgages it plans
to deliver to the secondary mortgage market.
TITLE Back to Top...
A document that gives evidence of an individual's ownership of property.
TITLE INSURANCE Back to
Top...
Insurance that provides an INDEMNITY
against loss or damage as a result of defect in title ownership to a
particular piece of property. 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 Back to
Top...
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.
TRANSFER OF OWNERSHIP Back to Top...
The means by which the ownership of a property changes hands. Examples of
such include the purchase of a property "subject to" the mortgage, the
assumption of the mortgage debt by the property purchases, and any exchange of
possession of the property under a land sales contract or any other land trust
device.
TRANSFER TAX Back to Top...
State or local tax payable when the title passes from one owner to another.
TRUST Back to Top...
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.
TRUSTEE Back to Top...
One who holds property in Trust for another.
TRUTH-IN-LENDING Back to
Top...
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 Back to
Top...
A mortgage in which the borrower receives a below-market interest rate for
a specified number of years (most often five or seven), 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 seven years.
UNDERWRITING Back to
Top...
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.
USURY Back to Top...
Charging more than the maximum legally permitted rate of interest.
VA LOAN Back to
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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.
VARIABLE RATE MORTGAGE (VRM)
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See adjustable rate mortgage
VERIFICATION OF DEPOSIT (VOD) Back
to Top...
A document signed by the borrower's financial institution verifying the
status and balance of his/her financial accounts.
VERIFICATION OF EMPLOYMENT (VOE)
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A document signed by the borrower's employer verifying his/her position and
salary.
VESTED Back to Top...
Means that one has a right to use a portion of a fund, such as an
individual's retirement fund.
WAIVER Back to
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Relinquishment of a right.
WARRANTY DEED Back to
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A deed conveying the title to a property with a warranty of clean, clear
marketable title.
WRAPAROUND Back to Top...
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.
ZERO PERCENT FINANCING Back to
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A loan with no interest in the contract. The IRS imputes 10 percent for
both borrower and lender.
ZONING Back to Top...
Regulation of private land use and development by local government.
To report errors or to request submission of additional Mortgage or Real
Estate terms, please contact
us.
