| A | |
| ACCIDENT AND HEALTH PREMIUM | A premium paid for an insurance policy that insures continuance of mortgage payments in the event of a mortgagor's disability or illness. |
| ACCRUAL RATE | The rate on which interest is calculated. The accrual rate may differ from the qualifying or payment rate. An addition to a written document. In many jurisdictions, notes, mortgages and sales contracts can be modified by addenda. This makes it possible to avoid striking out and adding language in the basic document to accommodate special program requirements. |
| ADJUSTABLE RATE MORTGAGE (ARM) | A mortgage in which the accrual rate is adjusted periodically according to a pre-selected index. Loan features, adjustment schedule and index vary by loan type. |
| ADVANCE | In real estate, a partial disbursement of funds under a note. Most often used in construction lending, but also used in combination purchase and rehabilitation loans insured by HUD FHA. HUD-FHA and VA do not insure or guarantee advances on single-family construction loans, but HUD-FHA does insure advances in loans. |
| AGREEMENT FOR SALE | A document in which the purchaser agrees to buy real estate (or personal property) and the seller agrees to sell under stated terms and conditions. Terms related to the purchaser's financing are commonly included, and any deposit made by the purchaser is usually recognized. Also called Sales Contract or Earnest Money Contract. |
| ALIENATION CLAUSE | A special type of acceleration clause that demands payment of the entire loan balance upon sale or other transfer of the title. See also "Due on Sale Clause". |
| ALTA | American land Title Association. A national association of title insurance companies, abstractors, and attorneys, specializing in real property law. The association represents the title insurance and abstracting industry and establishes standard procedures. |
| AMORTIZATION | Gradual debt reduction. Normally, the reduction is made according to a predetermined schedule for installment payments. FHA and VA regulations require that insured or guaranteed mortgages provide for amortization in equal monthly payments over the term of the loan. The payments of an adjustable rate mortgage may change from time to time, subject to certain restrictions. |
| AMORTIZATION SCHEDULE | A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made. |
| ANNUAL PERCENTAGE RATE (APR) | A term used in the Truth in Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. |
| APPORTIONMENT | A prorated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents, and other income and expenses between the buyer and the seller. Apportionment usually occurs when a property is sold, and is the manner of determining the amounts due to and from each party. See also "HUD-1", and "Settlement Statement". |
| APPRAISAL | A report made by a qualified person setting forth an opinion or estimate of value. The term also refers to the process by which the estimate is obtained. |
| APPRAISED VALUE | An opinion of value reached by an appraiser based upon knowledge, experience and a study of pertinent data. |
| APPRAISER | A person qualified by education, training and experience to estimate the value of real estate and personal property. The estimate is based on a process in which the appraiser judges the facts discovered in an investigation on the property. |
| ARM'S LENGTH TRANSACTION | A transaction between a willing buyer and seller with no undue influence imposed on either party and where there is no relationship between the parties except that of the specific transaction. |
| ASSIGNMENT | The transfer of a right or contract from one person to another. Mortgages and other security instruments are regularly assigned from one investor to another. |
| ASSOCIATE BROKER | A person who has qualified as a real estate broker but works for a principal broker licensed in the state. |
| ASSUMPTION AGREEMENT | A written agreement by one party to pay an obligation originally incurred by another. |
| ASSUMPTION FEE | The fee paid to a lender (usually by the purchaser of real property) as compensation for the work involved in processing the assumption of a mortgage or as consideration for permitting an assumption. |
| ASSUMPTION OF MORTGAGE | Assumption by a purchaser of the primary liability for payment of an existing mortgage or deed of trust. The seller remains secondarily liable unless specifically released by the lender. See also "Alienation" and "Due on Sale". |
| B | |
| BALANCE SHEET | A statement of financial condition of a business organization showing assets, liabilities, capital, and including net worth as of a given date. |
| BALLOON MORTGAGE | A mortgage with periodic installments or principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specific date in the future, usually at the end of the term. |
| BALLOON PAYMENT | The unpaid principal amount of a mortgage or other long-term loan due on a specific date in the future, usually at the end of the term. |
| BASIS POINT | One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages. |
| BINDER INSURANCE | A written evidence of temporary hazard or title coverage that only runs for a limited time and must be replaced by a permanent policy. Prudent lenders generally refuse to close loans without a least a binder. |
| BINDER REAL ESTATE | A preliminary agreement between a buyer and a seller in which the basic price and terms of a real estate contract are included. The final contract is then prepared and signed by both parties. In some instances, the term refers to the actual sales contract. |
| BORROWER | A mortgagor who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable. |
| BUILDING CODE | The local regulations that control design, construction, and materials used in construction. Building codes are usually based on safety and health standards. |
| BUILDER'S RISK INSURANCE | Fire and extended coverage insurance for a building under construction. |
| BUYDOWN | Money
advanced by an individual, usually a builder or seller,
to subsidize a borrower's monthly payments for a home
mortgage.
|
| BUYDOWN ESCROW AGREEMENT | A form used to formalize the terms of an escrow established to finance the reduced initial payments made available to the buyer by a buydown agreement. |
| C | |
| CAP | Refers to the maximum allowable increase, either payment or interest rate, for a specific amount of time for an adjustable rate mortgage. |
| CASH EQUIVALENT VALUE | A method of arriving at the appraised value of a property using the market approach to value in which comparable properties are adjusted by the appraiser to take sales and financing concessions into consideration. If, for example, a comparable property sold for $50,000, but the seller paid a substantial discount to assist the buyer in arranging financing, it is assumed that the actual sales price was less, usually by the amount of discount in excess of that paid by sellers in the typical transaction. If the typical discount on a similar transaction should have been $2,000, but the seller paid $4,000, the "cash equivalent value" of the comparable property would be reduced to $48,000. |
| CASH FLOW | The spendable cash (income) from an income-producing property after deducting from gross income all operating expenses and debt service. |
| CEILING | Refers to the maximum allowable interest rate increase over the life of the loan on an adjustable rate mortgage. |
| CERTIFICATE OF ELIGIBILITY | Evidence that the veteran is eligible for VA loan guaranty benefits. The face of the form identifies the veteran. The reverse provides details on the status and extent of his or her eligibility. VA Form 26-8320. |
| CERTIFICATE OF OCCUPANCY (CO) | Written authorization given by a local municipality that allows a newly completed or substantially completed structure to be occupied. |
| CERTIFICATE OF REASONABLE VALUE (CRV) | A document issued by the VA establishing a maximum value and loan amount for a mortgage to be guaranteed by VA. The CRV will also be accepted by FHA to establish the appraised value of the property for a mortgage to be insured by FHA. |
| CERTIFICATE OF TITLE | A written statement furnished by an abstract or title company or attorney to a client stating that the title to a piece of property is legally vested in the present owner. |
| CHANGE ORDER | A change in the original plan of construction by a building owner or the general contractor. May or may not affect the appraised value of the completed property, but its impact must be evaluated. |
| CHATTEL | Personal property. |
| CLEAR TITLE | Title not encumbered or burdened with defects. See also "Marketable Title". |
| CLOSING | The conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction. |
| CLOSING COSTS | Money paid by any party to the transaction to effect the closing of a mortgage loan. Does not included prepaid expenses, reserves, and the like, but does normally include an origination fee, title insurance. |
| CLOSING STATEMENT | A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance premiums for for the escrow account. See also "HUD-1" and "Settlement Statement". |
| CLOUD ON TITLE | Any conditions revealed by a title search that adversely affect the title to property. Usually they cannot be removed except by a quitclaim deed, release, or court action. |
| CERTIFIED MORTGAGE BANKER (CMB) | The highest professional designation awarded to employees of member firms or individual members of the Mortgage Bankers Association of America. |
| COLLATERAL | Property pledged as security for a loan; real estate is security for a mortgage. |
| COMMITMENT | An agreement, often in writing, by one party to a transaction to perform a specific act at some future date, subject to compliance with certain conditions. The commitment may be by a lender to an individual borrower to make a loan, by a lender to a builder to provide long-term financing to future purchasers, by an insurer or guarantor to insure or guarantee to a loan made by a lender, by an investor to purchase loans originated by a lender, etc. |
| COMMITMENT FEE | A fee paid by a borrower to a lender for the lender's promise to lend money at a specified date in the future. |
| COMMUNITY PROPERTY | Property owned jointly by a husband and wife. In some states, almost all property acquired by a husband and wife after their marriage becomes the property of both, even if it is acquired in only one name. With respect to real property, community property laws create the equivalent of a joint tenancy or, in some states, a tenancy in the entirety. If purchasers wish to create a tenancy in common, or to vest title in either the husband or wife alone, they can usually do so, by specific legal actions. See also "Joint Tenancy", "Tenancy in Common" and "Tenancy in the Entirety". |
| CO-MORTGAGOR | A second borrower who assumes equal responsibility for the debt and a share in ownership of the property: Income and obligations of a co-mortgagor are considered in the underwriting process as though he or she were the principal mortgagor. Contrast with "Co-signer". |
| COMPARABLES | An abbreviation for "comparable properties" used for comparative purposes in the appraisal process. Facilities of reasonably the same size and location with similar amenities. Properties that have been sold recently and have characteristics similar to the property under consideration, thereby indicating the approximate fair market value of the subject property. |
| COMPLIANCE REPORT | A report given to a lender by a designated compliance inspector indicating whether or not construction or repairs comply with conditions established as the result of an earlier inspection or appraisal. Compliance Inspection Reports in other forms are typically used for the same purpose whenever a lender or some other agency has required repairs or improvements to an existing property or when a newly-constructed dwelling must be completed before the loan is closed. |
| CONDITIONAL REPORT | Any commitment that includes conditions. Specifically with respect to HUD-FHA transactions, a contractual agreement on a specific property, provided certain conditions stated in the commitment are met and an acceptable borrower is required. |
| CONDITIONAL SALE CONTRACT | A contract for the sale and delivery of property to a buyer, with the seller retaining title until the conditions of the contract, usually related to payment, have been met. Also known as "Sales Contract", "Contract for Sale", "Contract for Deed", and "Agreement for Deed". |
| CONDOMINIUM | A form of ownership of real property. The purchaser receives title to a particular unit and an undivided, or proportionate, interest in certain common areas. A condominium generally defines each unit as a separately owned space to the interior surfaces of the perimeter walls, floors and ceilings. Title to the common areas is in terms of percentages and refers to the entire project less the separately-owned units. |
| CONDOMINIUM DECLARATION | The basic condominium document that must be registered by the originating property owner before conveyance of the first unit sold. This declaration thoroughly describes the entire condominium entity, including each unit and all common areas, and specifies essential elements of ownership that permanently govern its operation. Also known as a Master Deed. |
| CONFORMING | Refers to loans which adhere to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guidelines & limitations. |
| CONSIDERATION | The required element in all contracts by which a legal right or promise is exchanged for the act or promise of another person. |
| CO-SIGNER | One who agrees to assume the debt obligation if the principal borrower should default on mortgage payments. A cosigner assumes only personal liability and has no ownership interest in the property. His other income and obligations are used in the underwriting process to reinforce the credit of the principal borrower, but they are not given equal weight with those of the principal borrower. They serve as compensating factors only. Contrast with "Co-mortgagor". |
| CONSTRUCTION | A written agreement between the lender and the builder to construct a home and the schedule of payments is usually spelled out. |
| CONTIGUOUS | Adjoining. |
| CONTRACT OF SALE | A contract between a purchaser and a seller of real property to convey a title after certain conditions have been met and payments have been made. See also "Sales Contract". |
| CONVENTIONAL LOAN | A mortgage loan not insured by HUD/FHA nor guaranteed by VA. |
| CONVERTIBILITY | This permits change, or "conversion" of an ARM to a fixed-rate mortgage at some predetermined time in the future, usually at certain designated times during the initial years of the mortgage. If you want to convert from an ARM to a fixed-rate loan, the lender may charge you a fee that is a percentage of the remaining balance of your loan. |
| CONVEY | The act of transferring title to real property from one party to another. |
| CONVEYANCE | The document, such as a deed, lease, or mortgage used to affect a transfer. |
| COOPERATIVE | A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property and grants occupancy rights to particular apartments or units to shareholders by means of proprietary leases or similar arrangements. |
| COST APPROACH TO VALUE | A method in which the value of the property is derived by estimating the replacement cost of the improvement, deducting the estimated depreciation, then adding the value of the land as estimated by used of the market data approach. Also called "physical indication of value". |
| CREDIT RATING | A rating given a person or company to establish creditworthiness based on present financial condition, experience and past credit history. |
| CREDIT REPORT | A report to a prospective lender on the credit standing of a prospective borrower used to help determine creditworthiness. |
| CRV | See Certificate of Reasonable Value. |
| CUSTODIAL ACCOUNTS | Bank accounts used for the deposit of funds belonging to others. See also "Escrow Accounts". |
| D | |
| DEBT SERVICE | The periodic payment of principal and interest on mortgage loans. |
| DEED | A document by which the ownership of land is transferred from one party to another. |
| DEED OF TRUST | In some states, the document used in place of a mortgage. 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. A conveyance of the title to land to a trustee as collateral security for the payment of a debt with the condition that the trustee will reconvey the title on payment of the debt, and with power of the trustee to sell the property and pay the debt in the event of a default on the part of the debtor. |
| DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT | See "Housing and Urban Development, Department of". |
| DEPOSIT | (1) A sum of money given to bind a sale of real estate, or (2) a sum of money given to assure a payment or an advance of funds in the processing of a loan. Also known as "Earnest money". |
| DISCOUNT | Discount adjusts the yield of a loan either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower and the rate or terms of the note. |
| DISCOUNT POINT | See "Discount" and "Point". |
| DOCUMENTARY STAMP | A form of tax imposed in some states on the transfer of real property. |
| DRAW | Disbursement of a portion of the loan proceeds, usually at a predetermined point in the construction or rehabilitation schedule, to pay for work already completed. The balance of the proceeds is retained until the next scheduled draw, or until completion of the construction or rehabilitation work. This protects the lender from the contractor's failure to complete the work as scheduled. |
| DUE-ON-SALE CLAUSE | See "Alienation Clause" |
| E | |
| EARNEST MONEY | See "Deposit". |
| 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 of income from public assistance programs. |
| ESCROW | (1) A transaction in which a third party, acting as the agent for the buyer and seller carries out instructions of both and assumes the responsibilities of handling all the paperwork and disbursement of funds in a transfer of title and mortgage loan transaction. Escrows may also be established for any purpose. For example, in the administration of funds set aside to effect a "buydown" agreement among seller, buyer and lender. (2) Funds included in the monthly mortgage payment to accumulate amounts necessary to pay property taxes, insurance premiums, etc., the lender most often acts as the escrow agent. |
| ESCROW ACCOUNT | The segregated trust account in which escrow funds are held. The term is also used to describe the accounting for such funds. |
| ESCROW AGENT | The person or organization having a fiduciary responsibility to both the buyer and the seller, or other parties, to see that the terns of the purchase/sale, loan or other agreement are carried out. |
| ESCROW COMPANY | A corporation established to act as an escrow agent. |
| ESCROW CONTRACT | An agreement among the parties (lender, buyer and seller; buyer and seller; etc.) and the escrow agent specifying the rights and duties of each. |
| ESCROW COSTS | In a loan closing involving an escrow contract, all of the costs to the buyer and seller individually that are associated with the purchase, sale or financing of real property. They include, but are not limited to, proration of agreed items such as taxes and rents, the cost of title insurance policies, the cost of credit reports, recording fees and escrow fees. See also "Closing Costs" and "Settlement Costs". |
| ESCROW FEES | Fees charged by the escrow agent for services. |
| ESCROW PAYMENT | The portion of a mortgagor's monthly payment held by the lender to pay taxes, insurance premiums, lease payments and other items as they come due. Also known as "impounds". |
| EXAMINATION OF TITLE | The review of the chain of title as revealed by an abstract of the title or public records. See also "Title Search". |
| EXCEPTION | In legal descriptions, that portion of land to be deleted or excluded. The term is often used in a different sense to mean an objection to title or encumbrance on title. |
| EXECUTE | To complete, finish, or in real estate deeds, to sign, seal and deliver. |
| EXISTING CONSTRUCTION | In HUD-FHA transactions a house that was not approved by HUD-FHA or VA before the beginning of construction (see "New Construction"), but which has been completed more than one year. |
| F | |
| FANNIE MAE (FNMA) | See Federal National Mortgage Association. |
| FEDERAL HOUSING ADMINISTRATION (FHA) | Formerly an independent agency, now a part of the Department of Housing and Urban Development (HUD) without a separate organizational identity and sometimes referred to as "HUD" or "HUD-FHA". Its main activity is the insurance of residential mortgage loans, home improvement loans, and land development loans made by private lenders. It sets standards for construction and the mortgage lending industry. While they are mandatory only with respect to loans insured by HUD-FHA, they have generally become accepted as industry-wide standards. HUD-FHA does not lend money, nor does it plan or construct housing. |
| FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) | Created by Congress in 1968 to support the secondary mortgage market. It purchases and sells conventional residential mortgages as well as loans insured by FHA or guaranteed by VA. |
| FEDERAL TRUTH-IN-LENDING (TIL) | A form designed and reproduced locally by lenders to comply with disclosure requirement of the Federal Truth-in-Lending Act. |
| FEE SIMPLE | The greatest possible interest a person can have in real estate. |
| FHA | See "Federal Housing Administration". |
| FHA VALUE | The value established by FHA as the basis for determining the maximum mortgage that may be insured on a specific property. It includes the appraised value of the property and the HUD-FHA estimate of required closing costs. |
| FIRST MORTGAGE | A real estate loan that creates a primary lien against real property. |
| FIRST-TIME HOME BUYER | In most government programs, a person applying for mortgage who has not owned real estate during the three years immediately preceding the date of the application. There are some exceptions as determined by each program definition. |
| FNMA | See "Federal National Mortgage Association". |
| G | |
| G.I. LOAN | Colloquial term used to describe a mortgage loan guaranteed by the Veterans Administration. |
| GINNIE MAE (GNMA) | See "Government National Mortgage Association". |
| GOVERNMENT NATIONAL MORTGAGE ASSOCIATION | GNMA administers the mortgage-backed securities program that channels new sources of funds into residential financing through the sale of privately issued securities guaranteed by GNMA. |
| GRANTEE | The person to whom an interest in real estate is conveyed. |
| GRANTOR | The person conveying an interest in real property. |
| GROUND LEASE | A contract for the rental of land, usually on a long-term basis. Improvements on land that is leased are said to be subject to a ground lease or ground rent. See also "Ground Rent". |
| GROUND RENT | The earnings of improved property allocated to the ground itself after allowance is made for earnings of the improvement. Also, payment for the use of the land in accordance with the terms of a ground lease. See also "Ground Lease". |
| GUARANTEED LOAN | A loan guaranteed by VA, FmHA or any other interested party. |
| GUARANTY | A promise by one party to pay a debt or perform an obligation contracted by another in the event that the original obligor fails to pay or perform as contracted. A guaranty is usually distinguished from insurance primarily by the absence of the payment of any premium. |
| H | |
| HAZARD INSURANCE | A contract whereby an insurer, for a premium, compensates the insured for loss on a specific property due to certain hazards. |
| HOME LOAN | A mortgage loan secured by a one to four family residence. Also known as a "single family mortgage, even though the property my be designed for more than one family. |
| HOMEOWNERS ASSOCIATION | An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents. |
| HOMEOWNERS POLICY | A multiple peril hazard insurance policy commonly called a "package policy". It is available to owners of private dwellings and covers the dwelling and contents in the case of loss due to specific hazards enumerated in the policy. It generally also provides insurance against loss due to personal liability related to the property. |
| HOMESTEAD ESTATE | In some states, the home and property occupied by an owner are protected by law (usually up to a certain amount) from attachment and sale for the claims of creditors. There may also be specific exemptions from taxation and other benefits. |
| HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF | The Department of Housing and Urban Development was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency and give administration of the nation's housing and urban development programs Cabinet status. It is responsible for the implementation and administration of government housing and urban development programs. The broad range of programs includes community planning and development, low-rent public housing, mortgage insurance for residential mortgages (FHA), equal opportunity in housing, and research and technology. |
| HOUSING CODE | Local standards that ensure that maintenance and improvements of housing meet accepted standards and are adequate for occupancy. Generally, the property standards imposed by lenders, insurers and guarantors of mortgage loans exceed those of local housing codes, and evidence of compliance is not required. |
| HUD | See "Housing and Urban Development, Department of". |
| HUD-1 | See "Settlement Statement". |
| I | |
| IMPOUND | See "Escrow Payment" and "Escrow Account". |
| IMPROVED LAND | Land having utilities, roads or other improvements. |
| IMPROVEMENTS | Those additions to raw land that normally increase its value, such as buildings, streets and sewers. See also "Off-Site Improvements" and "On-Site Improvements". |
| INCOME APPROACH | See ‘Capitalization (As Applied to Appraisal)". |
| INSTALLMENT | The regular periodic payment that a borrower agrees to make to the mortgagee. |
| INSTALLMENT NOTE | A note requiring periodic payment of a specified sum to satisfy a debt. |
| INSURANCE | A contract for indemnification against loss. |
| INSURED CLOSING | A document issued by a title insurance company in connection with a to-be-issued title insurance policy. It protects a mortgagee that is forwarding funds to a title insurance company's agent or approved attorney against an embezzlement of funds of a failure to follow specific closing instructions. |
| INSURED LOAN | A property improvement or manufactured housing loan insured by HUD-FHA under Title I of the National Housing Act. Sometimes improperly used to mean any loan or mortgage insured by HUD-FHA or a private mortgage insurer. See also "Insured Mortgage". |
| INSURED MORTGAGE | A mortgage insured by HUD-FHA under any Title of the National Housing Act other than Title I. See also "Insured Loan". |
| INTEREST | Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share or title in property. |
| INTEREST FACTOR | The decimal equivalent for an interest rate on a unit amount for a period of time. Computed as interest rate divided by 365 X days accrued. |
| INVESTOR | The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages. See also "Institutional Lender". |
| J | |
| JOINT ESTATE | See "Joint Tenancy". |
| JOINT AND SEVERAL NOTE | A note signed by two or more person, each of whom is liable for the full amount of the debt. |
| JOINT TENANCY | The single ownership of property by two or more persons. In some states, if the joint tenants are husband and wife, they have a tenancy in the entirety. While both (or all) owners live, they each own an undivided interest in the entire pr petty, and each has the full right of possession of the entire property, not just part of it. When a joint tenant dies, the property is inherited jointly by the surviving tenants and, finally, by the last one, free from the ownership clams of anyone else. Each joint tenant must receive his or here interest at the same time and from the same grantor. This type of ownership is sometimes called a joint estate. See also "Community Property", "Tenancy in Common", and "Tenancy in the Entirety". |
| JUNIOR MORTGAGE | A lien that is subsequent to the claims of the holder of a prior (senior) mortgage. The seniority of liens is determined by the order of recording, not by the order of creation, with the exception of some liens imposed by government, such as tax liens. See also "Subordinate". |
| K | |
| L | |
| LAND CONTRACT | See "Contract of Sale". |
| LANDLORD | Owner or lessor of real property. |
| LATE CHARGE | An additional charge a borrower is required to pay as a penalty for failure to pay a regular installment when due. |
| LEASE | A written document containing the conditions under which the possession and use of real and/or personal property are given by the owner to another for a stated period and for a stated consideration. |
| LEASEHOLD | An estate or interest in an estate in real property held by virtue of a lease. See also "Lease" and "Ground Lease". |
| LEASEHOLD MORTGAGE | A loan to a lessee secured by a leasehold interest in the property. Where a ground lease exists, any mortgage on the property in which title is subject to the ground lease is a leasehold mortgage. |
| LEGAL DESCRIPTION | A property description recognized by law, which is sufficient to locate and identify the property without oral testimony. |
| LESSEE | One holding rights of possession and use of property under a lease. See also "Tenant". |
| LESSOR | One who owns property and leases it to a lessee. See also "Landlord". |
| LEVEL PAYMENT MORTGAGE | A mortgage that provides for a constant, fixed payment at periodic intervals during its term. Part of each payment is credited to interest with the balance of the payment used to reduce the principal. |
| LIEN | A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt. |
| LIEN WAIVER | See "Waiver of Lien". |
| LIFE OF LOAN | Contract term in years of a mortgage. |
| LIMITED COMMON AREA | Common area assigned to a specific owner for personal private use. See also "Common Areas". |
| LISTING | A written authorization to sell or lease real estate. |
| LOAN CLOSING | See "Closing". |
| LOAN COMMITMENT | See "Commitment". |
| LOAN-TO-VALUE RATIO | The relationship between the amount of the mortgage loan (LTV) and the lower of sales price or appraised value of the security, expressed as a percentage. Loan-to-value= loan amount/sales price or value. |
| LOSS PAYABLE | An insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the covered Property. See also "Mortgagee Clause". |
| M | |
| MAI (MEMBER)APPRAISAL INSTITUTE | The highest
professional designation awarded by the American
Institute of Real Estate Appraisers. |
| MANUFACTURED HOUSE | See "Modular House" and "Mobile Home". |
| MARKETABLE TITLE | A title that may not be completely clear, but has only minor objections that a well-informed and prudent buyer of real estate would accept. In mortgage insurance and guaranty programs that require conveyance of title to the insurer or guarantor in exchange for settlement of a claim, marketable title is generally required. See also "Clear Title". |
| 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. The reliability of this technique is dependent upon (a) the degree of comparability of each property with the subject property, (b) the time of sale, (c) the verification of the sale dates, (d) the absence of unusual conditions affecting the sale, and (e) the terms of the sale. |
| MARKET VALUE | The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept. |
| MATURITY | The terminating or due date of a note, time draft, or bill of indebtedness becomes due and payable. |
| MINIMUM PROPERTY STANDARDS | HUD-FHA regulations that set forth minimum acceptable technical standards for properties that are to be the security for insured mortgages. |
| MIP | See "Mortgage Insurance Premium". |
| MOBILE HOME | A factory assembled residence consisting of one or more modules, in which a chassis and wheels are an integral part of the structure and that can be made ready for occupancy without removing the chassis and/or wheels. See also "Modular House". |
| MODULAR HOUSE | A factory assembled residence built in units or sections, transported to a permanent site and erected on a foundation. The term excludes mobile homes. Also see "Mobile Home". |
| MORTGAGE AMORTIZATION SCHEDULE | See "Amortization Schedule". |
| 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 off the securities. |
| MORTGAGE BANKER | A firm or individual active in the field of mortgage banking. Mortgage bankers, as local representatives of regional or national institutional lenders, holding mortgages in their own portfolios as the basis for mortgage-backed securities that they issue. |
| MORTGAGE BANKING | The packaging of mortgage loans secured by real property to be sold to a permanent investor with servicing retained for the life of the loan. The origination, sale and servicing of loans by a firm or individual. |
| MORTGAGE BROKER | A firm or individual who assist borrowers in obtaining loan financing. A mortgage broker does not retain loan servicing. |
| MORTGAGE DISCOUNT | The difference between the principal amount of a mortgage and the amount it actually sells for. Sometimes called points. The discount is computed on the amount of the loan, not the sales price. |
| MORTGAGEE | A person or firm to whom property is conveyed as security for a loan made by such person or firm (a creditor). |
| MORTGAGEE CLAUSE | A special clause that my be attached to a hazard insurance policy covering mortgaged real property. See also "Loss Payable Clause". |
| MORTGAGE INSURANCE | Insurance, for which the borrower pays a premium, that protects the lender against loss if the borrower should default on the mortgage payments and foreclosure of the mortgage should become necessary. Mortgage insurance issued by private mortgage insurance (PMI) companies typically covers a specific dollar amount or percentage of the debt adequate to protect the lender even though the value of the property may not be enough to make the lender whole. The lender generally, but not always, retains title to the property after the mortgage insurance claim is paid. Mortgage insurance issued by HUD-FHA provides coverage of the entire unpaid principal of the debt, plus certain costs of foreclosure and requires that marketable title to the property be conveyed to HUD-FHA. |
| MORTGAGE LIFE INSURANCE | A type of life insurance often bought by mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. Sometimes improperly called "Mortgage Insurance". |
| MORTGAGE INSURANCE PREMIUM | The consideration paid by a mortgagee for mortgage insurance either to HUD-FHA or to a private mortgage insurance (PMI) company. Although the premium is paid to the insurer by the lender, it is usually collected, in turn, from the borrower. |
| MORTGAGE NOTE | A written promise to pay a sum of money at a stated interest rate during a specified term. It is secured by a mortgage. See also "Deed of Trust" and "Deed of Trust Note". |
| MORTGAGOR | One who borrows money, giving as security a mortgage or deed of trust on real property (a debtor). |
| N | |
| NET WORTH | The value of all assets, including cash, less total liabilities. It is often used as an underwriting guideline to indicate credit worthiness and financial strength. |
| NOTARY | One authorized by the state to take acknowledgments and administer oaths. |
| NOTE | See "Mortgage Note". |
| O | |
| OFF-SITE IMPROVEMENTS | Improvements outside the boundaries of a property, such as sidewalks, streets, curbs and gutters, that enhance its value. |
| ON-SITE IMPROVEMENTS | Any construction of buildings or other improvements within the boundaries of a property that increases its value. |
| ORIGINATION FEE | A fee or charge for the work involved in the evaluation, preparation and submission of a proposed mortgage loan. Often, improperly, considered a part of the discount. |
| ORIGINATOR | A person who obtains applications for mortgage loans. |
| P | |
| PAR | The principal amount of a mortgage with no premium or discount. |
| PERCOLATION TEST | A test given to soil to determine its water seepage capacity when the use of a septic tank is being considered. Also call "Perc Test". |
| PERMANENT LOAN | A long-term loan or mortgage that is usually amortized and extends for a period not less than five years. |
| PERSONAL PROPERTY | Any property that is not real property. State laws vary on the definition of personal property. Also called "Personalty". |
| PITI | (Principal, Interest, Taxes and Insurance) The principal and interest payment on a loan. The tax and insurance portions may be adjusted to reflect changes in taxes or insurance costs. |
| PLANNED UNIT DEVELOPMENT | (1) A comprehensive development plan for a large land area. It usually includes residences, roads, schools, recreational facilities and service areas, plus commercial, office and industrial areas. (2) A subdivision having lots or areas owned in common and reserved for the use of some or all of the owners of the separately-owned lots. |
| PLANS AND SPECIFICATIONS | Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied. |
| PLAT | A map representing a piece of land subdivided into lots with streets, boundaries, easements and dimensions shown thereon. It is usually recorded and made a part of the public record. |
| PLOT PLAN | A layout of improvements on a site, including their location, dimensions and landscapes. It is generally a part of the architectural plan. |
| POINT | An amount equal to one percent of the principal amount of an investment or note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments. |
| POWER OF SALE | (1) A clause in a will or trust agreement authorizing the sale or transfer of property in accordance with the terms of the clause. (2) The power granted in a deed of trust which permits the trustee(s) to sell the property to satisfy the debt in the event of default by the borrower. |
| PRELIMINARY TITLE REPORT | A title search by a title company before issuance of a title binder or commitment to insure. |
| PREMISES | A defined portion of land and the improvements thereon as usually described in a deed, deed of trust or mortgage. |
| PREMIUM | The amount, often stated as a percentage, paid in addition to the face value of a note or bond. The opposite of "Discount". Also, the charge for insurance coverage. |
| PREPAYMENT PENALTY (FEE) | A consideration paid to the mortgagee for the prepayment privilege. Also know as "Prepayment Penalty" or "Reinvestment Fee". |
| PREPAYMENT PRIVILEGE | The right given a borrower to pay all or part of a debt before its maturity. The mortgagee cannot be compelled to accept any payment other than those originally agreed to. Therefore, if the original mortgage does not include a specific agreement that the mortgagee will accept prepayments or does not establish the right of the mortgagor to make prepayments, then the mortgagee need not accept any prepayments offered by the mortgagor. |
| PRIMARY FINANCING | A loan secured by a first mortgage or trust deed on real property. See also "Secondary Financing". |
| PRINCIPAL BALANCE | The outstanding balance of a mortgage, exclusive of interest and any other charges. |
| PRIORITY | As applied to claim against property, the status of being prior to or having over other claims. Priority is usually by filing or recondition in point of time, but may be established by filing or recordation in point of time, but may be established by statute or agreement. |
| PRIVATELY INSURED MORTGAGE | A conventional mortgage loan on which a private mortgage insurance company protects the lender against loss. The protection may be complete, but is usually partial. When it is partial, it is calculated on the assumption that the combination of the insurance and recovery from other sources, such as sale of the property, will be adequate to provide the lender with full protection. |
| PRIVATE MORTGAGE INSURANCE (PMI) | Insurance
written by a private company, protecting the mortgage lender against loss occasioned by a mortgage default. |
| PROCESSING | The preparation of a mortgage loan application and supporting documents for consideration by a lender or insurer. |
| PROMISSORY NOTE | ;See "Mortgage Note". |
| PRO-RATE | To allocate proportionate shares of income (such as rents) or of an obligation (such as taxes and insurance premiums), paid or due, between seller and buyer at closing. |
| PUD | See "Planned Unit Development". |
| PURCHASE AGREEMENT | See "Agreement for Sale". |
| PURCHASE MONEY MORTGAGE | A mortgage given by the purchaser of real property to the seller as part of the consideration in the sales transaction. Also used to describe a mortgage given to any party as security for a loan to finance the purchase of real property. |
| Q | |
| QUIET TITLE ACTION | A legal action brought to eliminate any interest on a claim to property by others. The procedure used to perfect title when a quitclaim deed cannot be obtained from such others. |
| QUITCLAIM DEED | A deed that transfers only such interest, title or right a grantor may have at the time the conveyance is executed. |
| R | |
| REAL ESTATE | See "Real Property". |
| REAL PROPERTY | Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals and the interest, benefits and inherent rights thereof. |
| REALTOR | A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors. |
| REALTY | A brief term for real property and the business involved in the buying and selling of real property. |
| RECORDING | The noting in the recorder's or registrar's office of the details of a properly executed legal document, such as a deed, mortgage, satisfaction of mortgage or an extension of mortgage, thereby making it a part of the public record. While a transaction may be completely valid between the parties without recording, the act of recording gives notice to the rest of the community--to the "whole world"--that the transaction has taken place and serves as warning that later transactions contrary to its provisions may not be valid or binding on any of the parties. |
| REFINANCING | The repayment of a debt from the proceeds of a new loan using the same property as security. |
| RELEASE OF LIABILITY | An agreement by a lender to terminate the personal obligation of a mortgagor in connection with the payment of a debt, usually when another mortgagor has agreed to assume the liability. |
| RENT | Consideration paid for use or occupancy of property, buildings or dwelling units. |
| RESIDENTIAL LOAN APPLICATION | The basic application for approval as a mortgagor used with mortgages lending. |
| RESIDENTIAL PLANNED COMMUNITY | See "Planned Unit Development". |
| RESPA | Real Estate Settlement Procedures Act. A federal law that requires lenders to provide home mortgage borrowers in advance with information of known or estimated settlement costs. RESPA also limits the amount lenders may require to be held in escrow for real estate taxes and insurance, requires the disclosure of known settlement costs to both buyers and sellers by the person conducting the settlement and outlaws certain referral fees. |
| S | |
| SALES AGREEMENT | See "Agreement for Sale". |
| SALES CONTRACT | A deliberate written agreement between competent parties stating terms and conditions of a sale. |
| SECONDARY MORTGAGE | A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated. |
| SECOND MORTGAGE | A real estate mortgage junior to another mortgage. |
| SECURITY | The collateral given, deposited or pledged to secure the fulfillment of an obligation or the payment of a debt. |
| SECURITY INSTRUMENT | The mortgage or trust deed evidencing the pledge of real estate security as distinguished from the note or other credit instrument. |
| SERVICING | The collection of payments (principal, interest and escrow items such as hazard insurance and taxes) on a mortgage. Servicing also includes operational procedures covering accounting, bookkeeping, tax and insurance administration and loan analysis. |
| SETTLEMENT COSTS | See "Closing Costs". |
| SETTLEMENT STATEMENT | HUD Form 1. A statement showing the full details of the loan closing including costs paid by both the buyer and the seller and a detailed (HUD I) breakdown of the manner in which the loan proceeds were distributed. The Real Estate Settlement Procedures Act (RESPA) requires that this standardized form be used in all loan closings involving purchase money first mortgages in which the Federal Government is involved in any way, even though the loan itself may not be insured or guaranteed by a government agency. For practical purposes, the form must be used with all purchase money first mortgage loan closings and may be used in other transactions, such as second mortgages, refinancing transaction, etc. |
| SPECIFICATIONS | See "Plans and Specifications". |
| SREA | Society of Real Estate Appraisers. The Society awards the following professional designations: Senior Residential Appraiser (SRA); Senior Real Property Appraiser (SRPA); and Senior Real Estate Analyst (SREA). |
| SUBDIVISION | Improved or unimproved land divided into a number of parcels for the purpose of sale, lease or financing, immediate or future. |
| SUBORDINATE | To make subject to, or junior to. |
| SUBORDINATION | The act of a party acknowledging, by written recorded instrument, that a debt due is inferior to the interest of another in the saw property. Subordination may apply not only to mortgages, but to leases, real estate rights and any other types of debt instruments. |
| SUBORDINATION CLAUSE | That clause in a deed of trust that effects the subordination. |
| SURETY | One who guarantees the performance of another. See also "Accommodation Party". |
| SURVEY | A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to dimensions of any improvements. |
| SURVEYOR'S CERTIFICATE | A formal statement signed, certified, and dated by a surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements. |
| SWEAT EQUITY | Equity created in a property by the performance of work or labor by the purchaser or borrower. it directly increases the value of the property. |
| T | |
| TAX DEED | A deed on property purchased at public sale for non-payment of taxes. |
| TAXING AUTHORITY | A statutory authority given to a governmental body to levy and collect taxes for public purposes. The governmental body so authorized. |
| TAX LIEN | A claim against property for the amount of its due and unpaid taxes. |
| TAX RATE | The rate of tax, usually stated in terms of tax per $100 of assessed value of real property. |
| TAX SALE | The sale of property by a taxing authority or an officer of the court acting on a judgement to satisfy the payment of delinquent taxes. |
| TENANCY IN COMMON | Concurrent ownership of property by two or more persons. Each tenant owns his or her share of the property (as distinguished from an undivided interest in the entire property) but has an equal right to occupy the whole property in common with the co-tenants. Tenants in common do not have a right to survivorship. Each tenant's share is taken by his or her heirs at the time of death, not by the surviving co-tenants. This is the opposite of joint tenancy and tenancy in the entirety, where the co-tenant automatically inherits the deceased's share of the property. Tenancy in common is created automatically when two or more persons own a piece of property except where they specify a different type of ownership, or where the co-tenants are a husband and wife in a community property state and no specific action is taken to negate the community property laws. See also "Community Property", "Joint Tenancy" and "Tenancy by (or in) the Entirety". |
| TENANCY BY (OR IN) THE ENTIRETY | In some states, a form of ownership shared by husband and wife, tantamount to joint tenancy. See also "Community Property", "Joint Tenancy" and "Tenancy in Common". |
| TENANT | One who is not the owner but occupies real property with the consent of the owner and in subordination to the owner's title. The tenant is entitled to exclusive possession, use and enjoyment of the property, usually for a rent specified in the lease. Also, in the broadest sense, a person who possesses lands or buildings by any kind of right or title. |
| TERM | The period of time between the commencement date arid termination date of a note, mortgage, legal document or other contract. |
| TERM MORTGAGE | A loan having a specified term during which interest is paid but the principal is not reduced. The entire principal plus any unpaid accrued interest is due and payable at the end of its term. See also "Balloon Mortgage" and "Balloon Payment". |
| TITLE | The evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed that specifies in whom the legal estate is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift or through foreclosure of a mortgage. |
| TITLE I | The portion of the National Housing Act that provides for insurance by HUD-FHA of home improvement and mobile home loans. |
| TITLE INSURANCE POLICY | A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects in title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise. |
| TITLE SEARCH | An examination of public records, laws and court decisions to disclosed the past and current facts regarding ownership of real estate. |
| TOWNHOUSE | A residential unit on a small lot that has coincidental exterior limits with other similar units. Title to the unit and its lot is vested in the individual buyer with a fractional interest in common areas, if any. Sometimes called "Row House". |
| TRANSFER FEES | Fees collected from the buyer or seller of a property to defray city or county charges for changing the records. |
| 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. See also "Deed of Trust". |
| TRUSTEE | A fiduciary who holds or controls property for the benefit of another. |
| TRUSTEE IN BANKRUPTCY | An agent of the court authorized to liquidate the assets of the bankrupt, protect the assets and bring them to the court for final distribution for the benefit of the bankrupt and all the creditors. |
| U | |
| UNDERWRITING | The analysis of risk. Underwriting involves an analysis of the property, as acceptable and adequate security for the loan and of the borrower's ability and probable willingness to repay the loan. Risk may also be affected by other factors, such as loan-to-value ratios, the presence or absence of mortgage insurance, etc. |
| UNENCUMBERED PROPERTY | Property that is free and clear of liens. |
| UNIFORM COMMERCIAL USURY | A comprehensive law regulating commercial transactions. It has been adopted, with modifications, by most states. Charging more for the use of money than allowed by law. |
| USURY CEILING | A maximum legal rate, established by state law, for interest, discounts or other fees that my be charged for the use of money. The ceiling may vary depending on the nature or type of the loan. |
| V | |
| VA | See "Veterans Administration". |
| VACANCY FACTOR | A percentage rate expressing the loss from gross rental income due to vacancy and collection losses. |
| VA CERTIFICATE OF REASONABLE VALUE | See "Certificate of Reasonable Value". |
| VALUATION | See "Appraisal". |
| VALUATION CONDITION | A condition imposed as prerequisite to insurance of the mortgage by HUD-FHA and normally included with the Conditional Commitment, although it my be added as a condition of the Firm Commitment. Valuation conditions relate to the property. See "Conditional Commitment Requirements(VC Sheet)". |
| VARIABLE RATE MORTGAGE | A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the note. Also see adjustable rate loan. |
| "VC SHEET" | A separate sheet, designed and prepared by local HUD-FHA offices, listing conditions of mortgage insurance related to the property and attached to and made a part of the conditional commitment itself by number ("VC-10", "VC-25", etc.). |
| VENDEE | The party to whom personal or real property is sold. |
| VENDEE LOAN | A mortgage loan made directly by the Veteran's Administration, usually connected with the sale of a property owned by VA. |
| VENDOR | The seller of personal or real property. |
| VENDOR'S LIEN | An unpaid seller's right to a prior lien on property until the purchase price has been recovered. |
| VETERANS ADMINISTRATION (VA) | An independent agency of the federal government created in 1930. The Servicemen's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low-downpayment mortgages to eligible veterans by guaranteeing the lender against loss. VA losses, if any, are paid with appropriated funds. |
| W | |
| WAIVER OF LIEN | Written evidence from a contractor (or supplier of material) surrendering the right of lien to enforce collection of debt against property. |
| WRAP-AROUND | A mortgage securing a debt that includes the balance due on an existing senior mortgage and an additional amount advanced by the wrap-around mortgagee. The wrap-around mortgagee thereafter makes the amortizing payments on the senior mortgage. |
| X | |
| Y | |
| YIELD | In real estate, the term refers to the effective annual amount of income being accrued on an investment. Expressed as a percent of the price originally paid. |
| YIELD TO MATURITY | A percent returned each year to the lender on actual funds borrowed considering that the loan will be paid in full at maturity. |
| Z |