Abstract of Title
A full summary of all consecutive grants, conveyances, wills, records and judicial
proceedings affecting title to a specific parcel of real estate, together with
a statement of all recorded liens and encumbrances affecting the property and
their present status.
Acceleration Clause
A loan provision giving the lender the power to declare all sums owing lender
immediately due and payable upon the violation of a specific loan provision, such
as the sale of the property or the failure to make loan payments on time. Example:
John sells his property to Mary who takes over John's mortgage payments. They
do not notify the lender of this transaction. The lender finds out that the title
to the property has transferred and calls the loan, since the loan documents state
that the loan is due on the sale of the property. John is now liable to pay his
lender in full.
Adjustment Period
Length of time for which the interest rate is fixed on an Adjustable Rate Mortgage
[ARM] or a variable rate loan. Therefore if the adjustment period is six months,
then the interest rate will remain fixed for six months, after which time it will
adjust.
Agreement of Sale
A written signed agreement between the seller and the buyer in which the buyer
agrees to buy certain real estate and the seller agrees to sell the same upon
certain price, terms, and condition. Also known as Contract of Purchase, Purchase
Agreement, Offer and Acceptance, Earnest Money Contract, or Sales Agreement.
ALTA
American Land Title Association. An organization of title companies which has
standardized forms and coverage on a national basis. This standardized coverage
is required for all Argent Mortgage Company loans.
Amortization
The gradual repayment or retiring of a debt by means of systematic payments of
principal and/or interest over a set period, so that at the end of the period
there is a zero balance.
Annual Percentage Rate
An expression of the relationship of the total finance charge to the total amount
to be financed, as required under the Federal Truth-in-Lending Act.
Arm's Length Transaction
A transaction among parties in which each acts in his or her own best interest.
A transaction between a father and his son would NOT be an Arm's length transaction
As Is
In appraisals, “As Is” is an indication that the value estimate is
made with the property in its current condition, may not include needed repairs.
Assumable Mortgage
A mortgage loan which allows a new home buyer to take over the obligation of existing
home-owner/seller to make loan payments without any change in the terms of the
loan [assume the loan]. Assumable loans do not have a due-on-sale clause. Assumption
must be approved by the lender and permitted by the Note that the existing owner/seller
originally signed. The lender may require the buyer to qualify for the loan and
may charge an assumption fee. The existing homeowner/seller should obtain a written
Release from the lender stating clearly that he/she is no longer liable for making
the remaining mortgage payments. See also "Subject To".
Attorney In Fact
One who is authorized to act for another under a power of attorney which may be
general or limited in its scope.
Example: John wants to sell his house but has to be out of the country for 4 months.
John gives authorization to Mary to sign the grant Deed to sell the property to
a buyer. Mary becomes John's Attorney In Fact.
Back End
Expressed as a percentage, back-end refers to the debt-to-income ratio calculated
using principal, interest, tax, insurance, and consumer credit obligations divided
by gross monthly income.
Balloon (payment) Mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain
period of time and one large payment for the remaining amount of the principal
at a time specified in the contract.
Example : A balloon mortgage for $25,000 has interest only payments for 5 years
at 12% ($250 per month), with the full principal of $25,000 due and payable after
5 years.
Bankruptcy
A condition of financial insolvency in which a person’s liabilities exceed
assets and the person is unable to pay current debts. All assets are surrendered
to a court-appointed trustee or receiver, who liquidates these assets to pay claims
held against the debtor by creditors. Bankruptcy discharges the debtor from further
liability on all debts then owed, with some exceptions.
Basis Point
A unit of measure; 1/100 of 1 percent. Used to describe the amount of change in
the market price of bonds and many debt instruments, including mortgages.
Beneficiary
The person who receives or is to receive the benefits resulting from certain acts.
Examples: The lender is named as the beneficiary on a mortgage loan. John has
a life insurance policy for $100,000 with Jane as his beneficiary. Should John
die – Jane, as the beneficiary, will receive $100,000.00 in benefits.
Bi-weekly Mortgage
A mortgage which requires 1/2 the normal monthly payment every two weeks. Over
the course of the year, 26 half payments are made which is equivalent to 13 full
mortgage payments. As a result of this extra payment the loan amortizes much faster
than a loan with normal monthly payments.
Binder
A written memorandum of the important terms of the contract of insurance, including
title and hazard insurance, which provides the insured with temporary protection
pending investigation of risks by the insurance company or until a formal insurance
policy is issued. Also a preliminary agreement, normally secured with earnest
money, between a buyer and a seller as an offer to purchase real estate.
Blanket Mortgage
A mortgage covering more than one piece of property.
Example: A developer subdivides a tract of land into lots and obtains a blanket
mortgage on the whole tract.
Bond
A debt instrument in the capital markets. The U.S. government, corporations and
municipalities use bonds to raise money. Bonds can also be backed by mortgages.
The best known bond is the 30-year Treasury Bond issued by the U.S. government.
Also a sum of money given to a court to guarantee against a loss. For example
if there is a lien on a property, the owner may remove the lien by posting a bond.
BPO
Broker's Price Opinion also called a Comparative Market Analysis. A method of
appraisal in which selling prices of similar properties are used as the basis
for arriving at the value estimate. Institutional sellers usually rely on a BPO
prepared by a real estate agent and a professional appraisal to determine a listing
price.
Bridge Loan
A bridge loan is a loan made on the buyer’s current residence to finance
the buyer’s new residence. The loan is paid off when the buyer’s current
residence is sold; an interim loan typically used when the buyer is unable to
sell current residence but needs money to close the transaction on the new residence.
Buy Down
To buy down is to obtain a lower interest rate (buying down the rate) by paying
additional points to the lender either for the full duration of the loan or for
just the first few years. Buy down results in lower payments which are easier
to qualify for. Mortgage Brokers use buy down to qualify prospective mortgagors
who otherwise would not qualify for mortgage loans. A very popular buy down is
the 2-1 buy down. If the interest rate on the note is 9%, the buy down results
in the rate being 7% (9%-2%) for the first year, 8% (9%-1%) for the second year,
and 9% thereafter.
Buyers Broker
An agent hired by the buyer to locate a property for the buyer. The Broker exclusively
represents the buyer and negotiates with the seller, or seller’s broker
for the best price, terms, and conditions.
Buyers Market
Market conditions that favor buyers i.e. there are more sellers than buyers in
the market. As a result buyers have ample choice of properties and may negotiate
lower prices. A buyers market may be caused by an economic slump or overbuilding.
Bylaws
A set of regulations by which an organization conducts its business.
Example: A condominium association prepares bylaws that state the minimum number
of owners to conduct a meeting to decide policies.
Cap
The highest rate an Adjustable Rate Mortgage may reach; expressed as the actual
rate or the amount of change allowed above the start rate.
Example: A 7.99% start rate with a 6% rate change cap would have a maximum interest
rate cap of 13.99%.
Capital Gains
Profit earned from the sale of such Capital as a real property. A seller may defer
taxes on the capital gain of his/her primary residence by buying a higher priced
residence within 2 years.
Cash Flow
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
A legal term meaning "Let Buyer Beware". The buyer must examine the
property and buy at his/her own risk. However, a property may be offered on an
"as is" condition with no express or implied guarantee of quality or
condition.
CC&Rs
Covenants, Conditions, and Restrictions. The basic rules establishing the rights
and obligations of owners of real property within a condo, PUD, subdivision or
other tract of land.
CCR’s
Covenants, Conditions, and Restrictions. The basic rules establishing the rights
and obligations of owners of real property within a condo, PUD, subdivision or
other tract of land.
Certificate of Eligibility
The document issued by the Veterans Administration to those who qualify for a
VA loan. This loan may be used to buy a house with 0 down. Certificates of Eligibility
may be obtained by sending the form DD-214 to the local VA office along with VA
form 1880.
Certificate of Occupancy
Document issued by a local governmental agency that states that a property meets
the local building standards for occupancy and is in compliance with public health
and building codes. Lender will normally need this document prior to closing the
loan.
Certificate of Reasonable Value (CRV)
An appraisal performed by a VA-Approved Appraiser which establishes the property's
current market value. This value establishes the ceiling on the maximum VA mortgage
loan principal.
Certificate of Title
An Opinion rendered by an attorney as to the status of title to a property, according
to the public records. This certificate does not grant the buyer the same level
of protection as title insurance..
Certified Copy
A true copy, attested to be true by the officer holding the original. It should
have a stamp and signature stating that it is a true copy.
Chain of Title
The chronological order of conveyance of a parcel of land from the original owner
to the present owner. A title abstractor can research title to property going
back to the date that the property was granted to the United States.
Charge-Off
Term used to indicate that a creditor does not expect a debt to be paid and is
listing it as such. This does not mean that the debt no longer exists or that
there will not be further attempts to collect it.
Co-op. - Cooperative
An apartment building, or a group of dwellings, owned by a Corporation whose stock
is owned by the residents of the dwellings. A Co-Op is operated for the benefit
of its residents by their elected Board of Directors. In a cooperative, the corporation
or the association owns title to the real estate. A resident purchases stock in
the corporation which entitles him to occupy a unit in the building or property
owned by the cooperative. While the resident does not own his unit, he has an
absolute right to occupy his unit for as long as he owns the stock.
Comp. / Comparable
A property with the same basic characteristics as the property you are attempting
to find the value of. It should have been sold recently and be as similar as possible.
Condemnation
Condemnation is the taking of private property under the power of eminent domain
for a public use with compensation to the owner. Used by governments and utilities
to acquire land for streets, schools, freeways, and other public projects; to
condemn is declare a structure unfit for use because of violations in housing
codes or other reasons.
Condominium
An estate in real property consisting of an undivided interest in common in a
portion of a parcel together with a separate interest in space in a residential
building.
Construction Loan
A short term loan to pay for the construction of buildings or homes. These loans
typically provide periodic disbursements to the builder as each stage of the building
is completed. When construction is completed a take-out or permanent loan is used
to pay off the construction loan.
Contingency
Conditions which must be satisfied before the buyer can close the purchase of
a property. Contingencies are generally outlined in the purchase contract between
the buyer and seller.
Example: Under a purchase contract, the buyer has 14 days to remove the property
contingency. In this case the buyer has 14 days to inspect the property and request
the seller to perform repairs. If the buyer is not satisfied with the condition
of the property or if the buyer and the seller cannot agree on repairs, the buyer
may back out of the contract with no penalty. After 14 days the buyer no longer
has the right to back out with no penalty as a result of a problem with the condition
of the property.
Contract Sale or Deed/Installment Land Contract
A real estate installment selling arrangement where the buyer may occupy the property
but the seller retains the title until the agreed upon sales price has been paid.
Example: John sells Mary a house. Mary has to put $10,000 down and pay $1,000
per month for 24 months, after which time she will receive title to the property.
Contract/Agreement
An agreement between competent parties to do or not do certain things for consideration.
Elements of a valid contract include: competent parties, offer, acceptance, consideration,
and legal purpose. A real estate contract must be in writing, describing the property,
and signed by all the principals or their duly authorized agents, representatives,
or attorneys-in-fact.
Convertible ARMs
Some variable loans come with options to convert them to a fixed loan based on
a pre-determined formula, during a given time period. For example the 1-year T-Bill
Adjustable Rate Mortgage [ARM] may be converted to a Fixed Rate Mortgage during
the first five years on the adjustment date which means that one could convert
ARM to Fix Rate Mortgage during the 13th, 25th, 37th, 49th and 61st months of
the loan.
Credit Score
A numeric value used to represent a borrower’s credit history and current
usage of credit at a given point in time. The score ranges from 400 to 850, with
a high score indicating less risk. Also referred to as FICO Score.
Deed
A written document by which title to real property is transferred from one owner
to another. To be valid a Deed should be signed by the Grantor, contain an accurate
description of the property being conveyed, notarized according to law of the
state where the property is located, and at closing delivered to the buyer.
Deed of Trust/Mortgage
A legal document in which title to property is transferred to a third party trustee
as security for an obligation owed by the trustor (borrower) to the beneficiary
(lender).
Deed Restriction
A clause or provision in the Deed that limits the use of land and prohibits the
use of land for certain purposes.
Example: A Deed might require that a road cannot be built on the land.
Defective Title
Any recorded instrument that would prevent a Grantor/seller from giving a clear
title.
Example: The seller has a contractor lien on the property that was filed when
the seller failed to pay the contractor for the kitchen remodel. The seller may
obtain clear title by paying the contractor and removing the lien.
Deferred Maintenance
Physical deterioration or damage of a property resulting from postponed maintenance.
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Deficiency Judgment
Personal claim against the debtor when the sale of foreclosed property does not
yield sufficient proceeds to pay off the mortgages, accrued interest, legal fees,
and other costs.
Discharge
Following a completed bankruptcy proceeding, discharged debts are no longer owed
or collectable. For a chapter 7 bankruptcy we will require having a copy of the
Discharge of Debts document in order to proceed with the loan.
Dismissal
If a bankruptcy is dropped without being completed, a Bankruptcy Dismissal document
will be needed to proceed with the loan. The dismissal can be prompted by either
the court or the debtor.
Dower Rights
The legal right or interest recognized in some states that a wife acquires in
the property her husband held or acquired any time during their marriage.
Dragnet Clause
A provision in a Mortgage that pledges several properties as collateral. A default
in the mortgage could lead to foreclosure proceedings on any of the properties
in the dragnet.
Easement
Property interest that one person has in land owned by another, entitling the
holder of the interest to limited use or enjoyment of the other’s land.
Eminent Domain
The power to take private property for public use by state, municipalities, and
utilities by the process of taking, condemnation, or expropriation. Just compensation
is paid to owners of the property which is taken.
Encumbrance
Any claim attached to real property that may lessen its value but not prevent
transfer of title; a right or interest in a property held by one who is not the
legal owner of the property.
Equity Sharing
Joint ownership of a property between the owner/occupant and the owner/investor,
that results in tax advantages for both parties. Upon sale of the property the
joint owners split profits based on the percentage they own.
Escrow
The process by which money and/or documents are held by a disinterested third
party until satisfaction of the terms and conditions of the loan transaction has
been achieved.
Escrow Instructions
Instructions to the escrow agent giving the parameters and contingencies involved
in the transaction and agreed upon by both parties.
Estoppel Agreement
A legal doctrine that applies to a person, who without having legal title to a
property, deeds the property to another and then subsequently obtains good title
to the property.
Executor (Executrix - feminine for Executor)
A person named in a Will to carry out the provisions of the Will for the disposition
of the estate of the deceased.
External Obsolescence
A loss of value resulting from extraneous factors that exist outside of a property
itself; a type of depreciation caused by environmental, social or economic forces
over which an owner has little or no control.
Farmer's Home Administration (FmHA)
An agency, within the U.S. Department of Agriculture, that administers assistance
programs for buyers of homes and farms in small towns and rural areas.
Fast Trac Income Documentation
Salaried:
current paystub including YTD earnings or completed VOE, and 6 month's worth of
current bank statements Self-employed:
12 month's worth of current bank statements and current YTD P&L
Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
A quasi-governmental agency that purchases conventional mortgages from insured
depository institutions who are members of the Federal Reserve, Federal Home Loan
Banks Systems, and HUD-approved mortgage bankers. After purchasing such loans,
Freddie Mac securitizes these loans and sells FHLMC mortgage backed securities
on Wall Street.
Federal Housing Administration (FHA)
A Division within the U.S. Department of Housing and Urban Development (HUD) whose
main activity is the insuring of residential mortgage loans made by private lenders.
FHA also sets standards for underwriting mortgages. FHA also administers loan
programs and issues loan guarantees to make home ownership increasingly affordable
and possible.
Federal National Mortgage Association (FNMA, Fannie Mae)
The nation’s largest mortgage investor created in 1968 by an amendment to
Title III of the National Housing Act. This stock-holder owned corporation, some
of whose Board of Directors is appointed by the President of the United States,
supports the secondary market by purchasing mortgage loans from lenders, securitizing
them, and then selling FNMA mortgage backed securities on Wall Street.
Federal Reserve System
The central federal banking system that regulates and provides services to member
commercial banks. The Federal Reserve also has the responsibility for conducting
federal monetary policy.
Fidelity Bond
An assurance, generally purchased by an employer, to cover employees who are entrusted
with valuable property or funds.
Example: A landlord employs a clerk who collects rents. To safeguard these funds
during the collection process, the landlord purchases a fidelity bond to cover
the clerk.
Fiduciary
A person in a position of trust or responsibility with specific duties to act
in the best interest of a client. A real estate Broker is a fiduciary for his/her
clients.
Finance Charge
The total of all costs imposed by the creditor and payable directly or indirectly
by the customer, as defined by the Federal Truth-In-Lending Act.
Fixture
Improvements and or personal property attached to the land so as to become a part
of the real estate. Fixtures are transferred to the buyer upon sale of the property.
To determine whether an item is a fixture or a personal property determine:
· Intent (was it intended to be part of the property)
· How is it fixed? (is it fixed to be removed easily)
· Is the fixture essential to the property?
· Relationship - was the fixture intended to be a part of the seller’s
property?
Example: John sells his house to Mary. John wants to take the chandelier because
he states it is personal property. Mary wants the chandelier to stay because she
believes it is a fixture.
Foreclosure
A legal procedure whereby property used as security for a debt is sold to satisfy
the debt in the event of default in payment of the mortgage note.
Front End
This refers to the debt to income ratio calculation using only principal, interest,
tax and insurance divided by gross monthly income. It is expressed as a percentage.
See also D.R.
General Warranty Deed
A Deed in which the Grantor (seller) agrees to protect the Grantee (buyer) against
any other claim to title of the property. See also warranty Deed.
Government National Mortgage Association (GNMA, Ginnie Mae)
A government agency that is part of HUD that buys VA and FHA loans from lenders,
securitizes them, and then sells Ginnie Mae securities to investors. “Ginnie
Mae” also provides sources of funds for residential mortgages, insured or
guaranteed by FHA or VA.
Graduated Payment Mortgage (GPM)
A mortgage that, initially, has lower payments (with potential negative amortization)
which increases each year until the loan is fully amortized.
Grandfather Clause
A common expression used to convey the idea that something that was once permissible
continues to be permissible despite changes in the controlling law.
Grossing Up
The practice of adding a percentage (123%) to nontaxable income to allow borrowers
the same opportunity to quality as applicants with gross incomes.
Hazard Insurance
A property insurance policy that indemnifies against loss resulting from physical
damage to property due to hazards such as fire, flood and windstorm.
HMDA (Home Mortgage Disclosure Act)
A federal act that requires information be available to the public to ensure that
depository financial institutions such as banks, are serving the housing credit
needs of the neighborhoods and communities where they are located. Also helps
public officials distribute public sector investments in a way that attracts private
investments in neighborhoods where they are needed.
Homeowners Association
A corporation that manages the common areas and services of a PUD or condo project.
In a condom project, it has no ownership interest in the common areas; in a PUD,
it holds title to common areas.
Homestead Exemption
Exemption which causes the assessed value of a principal residence to be reduced
by the amount of the exemption for the purposes of calculating property tax.
Example: John's principal residence is assessed at $100,000 and the homestead
exemption is $7,000. His property taxes will be based on $93,000.
Index
A statistic that indicates some current economic or financial condition. Indexes
are used to make adjustments in variable rate loans. They may also be used to
adjust rent and in some cases even executive compensation.
Interest Bearing
A form of interest calculation where the loan is charged at a daily or monthly
rate (1/365 or 1/12 of the annual interest rate) on the current outstanding balance.
This contrasts with the Rule of 78s and compound interest calculations.
Joint and Several Liability
Responsible together and individually. A lender can demand full repayment from
any and all borrowers. Each borrower is liable for the full debt, not just the
prorated share of a particular borrower. A lender does not, however, receive double
payments.
Joint Tenancy
Ownership of a property by two or more people, each of whom has an undivided interest
with the right of survivorship.
Example: John and Mary own a house in joint tenancy. Each owns half of the entire
(undivided) property. If John dies, Mary will own the entire property and vice
versa.
Judgment
The law’s last word in a judicial controversy; the official and authentic
Decision of a court of justice. Other words for judgment are “Decision”,
“Decree”, “Award”, and “Opinion”. Judgments,
when recorded, become a lien on real property. In common usage a sense of knowledge,
an opinion or estimate.
Junior Mortgage
A mortgage that is subordinate to another mortgage. In case of a foreclosure,
a senior mortgage will be paid prior to a junior mortgage.
Jurat
A notarial act made in a Notary's presence, whereby a voluntary signature and
oath of affirmation are made vouching for the truthfulness of a signed document.
Land Contract
An agreement for sale of property in which the buyer takes possession while making
payments, but the seller holds title until full payment is made.
LIBOR
London Interbank Offered Rate. LIBOR is the base interest rate paid on deposits
between banks in the Eurodollar market. Eurodollar is a dollar deposit in a bank
in a country where the currency is not a dollar. LIBOR is based on the following
five international banks: Bank of Tokyo, Bank of America, Barclays, Deutsche Bank,
and Swiss Bank.
Lis Pendens
Latin for "lawsuit pending”; recorded notice that litigation is pending
on a property. Prior to closing, most lenders will require the clearance of the
Lis Pendens.
Loan Application (1003)
A document which gathers property, employment, income, assets, liabilities, and
government monitoring information for each applicant.
Loan origination fee or points
Charge by a lender or Broker connected with originating a loan. This is different
from discount points which are used to buy down the rate of interest.
Loan Servicing
A process involving collection of loan payments, handling property tax and insurance
escrows, foreclosing on defaulted loans, and remitting payments to the investors.
Market Value
The highest price that a ready, willing and able buyer would pay and the lowest
price a ready, willing, and able seller would accept on a property. Market value
may, in fact, be different from the price a property could actually be sold for,
at a given time.
Marketable Title
Title that is readily acceptable to the buyer: Title that is free from any reasonable
doubts in both law and fact as to its validity, title that is free from such encumbrances
as liens, “clouds’ and other legal defects.
Maturity
The time when indebtedness, such as a mortgage note, becomes due and is extinguished
if paid in accordance with the agreed-on schedule of payments.
Mechanic's Lien
A statutory lien created in favor of material men and mechanics (and architects
and designers in some states) to secure payment for materials supplied and services
rendered in the improvement, repair or maintenance of real property.
Mortgage
An interest in land created by a document providing security to the lender for
the payment of a debt; a written instrument evidencing debt secured by real estate.
Mortgage Banker
A qualified and usually state-licensed professional who specializes in originating
and servicing loans. Mortgage Bankers generally sell their loans to investors,
but may continue to service them.
Mortgage Broker
A qualified and usually state-licensed professional who arranges financing from
a lender for a mortgage borrower. Mortgage Brokers are paid a fee by the borrower
or the lender when the loan closes.
Mortgage Late
Loan payments that are received at a date past the contractual due date. A mortgage
payment is considered late when the next scheduled payment becomes due.
Mortgage Note
A note of absolute promise evidencing a loan for which real estate has been offered
as a security; a written agreement secured by a mortgage that serves as a proof
of indebtedness and that states the manner in which the debt shall be paid, the
actual amount of the debt that the mortgage secures, and that renders the mortgagor
or borrower personally responsible for repayment.
Negative Amortization
An increase in principal balance in spite of periodic payments when monthly payments
do not cover all of the interest cost. The interest cost which is not covered
by the payment is added to the unpaid principal balance.
Non-Conforming Use
A permitted use of a real property that was lawfully established at the time of
its original construction but that no longer conforms to the current zoning law.
Offer
A written expression of intention and willingness to purchase a property at a
specified price, terms, and conditions for acceptance, rejection, or a counter-offer;
usually accompanied by earnest money deposit.
Offeree
The recipient of an Offer; the buyer makes an Offer to the seller who then becomes
the Offeree and as such accepts, rejects, or in turn makes a counter-offer..
Offeror
One who makes or presents the Offer to the Offeree for acceptance, rejection,
or a counter-offer. When the buyer makes an offer to the seller the buyer is an
Offeror.
Office of Comptroller of Currency
A bureau within the US Dept of Treasury charged with the execution of all laws
relating to the issue and regulation of the national currency secured by US Bonds
and all Federal Reserve notes, except for cancellation and destruction, including
accounting of cancellation and destruction.
Office of Thrift Supervision
The OTS charters federal thrift institutions and is the primary regulator of all
federal and many state-chartered thrift institutions.
Open House
A real-estate industry practice of marketing a home for sale: According to the
practice, with the Realtor playing the cheerful host, the home on the market is
left open for inspection by prospective buyers
Open-End Mortgage
A loan in which the borrower is given a limit up to which he or she may borrow,
with each incremental advance to be secured by the same mortgage.
Partial Release
A provision in a blanket mortgage directing mortgagees to release specified parcels
from lien upon payment of a certain sum of money. .
Perfecting Title
The process of eliminating any claims against a title, such as having a wife execute
a quitclaim deed to release any claim.
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Permanent Loan or Mortgage
A mortgage for a long period of time; often referred to as the mortgage that pays
off a construction loan on a completed property.
Permit
A document issued by a government regulatory authority that grants the bearer
the right to do something specific.
Example: An occupancy permit allows the owner of a building to occupy or rent
the building.
Planned Unit Development (PUD)
PUD is a concept according to which housing, typically a group of homes is built
with minimal ground space and what would normally constitute the yard for each
dwelling is consolidated into larger recreational or greenbelt areas.
Plat Book
A public record containing maps of land, showing the division of the land into
streets, blocks, and lots and indicating the measurements of the individual parcels.
Points
Fees paid to lenders. 1 point=1% of the loan amount. On a $100,000 loan 1 point
is $1000. Points may be further classified into origination points or discount
points.
Prelim. / Preliminary Title Report
The title report generated at the beginning of the application process. It tells
the mortgage company what liens are on the property and gives advice as to what
will need to be done to gain a clear title prior to recording our trust deed.
Prepaid Interest
Prepaid interest is the interest charged to borrowers at closing to pay for the
cost of borrowing for the balance of the month.
Example: If a loan closes on the 19th of the month and the first payment is due
on the 1st of the following month, the lender will charge 12 days of prepaid interest.
Prepayment
Full or partial payment of the principal before the due date. This might occur
if the borrower makes extra payments, sells the property, or refinances the existing
loan.
Primary Mortgage Market
Persons that originate and service mortgage loans. Banks, Savings & Loans,
Credit Union, Mortgage Bankers, and institutional and private lenders make up
the primary mortgage market. See also Secondary Mortgage Market.
Prime Rate
Usually the lowest rate of interest charged by a specific lender to its best customers
for short term unsecured loans. The prime rate is often used as a measuring rod
for interest rates on other loans.
Private Mortgage Insurance (PMI)
In the event the borrower does not have a 20 percent down payment, lenders will
allow a smaller down payment - as low as 2 percent in some cases. However, with
the smaller down payment for loans, borrowers are usually required to carry private
mortgage insurance. Private mortgage insurance payments are normally made annually
or monthly. An impound account may be required.
Real Estate Broker
A person qualified and usually licensed by the jurisdiction to manage, lease,
and procure the purchase or sale of real property, acting as intermediary between
seller and buyer, lessor and lessee, landlord and tenant, and in some states also
between mortgage lender and borrower.
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Real Estate Investment Trusts (REIT)
A Trust that uses investors’ money to purchase and manage real estate.
Realtor
A real estate professional who is a member of the National Association of Realtors.
Most Realtors are also state-licensed. “Realtor” is a federally registered
collective membership mark owned by the National Association of Realtors and properly
used only in reference to members of the association.
Recording
The act of officially recording or entering into a County Book of Public Records
instruments affecting title to the real property as notice to creditors, buyers,
and all others interested in the subject property. Example: A lender requires
that a Deed of Trust or a Mortgage be recorded to evidence the debt against the
property.
Recourse
To recur. The right of the holder of a note, secured by a mortgage or a Deed of
Trust, to recover against a party secondarily liable, such as prior endorser.
Therefore, if a prior endorser signs without recourse, he exempts himself from
liability for payment. U.C.C. Sec. 3-414(1).
Refinancing
Refinancing is the process of paying off an existing high interest rate loan from
the proceeds of a new lower interest loan on the same property. Refinancing is
also done to reduce the term of the loan, to convert from ARM to a fixed rate
mortgage, or to cash out all or portion of the equity.
Regulation Z (Reg Z)
Regulations of Federal Reserve Board which implement provisions of Federal Truth-in-Lending
Act. One such Regulation requires lenders to provide full disclosure of the terms
of a loan, including the term of the loan and the Annual Percentage Rate (APR).
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Request for Reconveyance
Verification given by the beneficiary to the trustee that the conditions of the
lien have been fulfilled and request that the lien be canceled.
Rescission
A “rescission” amounts to the unmaking of contract, or an undoing
of it from the beginning, and not merely a termination; annulling, abrogating,
or unmaking of a contract and the placing of parties to it in status quo.
Example: When refinancing a mortgage on a principal residence the law gives the
homeowner three days to rescind the contract.
RESPA (Real Estate Settlement Procedures Act)
A federal law that ensures all parties in a real estate transaction have knowledge
of all settlement costs.
Restrictive Covenants
A clause or a provision in a Deed limiting the use of the property and prohibiting
certain uses. Such restrictive covenants may "run with the land," binding
all subsequent buyers of the land, or they may be "personal" binding
only the buyer.
Right of Survivorship
The right, of a survivor of a deceased person, to the property of the deceased.
The right of survivorship is a distinguishing characteristic of a joint tenancy
relationship.
S.I. / Statement of Information
The form the customer fills out for the title company giving further identification
of the customer. This allows the title company to eliminate debts and liens owed
by people with similar names.
Sales Agreement or Sales Contract
Contract for the sale of real estate, including a contract for a Deed, See Agreement
of Sale and Conditional sale contract.
Savings & Loan
Federally or state chartered depository institutions that specialize in originating,
servicing, and holding mortgage loans primarily on owner occupied residential
property.
Second Mortgage
A subordinated lien, created by a mortgage loan, over the amount of the first
mortgage. Second mortgages generally carry a higher rate than a first mortgage
since they represent a higher risk for an investor.
Secondary Mortgage Market
The market where Banks, Savings & Loan Associations, private and institutional
lenders, and mortgage bankers can sell mortgages to investors like Fannie Mae
or Freddie Mac.
Section 1031
The section of the IRS that deals with tax free exchanges of certain property.
General rules for tax free exchanges are: Properties must be exchanged, similar,
and used for business or as an investment. .
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Section 8 Housing
Privately owned rental units participating in the low-income rental assistance
program. Landlords receive subsidies on behalf of qualified low-income tenants,
allowing the tenants to pay a limited proportion of their incomes toward the rent.
Servicing
Activities include collecting payments that include interest, principal, insurance
and taxes on a note from the borrower in accordance with the terms of the note.
Settlement Cost (HUD guide)
A booklet that provides an overview of the lending process and is required to
be given to consumers after the loan application is completed.
Shared Appreciation Mortgage
A residential loan with a fixed interest rate that is below the market rate, with
the lender entitled to a specified share of appreciation of the property over
an agreed upon time interval.
Soft Prepayment Penalty
A prepayment penalty which will not be enforced if the subject property is sold.
However if the property is refinanced, the prepayment penalty will be enforced.
Special Assessment
A special tax imposed on property, individual lots, or all property in the neighborhood
to pay for such improvements as sidewalks and street lights.
Specific Performance
A legal doctrine compelling performance of a contract, specifically, in instances
where damages for non-performance would not sufficiently compensate for the breach
of a contract; the actual accomplishment of a contract by a party bound to fulfill
it. As the exact fulfillment of a contract is not always practicable, specific
performance may mean substantial performance.
Subordinate
Ordinarily, liens are given chronological precedence when a liquidation of a property
occurs. If a lien holder agrees to accept a lien position after that of a later
recorded lien, a subordination agreement must be recorded stating that.
Surety Bond
A bond which ensures against harm to a party (usually the lender or owner) by
a lien still attached to the property. This is usually used when the original
deed was lost or the beneficiary cannot be located.
Survey
The process by which boundaries are measured and land areas determined, including
the determination of any existing encroachments, easements, or party walls.
Takeout Financing
A commitment to provide permanent financing upon completion of construction. The
take out loan normally pays off the construction loan.
Tenancy at Sufferance
Tenancy at Sufferance is created when a tenant or lessee continues to occupy the
premises after the right to occupy the premises has terminated.
Tenancy at Will
A license to use or occupy land and buildings at the will of either the tenant
or the owner. The tenant must leave at the landlord’s will.
Tenancy By Entirety
A special joint tenancy between a lawfully married husband and wife, which places
all title to property (real or personal) into the martial unit, with both spouses
having an equal, undivided interest in the whole property.
Tenancy In Common
A form of concurrent ownership of property between two or more persons, in which
each has an undivided interest in the whole property.
Time is of the Essence
A legal phrase meaning that a failure to do what is required by the time it is
required to be done, as specified in the contract, amounts to and is a breach
of contract.
Time Share
A form of property ownership under which a property is held by a number of people,
each with the right of possession for a specified time interval. Time sharing
is used mostly for vacation properties.
Title Report
A document indicating the current state of title. The report includes information
on the current ownership, outstanding Deeds of trust or mortgages, liens, easements,
covenants, restrictions, and any defects.
Town House
Residence which normally has 2 or more floors and is attached to other similar
units. Town houses are commonly found in planned unit developments (PUDs) and
condominiums.
Trust Account
A separate bank account maintained by a broker or an escrow company to handle
all monies collected for clients. A broker may not commingle these funds with
his/her own funds.
Trust Deed
The Trust Deed attaches the note as a lien on the property. This is the document
that conveys the ability to collect from the proceeds of the property.
Trustee
A party who is given legal responsibility to hold property in the best interest
of, or "for the benefit of" another. The trustee is one placed in a
position of responsibility for another, a responsibility enforceable in a court
of law.
Truth In Lending (TIL)
A federal law requiring lenders to fully disclose in writing the terms and conditions
of a mortgage, including the annual percentage rate and other charges. Also called
“Regulation Z”.
Two-Step Mortgage
A mortgage in which the borrower receives a fixed rate for a specified number
of years (most often 5 or 7), and then receives a new interest rate based on the
terms in the note.
Underwriting
The process of deciding whether to make a loan to a loan applicant based on the
applicant’s credit, income, employment history, assets, and other related
information.
Undivided Interest
An ownership right to use and possess a property that is shared among co-owners,
with no one co-owner having exclusive rights to any portion of the property.
Unrecorded Deed
A Deed that has not been recorded in the County Hall of Records and consequently
the public has no notice about the real estate transaction indicated on such unrecorded
Deed.
Verification of Employment
A document signed by the borrower's employer verifying his/her starting date,
job title, salary, and probability of continued employment.
Warehousing
A line of credit normally extended by a commercial bank to a mortgage banker.
The mortgage banker borrows money from the bank to fund its loans and pledges
the loans as collateral.
Wraparound Mortgage
A loan arrangement whereby the existing loan is retained and a new loan is added
to the property.
Example: The seller sells his/her property for $200,000. The buyer puts $80,000
down. The seller has an existing loan balance of $100,000 for a remaining period
of 25 years at an interest rate of 6%. The seller then makes a wraparound mortgage
to the buyer, (where the seller acts as a lender) for $120,000 at 8%. The seller
has to continue making payments on his old loan. The buyer has to pay the seller
on the new loan. The buyer may at a later date refinance the property and close
both loans.
Yield Spread Premium
Sum paid to a mortgage broker between the lender and the borrower. This premium
is based solely on interest rate. Also referred to as PYA.
Zoning
The regulation of structures and uses of property within designated districts
or zones. Zoning regulates and affects such things as use of the land, lot sizes,
types of structure permitted, building heights, setbacks and density.
