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Deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and
avoid foreclosure. Also called a "voluntary conveyance."
Deed of Trust
Like a mortgage, a security instrument whereby real property is
given as security for a debt. However, in a deed of trust there are
three parties to the instrument: the borrower, the trustee, and the
lender, (or beneficiary). In such a transaction, the borrower
transfers the legal title for the property to the trustee who holds
the property in trust as security for the payment of the debt to the
lender or beneficiary. If the borrower pays the debt as agreed, the
deed of trust becomes void. If, however, he defaults in the payment of
the debt, the trustee may sell the property at a public sale, under
the terms of the deed of trust. In most jurisdictions where the deed
of trust is in force, the borrower is subject to having his property
sold without benefit of legal proceedings. A few States have begun in
recent years to treat the deed of trust like a mortgage.
Default
Failure to make mortgage payments on a timely basis or to comply
with other conditions of a mortgage.
Deficiency Judgment
A court order to pay the balance owed on a loan if the proceeds
from the sale of the security are insufficient to pay off the loan.
Deficiency judgments are not allowed in all states.
Delinquency
A loan in which a payment is overdue but not yet in default.
Deposit
A sum of money given to bind the sale of real estate, or a sum of
money given to ensure payment or an advance of funds in the processing
of a loan.
Depreciation
A decline in the value of property; the opposite of "appreciation."
Discount Points
See Points.
Documentary Stamps
A State tax, in the forms of stamps, required on deeds and
mortgages when real estate title passes from one owner to another. The
amount of stamps required varies with each State.
Dower
The rights of a widow in the property of her husband at his death.
Down Payment
The part of the purchase price, which the buyer pays in cash and
does not finance with a mortgage
Due-on-sale provision
A provision in a mortgage that allows the lender to demand
repayment in full if the borrower sells the property that serves as
security for the mortgage.
Due-on-transfer provision
This terminology is usually used for second mortgages.
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Earnest Money
The deposit money given to the seller or his agent by the potential
buyer upon the signing of the agreement of sale to show that he is
serious about buying the house. If the sale goes through, the earnest
money is applied against the down payment. If the sale does not go
through, the earnest money will be forfeited or lost unless the binder
or offer to purchase expressly provides that it is refundable.
Easement Rights
A right-of-way granted to a person or company authorizing access to
or over the owner's land. An electric company obtaining a right-of-way
across private property is a common example.
Effective age
An appraiser’s estimate of the physical condition of a building.
The actual age of a building may be shorter or longer than its
effective age. Effective gross income
Normal annual income including overtime that is regular or
guaranteed. The income may be from more than one source. Salary is
generally the principal source, but other income may qualify if it is
significant and stable.
Eminent domain
The right of a government to take private property for public use
upon payment of its fair market value. Eminent domain is the basis for
condemnation proceedings.
Employer-assisted housing
A special Fannie Mae housing initiative that offers several
different ways for employers to work with local lenders to develop
plans to assist their employees in purchasing homes.
Encroachment
An obstruction, building, or part of a building that intrudes
beyond a legal boundary onto neighboring private or public land, or a
building extending beyond the building line.
Encumbrance
A legal right or interest in land that affects a good or clear
title, and diminishes the land's value. It can take numerous forms,
such as zoning ordinances, easement rights, claims, mortgages, liens,
charges, a pending legal action, unpaid taxes, or restrictive
covenants. An encumbrance does not legally prevent transfer of the
property to another. A title search is all that is usually done to
reveal the existence of such encumbrances, and it is up to the buyer
to determine whether he wants to purchase with the encumbrance, or
what can be done to remove it.
Endorser
A person who signs ownership interest over to another party.
Contrast with co-maker.
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make
credit equally available without discrimination based on race, color,
religion, national origin, age, sex, marital status, or receipt of
income from public assistance programs.
Equity
The difference between the market value of a property and the
homeowner's outstanding mortgage balance.
Equity Loan
A loan based on the borrower's equity in his or her home. Prior to
closing; also, an account held by the lender into which a homeowner
pays money for taxes and insurance.
Escrow account
The account in which a mortgage servicer holds the borrower’s
escrow payments prior to paying property expenses.Escrow analysis .
The periodic
examination of escrow accounts to determine if current monthly
deposits will provide sufficient funds to pay taxes, insurance, and
other bills when due.
Escrow collections
Funds collected by the servicer and set aside in an escrow account
to pay the borrower’s property taxes, mortgage insurance, and hazard
insurance. Escrow disbursements .
The use of escrow
funds to pay real estate taxes, hazard insurance, mortgage insurance,
and other property expenses as they become due.
Escrow payment
The portion of a mortgagor’s monthly payment that is held by the
servicer to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Estate .
The ownership
interest of an individual in real property. The sum total of all the
real property and personal property owned by an individual at time of
death.
Eviction
The lawful expulsion of an occupant from real property.
Examination of title
The report on the title of a property from the public records or an
abstract of the title.
Exclusive listing
A written contract that gives a licensed real estate agent the
exclusive right to sell a property for a specified time, but reserving
the owner’s right to sell the property alone without the payment of a
commission.
Executor
A person named in a will to administer an estate
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Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer
credit reports by consumer/credit reporting agencies and establishes
procedures for correcting mistakes on one's credit record.
Fair-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.
FDIC
(Federal Deposit Insurance Corporation). Provides insurance of
accounts for institutions whose deposits were formerly covered by the
Federal Savings & Loan Insurance Corporation. (FSLIC).
Fee simple
The greatest possible interest a person can have in real estate.
Fee simple estate
An unconditional, unlimited estate of inheritance that represents
the greatest estate and most extensive interest in land that can be
enjoyed. It is of perpetual duration. When the real estate is in a
condominium project, the unit owner is the exclusive owner only of the
air space within his or her portion of the building (the unit) and is
an owner in common with respect to the land and other common portions
of the property.
FHA
(Federal Housing Administration). A division of the Department of
Housing and Urban Development. The FHA's main activity is the insuring
of residential mortgage loans made by private lenders. It sets
standards for construction and underwriting. FHA neither lends money,
nor plans, nor constructs housing.
FHA Loan
Government loans are loans that are guaranteed or purchased by
government organizations. Two of the most popular Government Loans are
the Federal Housing Administration (FHA) and the Department of
Veterans Affairs (VA).
FHFB
(Federal Housing Finance Board). It oversees the credit functions
of the twelve regional Federal Home Loan Banks.
FHLBB
(Federal Home Loan Bank Board). A regulatory and supervisory agency
for federally charted savings institutions, which oversees the
operations of the FSLIC and FHLMC. This agency was abolished by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989.
(See FIRREA.)
FHLMC
(Federal Home Loan Mortgage Corporation, Freddie Mac). A private
corporation authorized by Congress, which became an independent,
stockholder-owned government corporation with the passage of FIRREA.
FHLMC promotes the flow of funds into the housing markets by
purchasing conventional mortgages in the secondary market and selling
securities backed by those mortgages in the capital market.
Finance Charge
The total dollar amount your loan will cost you. It includes all
interest payments for the life of the loan, any interest paid at
closing, your origination fee and any other charges paid to the lender
and/or broker. Appraisal, credit report and title search fees are not
included in the finance charge calculation.
Finder's fee
A fee or commission paid to a mortgage broker for finding a
mortgage loan for a prospective borrower.
FIRE
(Financial Institutions Reform, Recovery and Enforcement Act of
1989). An act signed into law in August 1989, by President Bush that
restructured the thrift regulatory an insurance system.
Firm commitment
A lender’s agreement to make a loan to a specific borrower on a
specific property.
First Mortgage
The mortgage that has first claim in the event of default.
Fixed installment
The monthly payment due on a mortgage loan.
Fixed-Rate Mortgage
(FRM) A mortgage in which the interest rate does not change during
the entire term of the loan.
FNMA
(Federal National Mortgage Association, Fannie Mae). A
government-sponsored corporation, owned solely by private investors,
created to provide support to the secondary market for FHA and VA
mortgages and conventional mortgages.
Fixture
Personal property that becomes real property when attached in a
permanent manner to real estate.
Flood insurance
Insurance that compensates for physical property damage resulting
from flooding. It is required for properties located in federally
designated flood areas.
Forfeiture
The loss of money, property, rights, or privileges due to a breach
of legal obligation.
Foreclosure
The process by which a mortgage property may be sold when a
mortgage is in default.
Fully amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is
sufficient to amortize the remaining balance, at the interest accrual
rate, over the amortization term.
Full Recasting
Setting the P&I payments to the level that will fully amortize the
loan's outstanding balance over the remaining term using the fully
indexed accrual rate at the recasting point.
Fully Indexed Accrual Rate
The interest (accrual) rate resulting from the index at closing (or
at another point in the loan) plus the lender's full spread, rounded
as prescribed in the loan documents (often to the nearest 1/8th of
1%).
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General Warranty Deed
A deed which conveys not only all the grantor's interests in and
title to the property to the grantee, but also warrants that if the
title is defective or has a "cloud" on it (such as mortgage claims,
tax liens, title claims, judgments, or mechanic's liens against it)
the grantee may hold the grantor liable.
Good Faith Estimate
An estimate of charges, which a borrower is likely to incur in
connection with a loan closing.
Graduated Payment Mortgage
(GPM) A mortgage where the payments are scheduled to increase,
usually annually, for a set number of years, and then level off. GPM
can be used with either a fixed or adjustable interest rate, and
usually has a 30-year term.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party in the deed who is the seller or giver.
Gross Monthly Income
The total amount the borrower earns per month, not counting any
taxes or expenses. Often used in calculations to determine whether a
borrower qualifies for a particular loan.
Growing Equity Mortgage
(GEM) A fixed rate, graduated payment mortgage with small initial
payments that increase each year so that the loan pays off in a
shortened term, usually 15 years.
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Hazard Insurance
Insurance to protect the homeowner and the lender against physical
damage to a property from fire, wind, vandalism, or other hazards.
Homeowner's Insurance
An insurance policy that combines liability coverage and hazard
insurance.
Homeowner's Warranty
A type of insurance that covers repairs to specified parts of a
house for a specific period of time.
Housing Ratio
The ratio of the monthly housing payment to total gross monthly
income. Also called Payment-to-Income Ratio or Front-End Ratio.
HUD
(Department of Housing and Urban Development). A cabinet department
responsible for the implementation and administration of government
housing and urban development programs.
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Income property
Real estate developed or improved to produce income.
Index
(Also called "Rate Index"). A regularly published rate, independent
of the lending institution, that measures the prevailing cost of
funds, and is used periodically with the margin to set AML accrual
rates.
Initial Borrower Interest Rate
The rate on which the borrower's first payment is calculated.
Initial Borrower Payment Rate
The annual interest rate used to calculate the borrower's initial
cash payment.
Inflation
An increase in the amount of money or credit available in relation
to the amount of goods or services available, which causes an increase
in the general price level of goods and services. Over time, inflation
reduces the purchasing power of a dollar, making it worth less.
Initial interest rate
The original interest rate of the mortgage at the time of closing.
Installment
The regular periodic payment that a borrower agrees to make to a
lender.
Installment loan
Borrowed money that is repaid in equal payments, known as
installments. A furniture loan is often paid for as an installment
loan.
Insurable title
A property title that a title insurance company agrees to insure
against defects and disputes.
Insurance
A contract that provides compensation for specific losses in
exchange for a periodic payment. An individual contract is known as an
insurance policy, and the periodic payment is known as an insurance
premium.
Insurance binder
A document that states that insurance is temporarily in effect.
Because the coverage will expire by a specified date, a permanent
policy must be obtained before the expiration date.
Insured mortgage
A mortgage that is protected by the Federal Housing Administration
(FHA) or by private mortgage insurance (MI). If the borrower defaults
on the loan, the insurer must pay the lender the lesser of the loss
incurred or the insured amount
Interest
The fee charged for borrowing money.
Interest accrual rate
The percentage rate at which interest accrues on the mortgage. In
most cases, it is also the rate used to calculate the monthly
payments, although it is not used for an adjustable-rate mortgage
(ARM) with payment change limitations.
Interest Rate
The percentage of an amount of money, which is paid for its use for
a specified time.
Interest Rate Cap
A provision of an ARM limiting how much interest rates may increase
per adjustment period.
Interest rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate,
as specified in the mortgage note.
Interest rate floor
For an adjustable-rate mortgage (ARM), the minimum interest rate,
as specified in the mortgage note.
Investment property
A property that is not occupied by the owner.
IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred
contributions to a personal retirement fund. Individuals can place IRA
funds in bank accounts or in other forms of investment such as stocks,
bonds, or mutual funds.
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Joint tenancy
A form of co-ownership that gives each tenant equal interest and
equal rights in the property, including the right of survivorship.
Judgment
A decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
Judgment lien
A lien on the property of a debtor resulting from the decree of a
court.
Judicial foreclosure
A type of foreclosure proceeding used in some states that is
handled as a civil lawsuit and conducted entirely under the auspices
of a court.
Jumbo Loans
Jumbo, or non-conforming, is a term used to describe a loan that
does not conform to Fannie Mae or Freddie Mac guidelines. The typical
Jumbo loan exceeds the maximum loan amounts described above.
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Late charge
The penalty a borrower must pay when a payment is made a stated
number of days (usually 15) after the due date.
Lease
A written agreement between the property owner and a tenant that
stipulates the conditions under which the tenant may possess the real
estate for a specified period of time and rent.
Leasehold estate
A way of holding title to a property wherein the mortgagor does not
actually own the property but rather has a recorded long-term lease on
it.
Legal description
A property description, recognized by law that is sufficient to
locate and identify the property without oral testimony.
Lender
An institution that makes loans to borrowers on real estate.
Liabilities
A person's financial obligations. Liabilities include long-term and
short-term debt, as well as any other amounts that are owed to others.
Liability insurance
Insurance coverage that offers protection against claims alleging
that a property owner's negligence or inappropriate action resulted in
bodily injury or property damage to another party.
Lien
A legal claim against a property that must be paid when the
property is sold.
Lifetime Cap
A provision of an ARM that limits the total increase in interest
rates over the life of the loan.
Lifetime payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that
payments can increase or decrease over the life of the mortgage.
Line of credit
An agreement by a commercial bank or other financial institution to
extend credit up to a certain amount for a certain time to a specified
borrower.
Liquid asset
A cash asset or an asset that is easily converted into cash.
Loan
A sum of borrowed money (principal) that is generally repaid with
interest.
Loan Commitment
Formal offer by a lender stating the terms under which it agrees to
loan money to a homebuyer.
Loan origination
The process by which a mortgage lender brings into existence a
mortgage secured by real property.
Loan Servicing
The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer.
Loan -To-Value
(LTV). The loan-to-value ratio (LTV) is the original loan amount
divided by the lower of the sales price or the appraised value.
Lock
The period, expressed in days, during which a lender will guarantee
a rate.
Lock-in period
The time period during which the lender has guaranteed an interest
rate to a borrower.
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Marketable Title
A title that is free and clear of objectionable liens, clouds, or
other title defects. A title which enables an owner to sell his
property freely to others and which others will accept without
objection.
Master association
A homeowners' association in a large condominium or planned unit
development (PUD) project that is made up of representatives from
associations covering specific areas within the project. In effect, it
is a "second-level" association that handles matters affecting the
entire development, while the "first-level" associations handle
matters affecting their particular portions of the project.
Maturity
The date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable.
Merged credit report
A credit report that contains information from three credit
repositories. When the report is created, the information is compared
for duplicate entries. Any duplicates are combined to provide a
summary of a your credit.
Modification Margin
(Also called "Spread"). The amount the lender adds to the index to
determine the Fully Indexed Accrual Rate.
Money market account
A savings account that provides bank depositors with many of the
advantages of a money market fund. Certain regulatory restrictions
apply to the withdrawal of funds from a money market account.
Money market fund
A mutual fund that allows individuals to participate in managed
investments in short-term debt securities, such as certificates of
deposit and Treasury bills.
Monthly Housing Expense
Total principal, interest, taxes, and insurance paid by the
borrower on a monthly basis. Used with gross income to determine
affordability.
Monthly payment mortgage
A mortgage that requires payments to reduce the debt once a month.
Mortgage
A legal document that pledges a property to the lender as security
for a payment of a debt.
Mortgage Banker
A company that originates mortgages exclusively for resale in the
secondary market.
Mortgage Broker
A company that for a fee matches borrowers with lenders.
Mortgage Insurance Premium
(MIP). The fee paid to FHA or a private insurer for mortgage
insurance.
Mortgagee
The lender in a mortgage agreement.
Mortgage Commitment
A written notice from the bank or other lending institution saying
it will advance mortgage funds in a specified amount to enable a buyer
to purchase a house.
Mortgage Insurance Premium
The payment made by a borrower to the lender for transmittal to HUD
to help defray the cost of the FHA mortgage insurance program and to
provide a reserve fund to protect lenders against loss in insured
mortgage transactions. In FHA insured mortgages this represents an
annual rate of one-half of one percent paid by the mortgagor on a
monthly basis.
Mortgage life insurance
A type of term life insurance often bought by mortgagors. The
amount of coverage decreases as the principal balance declines. In the
event that the borrower dies while the policy is in force, the debt is
automatically satisfied by insurance proceeds.
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a
mortgage, serves as proof of indebtedness, and states the manner in
which it shall be paid. The note states the actual amount of the debt
that the mortgage secures and renders the mortgagor personally
responsible for repayment.
Mortgagor
The borrower in a mortgage agreement.
Multidwelling units
Properties that provide separate housing units for more than one
family, although they secure only a single mortgage.
Multifamily mortgage
A residential mortgage on a dwelling that is designed to house more
than four families, such as a high-rise apartment complex.
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Negative Amortization
(Also called "Deferred Interest"). If the payments are too small to
cover the interest due on a loan, the remaining interest owed is added
to the outstanding loan balance, causing negative amortization.
Net cash flow
The income that remains for an investment property after the
monthly operating income is reduced by the monthly housing expense,
which includes principal, interest, taxes, and insurance (PITI) for
the mortgage, homeowners' association dues, leasehold payments, and
subordinate financing payments.
Net Effective Income
Gross income less federal income tax.
Negative amortization
A gradual increase in mortgage debt that occurs when the monthly
payment is not large enough to cover the entire principal and interest
due. The amount of the shortfall is added to the remaining balance to
create "negative" amortization
Net Worth
The value of all assets, including cash, less total liabilities.
No cash-out refinance
A refinance transaction in which the new mortgage amount is limited
to the sum of the remaining balance of the existing first mortgage,
closing costs (including prepaid items), points, the amount required
to satisfy any mortgage liens that are more than one year old (if the
borrower chooses to satisfy them), and other funds for the borrower's
use (as long as the amount does not exceed 1 percent of the principal
amount of the new mortgage).
Non-liquid asset
An asset that cannot easily be converted into cash.
Note
A legal document that obligates a borrower to repay a mortgage loan
at a stated interest rate during a specified period of time.
Note rate
The interest rate stated on a mortgage note.
Notice of Default
A formal written notice to a borrower that a default has occurred
and that legal action may be taken.
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Original principal balance
The total amount of principal owed on a mortgage before any
payments are made.
Origination Fee
A fee paid to a lender for processing a loan Application.
OTC
(The Office of Thrift Supervision). Charters federal thrifts,
serves as the primary federal examiner and regulator of federal and
state-chartered savings associations, and administers laws governing
savings and loan holding companies.
Owner financing
A property purchase transaction in which the property seller
provides all or part of the financing.
Owner Occupied
"Owner Occupied" means the property is the owner's primary
residence.
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Payment Adjustment Period
The length of time (typically a year) between changes to the AML
borrower's P&I payment.
Payment Buy down
Payment buy downs occur when a third party, typically a builder,
pays part of the initial P&I payments for a year or two, so that the
borrower has smaller payments and can qualify for the loan.
Payment Cap
A limit on the amount the payment can be changed at the end of each
Payment Adjustment Period.
Payment Discount
In a payment discount, the lender reduces the first year's interest
rate to make the mortgagor more attractive to borrowers.
Periodic payment cap
A limit on the amount that payments can increase or decrease during
any one-adjustment period.
Periodic rate cap
A limit on the amount that the interest rate can increase or
decrease during any one adjustment period, regardless of how high or
low the index might be.
Personal property
Any property that is not real property.
PITI
Principal, Interest, Taxes and Insurance are components of a
mortgage payment.
Plat
A map or chart of a lot, subdivision or community drawn by a
surveyor showing boundary lines, buildings, improvements on the land,
and easements.
Points
A one-time charge by the lender to increase the yield of the loan;
a point is 1 percent of the amount of the mortgage.
Power of attorney
A legal document that authorizes another person to act on one’s
behalf. A power of attorney can grant complete authority or can be
limited to certain acts and/or certain periods of time.
Prepayment
Payment of mortgage loan, or part of it, before due date.
Pre-qualification
The process of determining how much money a prospective homebuyer
will be eligible to borrow before application.
Prime rate
The interest rates that banks charge to their preferred customers.
Principal
The amount borrowed or remaining unpaid, also, that part of the
monthly payment that reduces the outstanding balance of a mortgage.
Private Mortgage Insurance
Insurance provided by nongovernmental insurers that protect lenders
against loss if a borrower defaults.
Promissory note
A written promise to repay a specified amount over a specified
period of time.
Public auction
A meeting in an announced public location to sell property to repay
a mortgage that is in default.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is
owned and maintained by a homeowners' association for the benefit and
use of the individual PUD unit owners.
Purchase Agreement
See Agreement of Sale.
Purchase money transaction
The acquisition of property through the payment of money or its
equivalent.
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Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to
grant a homebuyer.
Quitclaim Deed
A deed, which transfers whatever interest, the maker of the deed
may have in the particular parcel of land. A quitclaim deed is often
given to clear the title when the grantor's interest in a property is
questionable. By accepting such a deed the buyer assumes all the
risks. Such a deed makes no warranties as to the title, but simply
transfers to the buyer whatever interest the grantor has. (See Deed.)
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Radon
A radioactive gas found in some homes that in sufficient
concentrations could cause health problems.
Rate Caps
(Also called "Interest Rate Caps"). A limit on the amount of which
the interest rate charged to the borrower can be changed.
Rate lock
A commitment issued by a lender to a borrower or other mortgage
originator guaranteeing a specified interest rate for a specified
period of time.
Real Estate Broker
A middleman or agent who buys and sells real estate for a company,
firm, or individual on a commission basis. The broker does not have
title to the property, but generally represents the owner.
Real Estate Owned
(REO). A term frequently used by lending institution as applied to
ownership of real property acquired for investment or as a result of
foreclosure.
RESPA
(Real Estate Settlement Procedures Act). A Federal law that
requires lenders to provide home mortgage borrowers with information
about known or estimated settlement costs.
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 who holds active membership in
a local real estate board that is affiliated with the National
Association of Realtors.
Recission
The cancellation or annulment of a transaction or contract by the
operation of a law or by mutual consent.
Recorder
The public official who keeps records of transactions that affects
real property in the area.
Recording
The noting in the registrar’s office of the details of a properly
executed legal document, such as a deed, a mortgage note, a
satisfaction of mortgage, or an extension of mortgage, thereby making
it a part of the public record. Refinancing
The process of the same mortgagor paying off one loan with the
proceeds from another loan.
Rehabilitation mortgage
A mortgage created to cover the costs of repairing, improving, and
sometimes acquiring an existing property.
Remaining balance
The amount of principal that has not yet been repaid.
Remaining term
The original amortization term minus the number of payments that
have been applied.
Repayment plan
An arrangement made to repay delinquent installments or advances.
Lenders' formal repayment plans are called "relief provisions."
Replacement reserve fund
A fund set aside for replacement of common property in a
condominium, PUD, or cooperative project -- particularly that which
has a short life expectancy, such as carpeting, furniture, etc.
Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive
covenants are created by deed and may "run with the land," binding all
subsequent purchasers of the land, or may be "personal" and binding
only between the original seller and buyer. The determination whether
a covenant runs with the land or is personal is governed by the
language of the covenant, the intent of the parties, and the law in
the State where the land is situated. Restrictive covenants that run
with the land are encumbrances and may affect the value and
marketability of title. Restrictive covenants may limit the density of
buildings per acre, regulate size, style or price range of buildings
to be erected, or prevent particular businesses from operating or
minority groups from owning or occupying homes in a given area. (This
latter discriminatory covenant is unconstitutional and has been
declared unenforceable by the U.S. Supreme Court.)
Revolving liability
A credit arrangement, such as a credit card, that allows a customer
to borrow against a pre-approved line of credit when purchasing goods
and services. The borrower is billed for the amount that is actually
borrowed plus any interest due.
Right of first refusal
A provision in an agreement that requires the owner of a property
to give another party the first opportunity to purchase or lease the
property before he or she offers it for sale or lease to others.
Right of ingress or egress
The right to enter or leave designated premises.
Right of survivorship
In joint tenancy, the right of survivors to acquire the interest of
a deceased joint tenant.
RTC
(Resolution Trust Corporation). Formed to resolve thrift failures
over the next three years and dispose of their assets and liabilities.
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Sales Agreement
See Agreement of sale.
Second Mortgage
A mortgage that has rights that are subordinate to the rights of
the first mortgage holders.
Secondary Mortgage Market
The buying and selling of existing mortgages.
Seller-Provided Funds
(Also called "Seller Contributions"). Seller-provided funds include
all transaction cost paid by the seller except the real estate agent's
(or brokers) fee.
Servicer
The party who has entered into an agreement with the insured to
service a loan.
Settlement Costs
See Closing Costs.
Single Premium
A premium, which provides coverage for more than a year. empty)
Special Assessments
A special tax imposed on property, individual lots or all property
in the immediate area, for road construction, sidewalks, sewers,
streetlights, etc.
Special Lien
A lien that binds a specified piece of property, unlike a general
lien, which is levied against all one's assets. It creates a right to
retain something of value belonging to another person as compensation
for labor, material, or money expended in that person's behalf. In
some localities it is called "particular" lien or "specific" lien.
(See Lien.)
Special Warranty Deed
A deed in which the grantor conveys title to the grantee and agrees
to protect the grantee against title defects or claims asserted by the
grantor and those persons whose right to assert a claim against the
title arose during the period the grantor held title to the property.
In a special warranty deed the grantor guarantees to the grantee that
he has done nothing during the time he held title to the property
which has, or which might in the future, impair the grantee's title.
Survey
A map or plat made by a licensed surveyor showing the results of
measuring the land with its elevations, improvements, boundaries, and
its relationship to surrounding tracts of land. A survey is often
required by the lender to assure him that a building is actually sited
on the land according to its legal description.
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Tax
As applied to real estate, an enforced charge imposed on persons,
property or income, to be used to support the State. The governing
body in turn utilizes the funds in the best interest of the general
public.
Tax Lien
A claim against real estate for the amount of its unpaid taxes.
Teaser Rate
Similar to a Payment Discount, but implies either an unusually
large initial rate discount or an attempt by the lender to lure an
otherwise unqualified borrower into the mortgage.
Tenancy by the entirety
A type of joint tenancy of property that provides right of
survivorship and is available only to a husband and wife. Contrast
with tenancy in common.
Tenancy in common
A type of joint tenancy in a property without right of
survivorship. Contrast with tenancy by the entirety and with joint
tenancy.
Tenant-stockholder
The obligee for a cooperative share loan, who is both a stockholder
in a cooperative corporation and a tenant of the unit under a
proprietary lease or occupancy agreement.
Third-party origination
A process by which a lender uses another party to completely or
partially originate, process, underwrite, close, fund, or package the
mortgages it plans to deliver to the secondary mortgage market.
Title
As generally used, the rights of ownership and possession of
particular property. In real estate usage, title may refer to the
instruments or documents by which a right of ownership is established
(title documents), or it may refer to the ownership interest one has
in the real estate.
Title Company
A company that specializes in examining and insuring titles to real
estate.
Title Insurance
Protects lenders or homeowners against loss of their interest in
property due to legal defects in title. Title insurance may be issued
to a "mortgagee's title policy." Insurance benefits will be paid only
to the "named insured" in the title policy, so it is important that an
owner purchase an "owner's title policy", if he desires the protection
of title insurance.
Title Search or Examination
A check of the title records, generally at the local courthouse, to
make sure the buyer is purchasing a house from the legal owner and
there are no liens, overdue special assessments, or other claims or
outstanding restrictive covenants filed in the record, which would
adversely affect the marketability or value of title.
Total Debt Ratio
Monthly debt and housing payments divided by gross monthly income.
Also known as Back-End Ratio.
Total expense ratio
Total obligations as a percentage of gross monthly income. The
total expense ratio includes monthly housing expenses plus other
monthly debts.
Trade equity
Equity that results from a property purchaser giving his or her
existing property (or an asset other than real estate) as trade as all
or part of the down payment for the property that is being purchased.
Transfer of ownership
Any means by which the ownership of a property changes hands.
Lenders consider all of the following situations to be a transfer of
ownership: the purchase of a property "subject to" the mortgage, the
assumption of the mortgage debt by the property purchaser, and any
exchange of possession of the property under a land sales contract or
any other land trust device. In cases in which an inter vivos
revocable trust is the borrower, lenders also consider any transfer of
a beneficial interest in the trust to be a transfer of ownership.
Transfer tax
State or local tax payable when title passes from one owner to
another.
Treasury index
An index that is used to determine interest rate changes for
certain adjustable-rate mortgage (ARM) plans.
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 that requires lenders to fully disclose, in
writing, the terms and conditions of a mortgage, including the APR and
other charges.
Two- to four-family property
A property that consists of a structure that provides living space
(dwelling units) for two to four families, although ownership of the
structure is evidenced by a single deed.
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Underwriting
The process of evaluating a loan application to determine the risk
involved for the lender. Underwriting involves an analysis of the
borrower's creditworthiness and the quality of the property itself.
Unsecured-loan
A loan that is not backed by collateral.
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Government Loans FHA / VA
Government loans are loans that are guaranteed or purchased by
government organizations. Two of the most popular Government Loans are
the Federal Housing Administration (FHA) and the Department of
Veterans Affairs (VA).
Vested
Having the right to use a portion of a fund such as an individual
retirement fund.
Department of Veterans Affairs (VA)
An agency of the federal government that guarantees residential
mortgages made to eligible veterans of the military services. The
guarantee protects the lender against loss and thus encourages lenders
to make mortgages to veterans.
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Wraparound mortgage
A mortgage that includes the remaining balance on an existing first
mortgage plus an additional amount requested by the mortgagor. Full
payments on both mortgages are made to the wraparound mortgagee, who
then forwards the payments on the first mortgage to the first
mortgagee.
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Zoning Ordinances
The acts of an authorized local government establishing building
codes, and setting forth
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