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-D-
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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- E -
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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- Q -
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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- R -
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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- S -
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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- T -
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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- U -
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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- V -
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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- W -
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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- X -
(empty)
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- Y -
(empty)
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- Z -
Zoning Ordinances
The acts of an authorized
local government establishing
building codes, and setting
forth
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