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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 neighbouring
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 instalment
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.
Instalment
The regular periodic payment that a
borrower agrees to make to a lender.
Instalment loan
Borrowed money that is repaid in
equal payments, known as
instalments. A furniture loan is
often paid for as an instalment
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 instalments 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)
Short Sale
Sale
typically executed to prevent a home
foreclosure. Negotiation with Lien
holder for a payoff for less what
they owed, or rather a sale of a
debt, generally on a piece of real
estate, short of the full debt
amount.
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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