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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.
FIRRA
(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.
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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.
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.
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.
Multi-dwelling 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"). 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 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.
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 borrower's P&I
(Principal & Interest) 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.
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.
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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