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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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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 p
roperty 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, haz
ard
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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J -
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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(empty)
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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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M -
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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N -
Negative Amortization
(Also called "Deferred Interest"). If the
payments are too small to cover the interest due on a
loan, the remaining interest owed is added to the
outstanding loan balance, causing negative
amortization.
Net cash flow
The income that remains for an investment property
after the monthly operating income is reduced by the
monthly housing expense, which includes principal,
interest, taxes, and insurance (PITI) for the
mortgage, homeowners' association dues, leasehold
payments, and subordinate financing payments.
Net Effective Income
Gross income less federal income tax.
Negative amortization
A gradual increase in mortgage debt that occurs
when the monthly payment is not large enough to cover
the entire principal and interest due. The amount of
the shortfall is added to the remaining balance to
create "negative" amortization
Net Worth
The value of all assets, including cash, less total
liabilities.
No cash-out refinance
A refinance transaction in which the new mortgage
amount is limited to the sum of the remaining balance
of the existing first mortgage, closing costs
(including prepaid items), points, the amount required
to satisfy any mortgage liens that are more than one
year old (if the borrower chooses to satisfy them),
and other funds for the borrower's use (as long as the
amount does not exceed 1 percent of the principal
amount of the new mortgage).
Non-liquid asset
An asset that cannot easily be converted into cash.
Note
A legal document that obligates a borrower to repay
a mortgage loan at a stated interest rate during a
specified period of time.
Note rate
The interest rate stated on a mortgage note.
Notice of Default
A formal written notice to a borrower that a
default has occurred and that legal action may be
taken.
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Original principal balance
The total amount of principal owed on a mortgage
before any payments are made.
Origination Fee
A fee paid to a lender for processing a loan
Application.
OTC
(The Office of Thrift Supervision). Charters
federal thrifts, serves as the primary federal
examiner and regulator of federal and state-chartered
savings associations, and administers laws governing
savings and loan holding companies.
Owner financing
A property purchase transaction in which the
property seller provides all or part of the financing.
Owner Occupied
"Owner Occupied" means the property is
the owner's primary residence.
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Payment Adjustment Period
The length of time (typically a year) between
changes to the AML borrower's P&I payment.
Payment Buy down
Payment buy downs occur when a third party,
typically a builder, pays part of the initial P&I
payments for a year or two, so that the borrower has
smaller payments and can qualify for the loan.
Payment Cap
A limit on the amount the payment can be changed at
the end of each Payment Adjustment Period.
Payment Discount
In a payment discount, the lender reduces the first
year's interest rate to make the mortgagor more
attractive to borrowers.
Periodic payment cap
A limit on the amount that payments can increase or
decrease during any one-adjustment period.
Periodic rate cap
A limit on the amount that the interest rate can
increase or decrease during any one adjustment period,
regardless of how high or low the index might be.
Personal property
Any property that is not real property.
PITI
Principal, Interest, Taxes and Insurance are
components of a mortgage payment.
Plat
A map or chart of a lot, subdivision or community
drawn by a surveyor showing boundary lines, buildings,
improvements on the land, and easements.
Points
A one-time charge by the lender to increase the
yield of the loan; a point is 1 percent of the amount
of the mortgage.
Power of attorney
A legal document that authorizes another person to
act on one’s behalf. A power of attorney can grant
complete authority or can be limited to certain acts
and/or certain periods of time.
Prepayment
Payment of mortgage loan, or part of it, before due
date.
Pre-qualification
The process of determining how much money a
prospective homebuyer will be eligible to borrow
before application.
Prime rate
The interest rates that banks charge to their
preferred customers.
Principal
The amount borrowed or remaining unpaid, also, that
part of the monthly payment that reduces the
outstanding balance of a mortgage.
Private Mortgage Insurance
Insurance provided by nongovernmental insurers that
protect lenders against loss if a borrower defaults.
Promissory note
A written promise to repay a specified amount over
a specified period of time.
Public auction
A meeting in an announced public location to sell
property to repay a mortgage that is in default.
Planned Unit Development (PUD)
A project or subdivision that includes common
property that is owned and maintained by a homeowners'
association for the benefit and use of the individual
PUD unit owners.
Purchase Agreement
See Agreement of Sale.
Purchase money transaction
The acquisition of property through the payment of
money or its equivalent.
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Qualifying Ratios
Guidelines applied by lenders to determine how
large a loan to grant a homebuyer.
Quitclaim Deed
A deed, which transfers whatever interest, the
maker of the deed may have in the particular parcel of
land. A quitclaim deed is often given to clear the
title when the grantor's interest in a property is
questionable. By accepting such a deed the buyer
assumes all the risks. Such a deed makes no warranties
as to the title, but simply transfers to the buyer
whatever interest the grantor has. (See Deed.)
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Radon
A radioactive gas found in some homes that in
sufficient concentrations could cause health problems.
Rate Caps
(Also called "Interest Rate Caps"). A
limit on the amount of which the interest rate charged
to the borrower can be changed.
Rate lock
A commitment issued by a lender to a borrower or
other mortgage originator guaranteeing a specified
interest rate for a specified period of time.
Real Estate Broker
A middleman or agent who buys and sells real estate
for a company, firm, or individual on a commission
basis. The broker does not have title to the property,
but generally represents the owner.
Real Estate Owned
(REO). A term frequently used by lending
institution as applied to ownership of real property
acquired for investment or as a result of foreclosure.
RESPA
(Real Estate Settlement Procedures Act). A Federal
law that requires lenders to provide home mortgage
borrowers with information about known or estimated
settlement costs.
Real property
Land and appurtenances, including anything of a
permanent nature such as structures, trees, minerals,
and the interest, benefits, and inherent rights
thereof.
REALTOR
A real estate broker or an associate who holds
active membership in a local real estate board that is
affiliated with the National Association of Realtors.
Recission
The cancellation or annulment of a transaction or
contract by the operation of a law or by mutual
consent.
Recorder
The public official who keeps records of
transactions that affects real property in the area.
Recording
The noting in the registrar’s office of the
details of a properly executed legal document, such as
a deed, a mortgage note, a satisfaction of mortgage,
or an extension of mortgage, thereby making it a part
of the public record. Refinancing
The process of the same mortgagor paying off one
loan with the proceeds from another loan.
Rehabilitation mortgage
A mortgage created to cover the costs of repairing,
improving, and sometimes acquiring an existing
property.
Remaining balance
The amount of principal that has not yet been
repaid.
Remaining term
The original amortization term minus the number of
payments that have been applied.
Repayment plan
An arrangement made to repay delinquent
installments or advances. Lenders' formal repayment
plans are called "relief provisions."
Replacement reserve fund
A fund set aside for replacement of common property
in a condominium, PUD, or cooperative project --
particularly that which has a short life expectancy,
such as carpeting, furniture, etc.
Restrictive Covenants
Private restrictions limiting the use of real
property. Restrictive covenants are created by deed
and may "run with the land," binding all
subsequent purchasers of the land, or may be
"personal" and binding only between the
original seller and buyer. The determination whether a
covenant runs with the land or is personal is governed
by the language of the covenant, the intent of the
parties, and the law in the State where the land is
situated. Restrictive covenants that run with the land
are encumbrances and may affect the value and
marketability of title. Restrictive covenants may
limit the density of buildings per acre, regulate
size, style or price range of buildings to be erected,
or prevent particular businesses from operating or
minority groups from owning or occupying homes in a
given area. (This latter discriminatory covenant is
unconstitutional and has been declared unenforceable
by the U.S. Supreme Court.)
Revolving liability
A credit arrangement, such as a credit card, that
allows a customer to borrow against a pre-approved
line of credit when purchasing goods and services. The
borrower is billed for the amount that is actually
borrowed plus any interest due.
Right of first refusal
A provision in an agreement that requires the owner
of a property to give another party the first
opportunity to purchase or lease the property before
he or she offers it for sale or lease to others.
Right of ingress or egress
The right to enter or leave designated premises.
Right of survivorship
In joint tenancy, the right of survivors to acquire
the interest of a deceased joint tenant.
RTC
(Resolution Trust Corporation). Formed to resolve
thrift failures over the next three years and dispose
of their assets and liabilities.
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Sales Agreement
See Agreement of sale.
Second Mortgage
A mortgage that has rights that are subordinate to
the rights of the first mortgage holders.
Secondary Mortgage Market
The buying and selling of existing mortgages.
Seller-Provided Funds
(Also called "Seller Contributions").
Seller-provided funds include all transaction cost
paid by the seller except the real estate agent's (or
brokers) fee.
Servicer
The party who has entered into an agreement with
the insured to service a loan.
Settlement Costs
See Closing Costs.
Single Premium
A premium, which provides coverage for more than a
year. empty)
Special Assessments
A special tax imposed on property, individual lots
or all property in the immediate area, for road
construction, sidewalks, sewers, streetlights, etc.
Special Lien
A lien that binds a specified piece of property,
unlike a general lien, which is levied against all
one's assets. It creates a right to retain something
of value belonging to another person as compensation
for labor, material, or money expended in that
person's behalf. In some localities it is called
"particular" lien or "specific"
lien. (See Lien.)
Special Warranty Deed
A deed in which the grantor conveys title to the
grantee and agrees to protect the grantee against
title defects or claims asserted by the grantor and
those persons whose right to assert a claim against
the title arose during the period the grantor held
title to the property. In a special warranty deed the
grantor guarantees to the grantee that he has done
nothing during the time he held title to the property
which has, or which might in the future, impair the
grantee's title.
Survey
A map or plat made by a licensed surveyor showing
the results of measuring the land with its elevations,
improvements, boundaries, and its relationship to
surrounding tracts of land. A survey is often required
by the lender to assure him that a building is
actually sited on the land according to its legal
description.
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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
