-D-
Deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and
avoid foreclosure. Also called a "voluntary conveyance."
Deed of Trust
Like a mortgage, a security instrument whereby real property is given
as security for a debt. However, in a deed of trust there are three
parties to the instrument: the borrower, the trustee, and the lender, (or
beneficiary). In such a transaction, the borrower transfers the legal
title for the property to the trustee who holds the property in trust as
security for the payment of the debt to the lender or beneficiary. If the
borrower pays the debt as agreed, the deed of trust becomes void. If,
however, he defaults in the payment of the debt, the trustee may sell the
property at a public sale, under the terms of the deed of trust. In most
jurisdictions where the deed of trust is in force, the borrower is subject
to having his property sold without benefit of legal proceedings. A few
States have begun in recent years to treat the deed of trust like a
mortgage.
Default
Failure to make mortgage payments on a timely basis or to comply with
other conditions of a mortgage.
Deficiency Judgment
A court order to pay the balance owed on a loan if the proceeds from
the sale of the security are insufficient to pay off the loan. Deficiency
judgments are not allowed in all states.
Delinquency
A loan in which a payment is overdue but not yet in default.
Deposit
A sum of money given to bind the sale of real estate, or a sum of money
given to ensure payment or an advance of funds in the processing of a
loan.
Depreciation
A decline in the value of property; the opposite of "appreciation."
Discount Points
See Points.
Documentary Stamps
A State tax, in the forms of stamps, required on deeds and mortgages
when real estate title passes from one owner to another. The amount of
stamps required varies with each State.
Dower
The rights of a widow in the property of her husband at his death.
Down Payment
The part of the purchase price, which the buyer pays in cash and does
not finance with a mortgage
Due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment in
full if the borrower sells the property that serves as security for the
mortgage.
Due-on-transfer provision
This terminology is usually used for second mortgages.
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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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