ABSTRACT OF TITLE

A history of the title transactions or conditions bearing on the title to a designated parcel of land. The period covered is the original source of title to the present. All subsequent instruments are summarized by presenting the material parts of the public record.

ACCELERATION CLAUSE

A provision in a mortgage and note that the entire principal shall become due and payable in the event of default.

ACCRUED INTEREST

Is the interest earned for the period of time that has elapsed since interest was paid.

ADJUSTABLE RATE MORTGAGE (ARM)

A mortgage that permits an adjustment of the interest rate at specific intervals.

AMORTIZATION

Is the reduction of debt by means of periodic payments of principal.

ANNUAL PERCENTAGE RATE (APR)

Is the term used to express the relationship of the total finance charges to the amount of the loan. This rate is disclosed on the Truth-in-Lending Statement provided to a borrower under the Truth-in-Lending Act.

APPRAISAL

The estimated value of a property prepared by a professional appraiser. Generally required to support a loan transaction.

APPRECIATION

An increase in the value of property due to changes in the condition or environment of the property. Generally described as value increased due to inflation.

ASSESSED VALUATION

The value of a property upon which taxes are assessed.

ASSESSIMENT

The value placed on a property for the express purpose of taxation. This can also be expressed as a levy against property by a taxing authority or homeowners association.

ASSIGNMENT OF MORTGAGE

A transfer of ownership of a mortgage from one party to another.

ASSUMPTION OF MORTGAGE

A buyer of a property agrees to assume the liability for an existing debt, which is secured by the property under a mortgage or deed or trust. In this case the seller is liable in a secondary position, unless released by the lender.

ATTORNEY TN FACT

A person appointed to act as an agent for another under a power of attorney. The authority may be limited to a specific act or may be broader in scope.

ASIS POINT

One one-hundredth of a percent. This term is used to describe the changes in yield on debt instruments and mortgages.

BALLOON NOTE

A note calling for periodic payments, which are not sufficient to fully amortize the face amount of the note prior to maturity. A final payment of principal is due at maturity, known as a "balloon" payment.

BANKRUPT

A person, firm, or corporation, who has been relieved of all debts through a court proceeding. All assets must have been surrendered to a trustee or receiver for the protection of creditors.

BINDER, INSURANCE

Written evidence of temporary hazard or title insurance coverage. The period of coverage is for a limited time and must be replaced by a permanent policy.

BLANKET MORTGAGE

A mortgage on more than one property of the mortgagor. For instance--a mortgage covering all the lots of a builder in a subdivision. This can be extended to cover both present and future holdings.

BOND

An interest-bearing certificate of debt with a maturity date--such as an obligation of a government or corporation. A real estate bond is a written obligation secured by a mortgage or deed of trust.

BRIDGE FINANCING

An interim loan that provides funding prior to placing of a permanent loan.

CAPITALIZATION RATE

A rate that represents the relationship between real property and the net income it produces.

CERTIFICATE OF OCCUPANCY

Authorization from a municipality that allows a newly completed or substantially completed building to be occupied.

CERTIFICATE OF TITLE

A statement by a title or abstract company or attorney stating that the title to a property is legally held by the current owner.

CHAIN OF TITLE

A history of all documents transferring title to a parcel of property. This begins with the earliest existing evidence of documents and ends with the most current.

CHATTEL MORTGAGE

A lien on personal property—a security interest.

CLOSING

The consummation of a transaction. This includes delivery of a deed, any financial adjustments, the signing of notes, and the disbursement of funds to finalize the sale.

CLOSING COSTS

The expenses related to the sale of real estate. This may include loan fees, title fees, appraisal fees, and document preparation fees, etc. (Refer to the good faith estimate for details of closing costs.)

CLOSING STATEMENT

The disclosure accounting for all times received and required at the closing. This includes deposits for taxes, insurance, appraisals, etc.

CLOUD ON TITLE

Conditions revealed during a title search that adversely affect the title to a property. Removal requires a release, or court action.

CO-BORROWER

The co-borrower is equally liable for repayment as the borrower and has an interest in the property.

COINSURANCE

Sharing of risk in an insurance policy by more than one insurer.

COMMERCIAL LOAN

A mortgage loan on income producing property.

COMMITMENT

An agreement, usually in writing, between a lender and a borrower that specifies a loan at a future date, subject to conditions to be met by the borrower as requested by the lender.

COMMITMENT FEE

A fee paid by a potential borrower to a potential lender for the lender’s agreement to lend money at a specified time in the future.

COMIN4ON AREAS

Improvements or land provided for the benefit of all tenants and property owners in a specific area---such as parking lots and landscaping in a shopping center or parks and recreational areas in a residential subdivision.

COMPARABLES

Properties that are compared in value to a property being appraised in the area. Generally, the comparisons are among properties that have been sold in a recent time or are currently listed for sale in the immediate area.

CONDEMNATION

The use of private property for public use without the consent of the owner---after some form of compensation.

CONDITIONAL COMMITMENT

A commitment on a specific property for a definite loan amount subject to terms and conditions that must be met along with a purchaser of good credit standing.

CONDOMINIUM

form of ownership of real property in which the purchaser receives title to a proportionate interest in the property and certain common areas. Each unit is separately owned to the interior surfaces of the perimeter walls, floors, and ceilings. Title refers to the entire property less the separately owned units.

CONSIDERATION

The required element of all contracts by which a legal right or promise is exchanged for the act or promise of another person.

CONSTRUCTION LOAN

An interim loan for financing the costs of construction of a building or improvement to a property. The lender pays the contractor at periodic intervals during the construction.

CONTINGENCY

The dependence upon a stated event, which must occur before a contract, is binding.

CONTRACT

An agreement between parties to perform or not perform a particular legal act.

CONVENTIONAL LOAN

A mortgage loan that is not insured by FHA or VA.

CO-SIGNER

A person who binds himself to be liable for the debt of obligation of another.

CREDIT REPORT

A comprehensive report to a lender on the credit history of a potential borrower for the purpose of determining the creditworthiness of the borrower.

DEBT SERVICE

The periodic payment of principal and interest earned on mortgage loans.

DEED

A written instrument, which transfers the ownership of land from one to another.

DEED OF TRUST

A document, in some instances, used in place of a mortgage. A document used to secure the payment of a note. A trustee is used to facilitate the collection of the note and subsequent transfer of the property at maturity and payment of the note.

DEED RESTRICTION

Limitations placed on a deed restricting the use of the property.

DEFAULT

A breach or nonperformance of the terms of a note or the covenants of a mortgage.

DEFERRED PAYMENTS

Payments that begin at a future date.

DELINQUENT

The status of a mortgage with a payment past due.

DISCOUNT

Refers to an amount withheld from loan proceeds by the lender. In secondary market sales, a discount by which the sales price of the note is less than its face value. In both cases, the purpose of the discount is to increase the yield, either in lieu of interest or as an addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower, and the rate and term of the loan.

DOWNPAYMENT

The difference between the sales price and the loan amount

ECOA (EQUAL CREDIT OPPORTUNITY ACT)

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.

EFFECTIVE GROSS INCOME (PERSONAL)

Annual income including overtime that is veritable, which can be from more than one source if stable and verifiable.

ENCROACHMENT

An improvement that intrudes illegally upon another’s property.

ENCUMBRANCEAnything that affects or limits the fee simple title to property, such a mortgages, leases, easements, or restrictions.

ENVIRONMENTAL IMPACT REPORT

A report of the probable effect of a development on the surrounding area (environment). This report is prepared by an independent company using federal, state, or local guidelines.

EQUITY

The difference between fair market value and current indebtedness—the owner’s equity.

ESCROW

A transaction in which a third party, acting as the agent for the buyer and the seller, carries out instructions of both, then assumes the responsibilities of handling all the documents and disbursement of funds.

ESCROW ACCOUNT

A segregated trust account in which funds are held in escrow.

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 PAYMENT

he portion of a mortgagor’s monthly payment held by the escrow agent or lender to pay taxes, hazard insurance, mortgage insurance, lease payments, and other escrow items as they come due.

ET UX

And wife.

EXTENDED COVERAGE ENDORSEMENT

An endorsement that may be attached to fire insurance policies. This usually covers windstorm, hail, explosion, riot, civil commotion, damage by aircraft, vehicles, or smoke.

FAIR MARKET VALUE

The price at which property is transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.

FARMERS HOME ADMINISTRATION (FMHA)

The government agency established under the Farmer’s Home Administration Act of 1946 to provide financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FEASIBILITY STUDY

An analysis that determines whether a real estate project, proposed or existing, successfully meets desired objectives.

FEDERAL FAIR HOUSING LAW

Title VII of the Civil Rights Act, which prohibits discrimination in the sale or rental of residential property because of race, color, sex, religion, or national origin.

FEDERAL HOME LOAN BANK BOARD (FHLBB)

Is a regulatory and supervisory agency for federally chartered savings institutions. It oversees the operations of the Federal Savings and Loan Insurance Corporation and the Federal Home Loan Mortgage Corporation.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FKLMC)

A private corporation authorized by Congress. It sells participation sales certificates secured by pools of conventional mortgage loans--their principal and interest guaranteed by the federal government through the FHMLC. It also sells Government National Mortgage Association bonds to raise funds to finance the purchase of mortgages.

FEDERAL HOUSING ADMINISTRATION (FHA)

A division of the Department of Housing and Urban Development. Its primary activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA is not a lender.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)

(FANNIE MAE) - A tax-paying corporation created by Congress to support the secondary mortgage market. It purchases and sells conventional residential home mortgages and mortgages insured by FHA or guaranteed by VA.

FEE SIMPLE

The greatest possible interest in real estate.

FINANCING STATEMENT

A document prescribed by the Uniform Commercial Code and filed by a lender with the registrar of deeds, or secretary of state. It gives the name and address of the debtor and the secured party, along with a description of the personal property securing the loan.

FIRM COMMITMENT

A lender’s agreement to make a loan to a specific borrower on a specified property. It could be an Fl-IA or PMI agreement to insure a loan on a specific property, with a designated borrower.

FIRST MORTGAGE

A real estate loan that creates a primary lien against real property.

FLOOD INSURANCE

Insurance against loss by flood damage. This is required by lenders in areas designated as potential flood areas. The insurance is private, but is federally backed.

FLOODPLAIN

The area that has been designated to have the potential of flooding due to the topography, nearness to rivers or other waterways or water drainage areas.

FORECLOSURE

The procedure used by a lender to take possession of a property due to the default of a borrower on a mortgage loan.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)

(GINNIE MAE) – Formed in 1968 to administer a special assistance loan program and operate the liquidation function of the FNMA program. GNMA administers the mortgage-backed securities program which channels new sources of funds into residential financing by the sale of privately issued securities carrying a GNMA guaranty.

GNMA MORTGAGE-BACKED SECURITIES

Securities, guaranteed by GNMA, that are issued by mortgage bankers, commercial banks, savings and loan associations, savings banks, etc.

GRANTEE

The person to whom an interest in real property is conveyed.

GRANTOR

The person conveying an interest in real property.

HOMEOWNERS POLICY

A multiple peril policy that covers the improvements to the property as well as contents of the property in case of fire or wind damage, theft, liability for property damage, and personal liability.

(HOMESTEAD) EXEMPTION

Is for the dwelling of a head of a family. Some states grant statutory exemptions, protecting homestead property against the rights of creditors. Property tax exemptions are also available in some states. This usually involves a formal declaration by the homeowner.

HUD

The Department of Housing and Urban Development, which was established by the Housing and Urban Development Act of 1965. It is responsible for the implementation and administration of government housing and urban development programs.

INTEREST

Consideration in the form of money paid for the use of money. It is expressed as an annual percentage. It can also mean a right, share, or title in a property.

INVESTOR

The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.

JOINT TENANCY

An equal undivided interest or ownership of property by two or more persons.

LATE CHARGE

A charge to a borrower for failure to pay a regular installment when due.

LEGAL DESCRIPTION

A description of a property in metes and bounds identifying a property in respect to geographical location and proximity to other properties as described in court records.

LESSEE (TENANT)

A person holding rights to or possession of a property under terms of a lease.

LESSOR (LANDLORD)

one who leases property to a lessee.

LIEN

A legal hold or claim of one person on the property of another as security for a debt or charge.

LOAN-TO-VALUE

The relationship between the amount of a mortgage loan and the appraised value of the security, expressed as a percentage of the appraised value.

MM (MEMBER, APPRAISAL INSTITUTE)

The highest professional designation awarded by the American Institute of Real Estate Appraisers.

METES AND BOUNDS

A description in a deed of the land location by using boundaries described in directions and distances.

MORTGAGE

A conveyance of an interest in real property given as security for the payment of a debt.

MORTGAGE-BACKED SECURITIES

Investment securities representing an undivided interest in pools of mortgages or trust deeds. Income from the underlying mortgage is used to pay off the securities.

MORTGAGE BANKING

The packaging of mortgage loans secured by real estate to be sold to a permanent investor, with servicing to be retained by the bank. The origination, sale, and servicing of mortgage loans by a firm or individual.

MORTGAGE BROKER

A firm or individual who brings the borrower and lender together, receiving a commission. A mortgage broker does not retain either the mortgage or its servicing.

MORTGAGE DISCOUNT

The difference between the principal amount of a mortgage and the amount is actually sells for on the market. Sometimes called points, loan fees, or brokerage fees, the discount is computed on the amount of the loan.

MORTGAGE INSURANCE PREMIUM (MIP)

A price paid by the borrower for insurance against loss through default with FHA loans.

MORTGAGEE

A person or firm to whom property is conveyed as security for a loan made by such person or firm, generally referred to as a creditor.

MORTGAGE NOTE

A written promise to pay a sum of money at a stated interest rate during a specified term.

MORTGAGOR

One who borrows money, giving as security a mortgage or deed of trust on real property, generally referred to as a debtor.

NET YIELD

That part of gross yield that remains after the deductions for all costs, such as servicing, and any reserves for losses.

OPEN-END MORTGAGE

A mortgage containing a provision that the outstanding loan amount may be increased upon mutual agreement of the lender and the borrower.

ORIGINATION FEE

A fee or charge for the work involved in the qualification, preparation, and submission of a proposed mortgage loan.

PAR

The principal amount of a mortgage with no premium or discount added or subtracted.

PLAT (PLOT)

A map representing a tract of land divided into lots, providing for streets, boundaries, easements, and dimensions. This document is generally recorded and is part of the public record.

POINT

An amount equal to 1 percent of the principal amount of an investment or note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments.

PREPAYMENT FEE

A consideration paid to the mortgagee for the prepayment privilege. It can also be called a prepayment penalty.

PRINCIPAL BALANCE

The outstanding balance of a mortgage.

PRIVATE MORTGAGE INSURANCE (PMI)

Insurance written by a private company protecting the mortgage lender against losses caused by a mortgage default.

PROCESSING

The preparation of a mortgage loan application, including supporting documents, for consideration by a lender or insurer.

PRO-RATE

To allocate proportionate shares of income or expenses, paid or due, between seller and buyer at closing.

RECORDING

The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, mortgage, extension of a mortgage, payoff of a mortgage, thereby making it a part of the public record.

REFINANCING

The repayment of a debt from the proceeds of a new loan using the same security.

RESPA (REAL ESTATE SETTLEMENT PROCEDURES ACT)

RESPA is a federal law that requires lenders to provide home mortgage borrowers with information of known or estimated settlement costs. RESPA also limits the amount lenders may require to be held in escrow accounts for the payment of real estate taxes and hazard insurance. RESPA prohibits referral fees, and requires the disclosure of known settlement costs to both buyers and sellers by the person conducting the closing.

SECONDARY FINANCING

Financing real estate with a loan, or loans, that are subordinate to a first mortgage or first deed trust.

SECONDARY MORTGAGE MARKET

A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated.

SECOND MORTGAGE

A real estate mortgage which is subordinate to a first mortgage.

SERVICING

The collection of payments, interest and principal, and escrow or trust items, such as property taxes and hazard insurance on a note for a fee. The servicing fee is included in the price of the loan, so it is invisible to the borrower. Servicing includes the accounting functions and operational procedures for late payments, tax payments, and loan analysis. Servicing rights are a valuable and marketable commodity in the secondary market and have a bearing on the interest rate quoted for a loan.

SURVEY

A measurement of land that is prepared by a registered surveyor, showing the location of the land with reference to known points. This includes the dimensions of the property and the location.

TENANCY

A holding of real estate under any kind of right of title. Tenancy can refer to holding under a lease.

TERM

The period of time between the commencement date and the termination date of a note, mortgage, legal document, or other contract.

TITLE EXCEPTION

An exception in a title policy against which the company does not insure.

TITLE INSURANCE POLICY

A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects in the title to real estate in which the insured has an interest as purchaser, mortgagee, or otherwise.

TITLE SEARCH

An examination of public records, laws and court decisions to disclose the past and current facts regarding ownership of real estate.

UNDERWRITING

The analysis of risk and the matching of it to an appropriate rate and term.

USURY

Charging more for the use of money than allowed by law.

VARIABLE RATE MORTGAGE

A mortgage agreement that allows for adjustments to the interest rate on a mortgage in keeping with fluctuations in the market.

VENDEE

The party to whom personal or real property is sold.

VENDOR

The seller of personal or real property.

WAREHOUSING

The borrowing of funds by a mortgage banker on a short-term basis at a commercial bank using permanent mortgage loans as collateral. This form of interim financing is used until the mortgages are sold to a permanent investor.

WARRANTY DEED

A deed in which the grantor or seller warrants or guarantees that good title being conveyed, as opposed to a quit-claim deed that contains no representations or warranty as to the quality of title being passed.

WITHOUT RECOURSE

A qualified endorsement of a negotiable instrument that protects the endorser from liability.

YIELD

The ratio of income from an investment to the total cost of the investment over a given period of time.

ZERO LOT LINE

The construction of a building on any of the boundary lines of a lot.