Glossary of Terms
MORTGAGE. REAL ESTATE & INSURANCE
The number assigned to the form all potential customers must complete to apply for a home loan. This application is commonly referred to as “the 1003” and is produced by the Federal government.
1040 FEDERAL TAX RETURN
The Federal tax form used by U.S. citizens and residents to report their annual income to the Federal government. The 1040 tax return must be accompanied by any applicable schedules, which provide line-item detail of various sources of income. Schedule A details itemized deductions. Schedule B details investment income. Schedule C details business income. Schedule D details capital gains/losses. Schedule E details supplemental income, such as rental income. Schedule F details farming profit/loss.
1065 FEDERAL TAX RETURN
The Federal tax form used by U.S. partnerships to report their annual income to the Federal government.
A document that reports to the Federal government gross and net income earned by individuals who receive pension, social security or miscellaneous income, such as income from contract work. 1099s must be mailed to recipients by January 31 of each year for the previous year.
1120 FEDERAL TAX RETURN
The Federal tax form used by U.S. corporations to report their annual income to the Federal government.
1ST POSITION LIEN
A secured claim against a property that will be the first claim to be repaid should the property owner declare bankruptcy or default on the secured loan.
2-4 UNIT PROPERTY
A property that consists of a structure that provides living space for 2 to 4 families, although a single mortgage or deed of trust evidences ownership of the structure.
Lenders consider three factors, credit, capacity and collateral when considering a credit application. Credit is the borrower’s proven willingness to repay a debt. Capacity is the borrower’s financial ability to repay a debt. Collateral refers to the property used to secure a loan transaction.
30-DAY LATES, 60-DAY LATES, ETC.
Designations of the severity of mortgage delinquency. A mortgage payment is considered 30 days late when 2 payments are due. A mortgage payment is considered 60 days late when 3 payments are due.
ABSTRACT OF JUDGMENT
A summary of the essential provisions of a court judgment which, when recorded in the county recorder’s office, creates a lien upon the property of the debtor in that county, both presently owned or after acquired.
ABSTRACT OF TITLE
A history of a property’s title record used in some states to prepare the Preliminary or Title Commitment report. An Abstract of Title lists anyone who’s ever had a claim to the property, past and present. Some states require mortgage lenders to obtain a complete Abstract of Title. However, most states condense the abstract into a document called either the Preliminary or Title Commitment which lists only current claims to the property.
Offeree’s consent to enter into a contract and be bound by the terms of the offer.
ACCEPTED FEE APPRAISER PANEL
Panel of authorized fee appraisers that complete property appraisals for Data Mortgage Company loans.
Right to come and go.
Interest on a note, bond, etc., which has been earned but not yet paid.
Formal declaration, attached to or a part of an instrument, made before a duly authorized officer (usually a notary public) by the person who has executed that instrument, the execution being a free act and deed.
Measure of land: [ 1acre = 43,560 square feet ].
ACQUISITION COST/MORTGAGE BASIS
Total cost to the buyer for the real estate securing the mortgage, including the sales price, cost of any required repairs paid for by the buyer, plus Allowable Closing Costs. Total acquisition does not include non-realty items, prepaid expenses (i.e., taxes, assessments, and insurance premiums), or seller concessions.
Because of Public Law 97-66, service in the armed forces, for the purpose of Eligibility for Entitlement, does not commence until entry into actual active duty status, regardless of any reserve duty prior to that date OR enlistment under the Delayed Entry Program (considered in the reserves until reporting for active duty).
An attachment to a contract, deed or other document that incorporates additional terms of information to the original.
ADDENDUM TO DEED/MORTGAGE
Attachment to Deed Of Trust or Mortgage that governs the loan transaction during the construction phase of an OTC loan. This document is removed from the Deed Of Trust/Mortgage at permanent loan commencement.
ADDENDUM TO NOTE
This addendum governs the loan during the construction phase of an OTC loan, stating the start date and completion date of the construction phase as well as the interest rate and payment parameters of the construction phase.
ADJUSTABLE-RATE MORTGAGE (ARM)
A mortgage loan where the interest rate is not fixed for the entire term of the loan, and can change during the life of the loan in line with movements of an index rate. So, it Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
A rider is an addition to a security instrument. The adjustable-rate rider outlines terms and conditions specific to an adjustable-rate loan. It must be recorded along with the security instrument at the county recorder’s office. See also SECURITY INSTRUMENT.
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
The adjustment cap limits the degree of interest rate changes during a specific period, during the life of the loan.
AGREEMENT FOR SALE
Written document in which the purchaser agrees to buy, and the seller agrees to sell, certain real estate (or personal property) under stated terms and conditions. Also, known as sales contract, binder, or earnest money contract.
ALL-INCLUSIVE TRUST DEED (AITD)
Refinancing technique in which a new trust deed is created, which includes the balance due on the existing Note plus the new funds advanced. Also known as a wraparound mortgage.
ALLOWABLE CLOSING COSTS
Nonrecurring closing costs that are customary and reasonable charges common to the area and normally paid for by the borrower.
Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse. Alimony may be taken as a deduction from adjusted gross income by the person who pays it, while the person who receives it must claim it as a taxable income.
An acronym for American Land Title Association. Commonly used in reference to a particular type of Title policy. See AMERICAN LAND TITLE ASSOCIATION.
Feature of real property that enhances its attractiveness and increases the occupant or user’s satisfaction, although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Manmade amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.
AMERICAN LAND TITLE ASSOCIATION (ALTA)
An organization composed of title insurance companies, which has adopted certain insurance policy forms to standardize title insurance coverage on a national basis. See also TITLE INSURANCE.
Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments. Amortization is the process of reducing principal and interest in equal installment payments at specific intervals over a set term. For example, a fully amortized loan payment is a portion of which will be applied to pay the accruing interest on the loan with the remainder being applied to principal. Over time, the interest portion decreases as the loan balance decreases and the amount applied to principal increases so that the loan is paid off in the specified term.
ANNUAL PERCENTAGE RATE
The Annual Percentage Rate (“APR”) is a measure of the cost of credit, expressed as a yearly rate. The APR takes into account the amount financed, the finance charge, and the amounts and timing of the payments. Under the Truth in Lending Law, the APR must be disclosed and labeled.
Fixed payments an individual receives for a lifetime or specified number of years at consistent intervals. For example, a customer may receive an annuity from a pension plan or from an investment.
Form used to record pertinent information about a prospective borrower and the proposed security. Standard application forms include FNMA 1003.
APPLICATION FOR COMMITMENT FOR INSURANCE
HUD Form 92900, copy 4 of the URLA Addendum. Whenever HUD refers to the application, they are referring to this form.
Opinion as to the monetary value of the property. For example, an appraisal of property provides an idea of how much money the property is worth in the housing market at a given time.
An increase in value. Example: An increased value of property due to either a positive improvement of the area or the elimination of negative factors.
Anything-concrete or abstract-attached to the land and part of the property, such as a ban, garage, or an easement.
Acronym for Annual Percentage Rate.
ARM’S LENGTH TRANSACTION
Transaction in which the parties involved are entirely independent of each other, deal with each other as strangers, and have no reason for collusion.
Appraisal that is based on the value of the project assuming all construction has been completed. Includes land value. The appraiser utilizes the builder’s line item budget and plans and specifications to arrive at the appraised value.
AS IS CONDITION
Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.
Value placed on property for the purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
Value placed upon property for property-tax purposes by the tax assessor.
Transfer of a right or contract from one person to another.
ASSIGNMENT OF RENTS
Written agreement in which the owner of a property transfers possession, but not ownership, of the property to another party (usually a mortgagee or creditor), including the right to collect rents, manage the property, and apply the net income toward delinquent mortgage payments.
An act that occurs when the buyer of a property assumes the seller’s debt or obligation without obtaining new financing. This must be approved by the lender and be permitted under the terms of the note that the seller executed with the lender. So, assumption is a method of selling real estate in which the property purchaser agrees to take over the primary liability for payment of an existing mortgage. The seller remains secondarily liable unless specifically released by the lender.
A legal process whereby the judgment creditor may obtain a lien against the debtor’s property. See also LIEN.
This practice is prevalent in states where attorneys’ opinions are used in place of title reports. Closings by attorneys follow much the same procedures as escrow closings. The lender delivers to the attorney the settlement statement and the net loan proceeds, as well as instructions for their use.
ATTORNEY IN FACT
A person given the authority to act on behalf of another under a power of attorney.
ATTORNEY’S OPINION OF TITLE (IN ABSENCE OF A TITLE CO.)
A statement issued by an attorney in states that don’t use a Preliminary Title Report or Title Commitment. All liens recorded against the property are disclosed in this statement. The attorney also advises on items that require completion to gain a clear title insurance policy before recording our security instrument.
BACK-END DEBT RATIO
This refers to the borrower’s debt ratio and is calculated using a borrower’s total of monthly payments due on credit obligations divided by the borrower’s gross monthly income. It’s expressed as a percentage. See also DEBT RATIO.
Escrow set up to take care of the simultaneous purchase of one property and the sale of another property by the same party.
Financial report or statement in tabular form showing personal or corporate assets, liabilities, and equities as of a specified date.
Mortgage that includes level monthly payments that will fully amortize it over a stated term, but provides for a balloon payment due at the end of an earlier specified term.
Remaining balance of a mortgage that must be paid in a lump sum either at the end of the mortgage term or at the end of a specified earlier period. The amount may represent slightly more than a monthly payment or may be substantial. It occurs because the fixed installment did not fully amortize the mortgage, either accidentally or intentionally.
So, it is a large payment due at the end of a loan contract. Equal to the remaining principal balance plus any interest and charges due.
Federal court proceedings to relieve the debts of an individual or business unable to pay its creditors. See also CHAPTER 7 BK and CHAPTER 13 BK.
1/100th of 1%. For example 5 1/2 basis points equal 5.5/100=0.055% or 0.00055.
Suburban section from which a large number of residents commute to work in a n adjoining or nearby metropolitan area.
One in whose favor a trust operates, or in whose behalf the income from a trust estate or trust deed is drawn. Lender on the security of a Note. Also, one who receives funds from a life insurance policy.
Written instructions by a beneficiary under a deed of trust or mortgage stating and demanding the amount necessary for payoff of a lien in full.
BEST’S KEY RATING GUIDE
Publication issued by the A.M. Best Company, which establishes ratings for hazard insurance carriers by evaluating their assets and liabilities.
BILL OF SALE
Written document that transfers title to personal property.
Written evidence of temporary hazard or title coverage that runs for a limited time and must be replaced by a permanent policy.
Lien on more than one parcel or unit of land, frequently incurred by subdividers or developers who have purchased a single tract of land for the purpose of dividing it into smaller parcels for sale or development. Also known as blanket trust deed.
Also identified as architectural plans, these are provided by a licensed architect, a custom builder or can be provided by a factory-built home supplier. They provide a complete overview of how the project will be constructed, including all necessary architectural and structural issues.
Mortgagor who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.
The monthly savings a customer will experience by consolidating/paying off debt with a debt consolidation loan. Monthly savings equals current monthly payments less new monthly payments.
Board Approval is a condition in the bylaws of a co-operative requiring that the seller obtain approval from the Board of Directors as a prerequisite to transferring the shares or, in the case of a condominium, obtaining a waiver of the right of first refusal.
Building Codes are regulations established by the state or city government stating fully the structural requirements for a building.
By-Laws are the rules by which the co-operative corporation and condominium association operates.
Violation of any legal obligation.
In residential or commercial property, the figure at which occupancy income is equal to all required expenses and debt service.
Loan spanning the gap between the termination of one (generally short-term) loan and the start of another (generally permanent long-term) loan. Also known as gap financing.
BRIDGE (OR SWING) LOAN
Form of second trust that is collateralized by the borrower’s present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.
Individual employed on a fee or commission basis as agent to bring parties together and assist in negotiating contracts between them.
BUILDERS RISK INSURANCE
Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the building progresses and terminates at completion.
Regulations that control design, construction, and materials used in construction.
Written permission by a local government for the construction of a new building or for making improvements.
Cabinets, ranges, and ovens, or similar features that are part of the structure.
BUSINESS FOR SELF (BFS)
Customers who own their own business. Another word for self-employed.
A license that authorizes a business to operate and is typically required and issued by the city in which the business is located.
BUSINESS INTERRUPTION INSURANCE
Compensation to a business owner or operator for income lost when the business is closed due to a fire or other insured hazard.
Account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.
C C AND RS
Also know as Conditions, Covenants and Restrictions, this document may apply to homes constructed in a particular area or subdivision. Homeowners Associations include this document as a part of title liens. If the Appraisal specifies these, they are mandatory for Project Approval.
Provision in the mortgage that gives us the right to call the mortgage due and payable at the end of a specified period for whatever reason.
A check that has been cashed by the bank on which the check was drawn.
A customer’s financial ability to repay debt. Also see 3 Cs.
The amount of cash generated from income-producing property or investments after all operating expenses and loan payments have been made.
CAP (INTEREST RATE)
Maximum allowable interest rate increase for variable rate mortgages.
Money and/or property comprising the wealth owned/used by a person or business enterprise. Accumulated wealth of a person or business. Also the net worth of a business represented by the amount that its assets exceed liabilities.
Cost of an improvement made to extend the useful life of a property or to add to its value.
CAPITAL GAIN OR LOSS
Gain or loss incurred from the sale or disposition of a capital asset.
Amount of the difference between the total cost of acquisition and the amount of the mortgage to be insured. This cash investment must come from an approved source of funds. See Source of Funds.
Refinancing transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash (in an amount greater than the lesser of 2% of the principal amount of the new mortgage or $2,000).
CASH-OUT EXPLANATION LETTER
A handwritten, signed and dated letter provided by customers who are receiving cash from the loan to explain how they intend to use that cash. Generally used to verify that borrowers aren’t planning to use the cash to incur additional debt that will add to their monthly obligations and decrease disposable monthly income.
The amount of money one would receive today by selling an asset in the market place.
A check drawn by a bank on itself rather than on an account of a depositor. A cashier’s check is generally acceptable to close a sale without waiting for the check to clear.
The highest interest rate that may be assessed or an adjustable-rate loan during the life of the loan based on the start rate and lifetime cap.
CERTIFICATE OF COMPLETION
Document issued by an architect or engineer stating that a construction project is completed in accordance with the terms, conditions, approved plans, and according to specifications.
CERTIFICATE OF DEPOSIT INDEX
Index used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six (6)-month negotiable certificates of deposit.
CERTIFICATE OF OCCUPANCY
Written authorization given by a local municipality that allows a newly completed, or substantially completed structure to be inhabited. (Likewise, “C of O” or Temporary Certificate of Occupancy “TCO”) is a document issued by a government authority certifying that a building is ready and fit for occupancy.
A copy attested to be true by the individual or entity holding the original.
This is a date established in an adjustable rate loan contract when a new interest rate will be assessed. Also known as adjustment date.
CHAPTER 13 BK
Chapter 13 is a debt reorganization plan where debts are repaid under a court-supervised repayment plan. Debtors submit part of their income for distribution among creditors. Also known as the wage-earner plan.
CHAPTER 7 BK
A Chapter 7 BK is a straight liquidation bankruptcy where the debtor submits all of their non-exempt assets to the trustee for liquidation; proceeds are disbursed to creditors.
A delinquent credit account with a balance owed that was never fully satisfied and the creditor removed it from the books for accounting purposes even though the debtor still owes payment in full.
CHAIN OF TITLE
History of all documents transferring a title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Periodic payments made under a divorce decree or a written separation agreement for the support of the children.
Agreement between a secured party and a debtor creating a security interest in personal property.
Title not encumbered or burdened with defects.
Conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.
Money paid by borrowers and sellers to close a mortgage loan. This normally includes an origination fee, discount points, title insurance, survey, attorney’s fee, and such prepaid items as taxes and insurance escrow payments.
Financial disclosure giving an account of all funds received and expected at closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance for the escrow accounts.
CLOUD ON TITLE
Any outstanding claim or encumbrance which, if valid, would affect or impair the title. It can be removed by a quit claim deed, release, or court action.
A 2nd borrower on a loan who is entitled with same exact interest in property as primary borrower.
Provision in a hazard insurance policy stating the amount of coverage that must be maintained, as a percentage of the total value of the property, for the insured to collect the full amount of a loss.
Property pledged by the borrower to secure the repayment of the loan. The lender’s claim or lien appears on the title report for the property. See 3 Cs.
COMBINED LOAN TO VALUE (CLTV)
The total of all liens on the subject property divided by the appraised value of the property.
COMBINED MONTHLY HOUSING EXPENSE
Monthly expenses for the customer’s primary residence, which include rent or mortgage payments, other financing, hazard and flood insurance, mortgage insurance, real estate taxes, utilities and homeowner association dues.
COMMON AREA ASSESSMENTS
Levies against individual unit owners in a condominium or PUD project for additional capital to defray the owners’ association’s costs and expenses to repair, replace, maintain, improve, or operate the common areas of the project.
COMMON ELEMENTS (AREAS)
Portions of a building, land, and amenities owned (or managed) by a PUD or condominium owners’ association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Person’s name appearing on the application with the mortgagor. The co-mortgagor’s income, assets, and debts are added together with the mortgagor’s for underwriting and ratio analysis. The co-mortgagor’s name must appear on the Note and the Mortgage Deed of Trust.
A property used for business purposes.
Property owned equally by a husband and wife. This classification of property is only used in certain states.
Properties used for comparative purposes in the appraisal process. Refers to facilities of reasonably the same size and location with similar amenities. Also properties that have been recently sold and have characteristics similar to property under consideration, indicating the approximate fair market value of the subject property.
Element that may be used to justify the approval of a loan with ratios in excess of normal guidelines. Elements include, but are not limited to:
- Borrower can provide large down payment (in excess of 10%).
- Borrower has substantial cash reserves.
- Borrower receives compensation or income not reflected in effective income, but directly affecting the ability to pay the mortgage.
Special or unusual terms offered by the seller that may warrant the buyer paying a higher price for the property.
Determination that a building is not fit for use or is dangerous and must be destroyed. Taking of private property for a public purpose through an exercise of the right of eminent domain.
CONDITIONAL LIEN RELEASE
Signed by a contractor, subcontractor or material supplier, this form waives their right to file a mechanic’s lien. This is signed on the condition that they receive payment for work performed. This release may be submitted throughout the construction phase or at completion of construction on an OTC loan.
CONDO HOTEL/CONDOMINIUM HOTEL
Real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
Changing the ownership of an existing building (usually a rental project) to a condominium form of ownership.
Condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services, and which is operated as a commercial hotel even though the units are individually owned.
Required element in all contracts by which a legal right or promise is exchanged for the act or promise of another person.
CONSTRUCTION ADMINISTRATIVE FEE
This fee covers the cost of all inspections and disbursements during the construction phase of an OTC loan.
CONSTRUCTION LOAN AGREEMENT
Closing document that spells out the parameters and conditions of the construction phase of an OTC loan, as well as the responsibilities of all parties associated with the loan. The Lender, the borrower(s) and the builder/contractor will all sign this document at the closing table.
CONSTRUCTION START DATE
The date the OTC loan security instrument is recorded reflecting a certain lender as lender of record.
The actual term of the construction phase of an OTC loan. It is stated in months: 4, 6,9, 12 or 18 months are the current options or conventional loans.
Credit owed by the individual, not secured by real estate.
CONSUMER REPORTING AGENCY (OR BUREAU)
Organization that prepares reports used by credit grantors to determine the credit and public records history of an individual. The agency obtains data for these reports from repositories of accumulated credit records as well as from other sources.
Clause in a contract that requires the completion of a certain act or the occurrence of a certain event before the contract is binding.
A reserve account usually equal to 5% of the Direct Costs of the construction project of an OTC loan. These funds are held in reserve and will be available to cover any unexpected construction mishaps or severe problems.
CONTRACTOR REVIEW REQUEST
This form is to be used for submitting a builder/contractor for prior approval for the OTC program. It requires specific information about the builder / contractor and provides for attachment of licensing & insurance information.
A loan that was not underwritten by HUD, the SBA, VA or the FHA.
Mortgage that is not insured or guaranteed by the federal government.
Adjustable-rate mortgage that includes an option for the mortgagor to change the mortgage to a fixed-rate mortgage in the early years of the mortgage term.
A provision in some Adjustable Rate Mortgages (“ARM”) that allows a borrower to change the ARM to a fixed-rate loan at some point during the term.
Act of transferring title to real property from one party to another.
Document, such as a deed, lease, or mortgage, which is used to transfer title to real property.
An artificial person or legal entity created by or under the authority of the law of a state. May have limited liability, perpetual life, freely transferable shares and centralized management.
Arrangements under which an employer moves an employee to another area as part of the employer’s normal course of business, or transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
One who agrees to assume the debt obligation if the principal borrower defaults on mortgage payments. A cosigner assumes only personal liability and has no ownership interest in the property. His or her income and obligations are used in the underwriting process to reinforce the credit of the principal borrower. The cosigner’s credit is not given equal weight with that of the principal borrower, but serves only as a compensating factor. Contrast with co-mortgagor.
Repairs that improve the appearance of the property.
COST OF FUNDS INDEX
Index used to determine interest rate changes for certain ARM plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.
COVENANTS, CONDITIONS AND RESTRICTIONS (C C & RS)
Limitations placed on the use and enjoyment of real property. Usually intended to maintain a certain look within a neighborhood and common in subdivisions, PUDS or condominium communities.
CREDIT AUTHORIZATION LETTER
A letter signed by the borrower that authorizes a lender, to conduct a credit investigation.
CREDIT LIFE INSURANCE
Insurance often bought by mortgagors because it pays off the mortgage debt if the borrower dies while the policy is in force.
A company that collects and organizes information about an individual’s credit and payment habits. The 3 national credit bureaus are Experian, TransUnion and Equifax.
CREDIT DENIAL LETTER
A letter that is sent to a credit applicant advising him or her that the application has been denied and the reason for the denial.
The number of years a borrower has established credit. This information shows up on the borrower’s report.
The history of whether the borrower has met financial obligations on time in the past.
The length of time a customer has had established credit.
A report provided by a credit reporting bureau that provides a detailed account of the applicant’s credit history.
A numerical assessment assigned to the customer by credit bureaus that represents a measurement of the customer’s overall credit rating. The scores are weighted and range from approximately 365 to 840. Low scores reflect a “high risk”, while higher scores reflect a “lower risk”. Each credit bureau has its own credit score system.
A Cancellation Clause is a provision in a lease or other contract which confers upon one or more of the parties to the lease the right to terminate the party’s or parties’ obligations thereunder upon the occurrence of the condition or contingency set forth in the said clause.
A Capital Improvement is a permanent improvement to real estate, usually extending the useful life and value of a property.
Co-brokerage is an agreement between two brokerage firms to share listings and commissions. This is usually used when one of the brokers is the seller’s exclusive listing agent and the other broker represents the buyer.
A Commitment Letter is the letter issued by a lending bank which legally binds it to provide funds as specified subject to written terms and conditions.
A Condominium is an apartment building in which each apartment owner owns his or her own apartment plus a percentage of the ownership of the common areas of the entire property. Each owner receives a unit deed, proof of that ownership.
Unlike cooperatives, condominiums are owned outright as actual property. At closing, the buyer receives a deed to the apartment. Each owner is billed directly and is responsible for making individual real estate tax and mortgage payments, if any. The common charges for maintenance and upkeep are billed to owners on a monthly basis.
As part of the board package procedure, the real estate agent will present the buyer with the building’s condo board requirements and application papers, which may include:
- Signed financial statements
- Tax returns
- Bank statements
- Brokerage statements
- Personal and financial letters of interest
- Professional reference letters
- The contract of sale
- Bank financing documents (if financing)
Usually, a condop refers to a residential co-op that is operated pursuant to “condo style” rules. (Alternatively, this term refers to a hybrid form of co-op/condo ownership designed to shelter income, from commercial space owned by the building, for example.)
A Contract, also known as a Purchase of Sales Agreement, is a written agreement between seller and purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon conditions and terms set forth therein.
Conversion is a change in ownership type or status. Example: A rental housing building may be converted to co-operative or condominium ownership. A commercial loft building may be converted into residential apartments.
A Co-operative is a corporation that owns a building. Purchasers receive shares of stock in the corporation, and a Proprietary Lease for their apartment.
Cooperative apartments represent approximately 70% of all resident-owned real estate in Manhattan. Instead of purchasing the residence outright, the co-op buyer purchases a certain number of shares in a corporation. These shares entitle the buyer to a proprietary lease, affirming the buyer’s right to occupy a specific apartment. Tenants/shareholders of a co-op pay a monthly maintenance, based on the number of shares, to cover real estate taxes, the building’s mortgage, employee salaries, and overall building maintenance.
Facts about Cooperative Apartments:
- A co-op’s board of directors has the right to accept or reject a potential shareholder without providing a reason why.
- Most co-ops limit the amount of the purchase price that may be financed by the buyer. Some buildings require all cash.
- Interest on an underlying mortgage, if any, and real estate taxes typically comprise a portion of a co-op’s maintenance charges. Hence, a corresponding percentage of those mainteneance charges will be tax deductible.
- Shareholders must obtain permission from the board before subleasing a unit; some buildings forbid subleasing entirely.
- Prospective buyers must provide detailed personal financial data, tax returns, and professional reference letters to the board in order to be approved. The building’s board will also personally interview the buyer.
- A flip tax (generally 1 to 2% of the selling price) is a common feature in cooperative sales. This “tax” or fee helps build the co-op’s capital reserve fund and pay for building improvements. Flip taxes are payable by buyer or seller, depending on building policy.
A Covenant is an agreement(s) written into deeds promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property.
DATE DOWN ADDENDUM
An update to the Preliminary Title Report/Title Commitment that reflects any changes to title since the original title report was prepared. Same as UPDATE ADDENDUM.
DD FORM 13
Statement of Service document that may be issued when a veteran is still on active duty to verify military service.
DD FORM 214
Report of Separation From Active Duty form for veterans separated after January 1, 1950.
Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.
DEBT CONSOLIDATION LOAN
A loan that combines debt obligations into one debt.
The total amount of debt a customer currently owes.
One who owes debt.
Calculations that are used to determine if a borrower can qualify for a mortgage. These calculations include a monthly housing expense-to-income ratio and a total obligations-to-income ratio.
Deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also known as a voluntary conveyance.
DEED OF RECONVEYANCE
A document used to transfer legal title from the trustee back to the borrower after a debt secured by a deed of trust has been paid in full.
DEED OF TRUST
Document used in place of a mortgage in some states. A type of security instrument conveying title in trust to a third party covering a particular piece of property. It is used to secure the payment of a Note. A conveyance of the title land to a trustee as collateral security for the payment of a debt, with the condition that the trustee shall reconvey the title upon the payment of the debt, and with power of the trustee to sell the land and pay the debt in the event the debtor defaults on the debt.
In a deed, limits or restricts the use of the land or real property.
Breach or nonperformance of the terms of a Note or the covenants of a mortgage. Default It is the act performed by either the buyer or seller that breaches the contract of the sale and permits a claim for damages.
Clause in a mortgage that gives the mortgagor the right to redeem property upon the payment to the mortgagee of the obligation due.
Physical depreciation or loss in value of a building or property resulting from maintenance functions not being performed in a timely way. Often referred to as curable physical depreciation.
Interest rate being added to principle balance due to making minimum payment which is less than interest only payment. Also called, Negative Amortization.
Failure to make payments when due.
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.
A letter from a lender showing the total amount due to pay off a mortgage or trust deed, inclusive of unpaid principal, interest, impound amounts, prepayment penalty, etc. Also, known as a Demand for Payoff Request or Beneficiaries Demand Letter.
A feature that defines circumstances under which the remaining principal and interest amount of the loan is due and payable on demand.
Note of mortgage that the lender can call due at any time and without prior notice.
Sum of money given to bind a sale of real estate, or assure payment or an advance of funds in the processing of a loan. Also known as earnest money.
Sum representing presumed loss in the value of a building or other real estate improvement resulting from age, physical wear, and economic or functional obsolescence that is deducted annually from net income to arrive at taxable income.
A letter written by the borrower that explains any derogatory information or reporting on the credit report.
DESCRIPTION OF MATERIALS
Details of the type grade, and color of all building materials to be used in the construction of the home for an OTC loan. Can be presented on a standard HUD Form or in any format chosen by the builder/contractor.
DIRECT COSTS (HARD COSTS)
Construction costs that include labor and all building materials associated with the actual construction project. These costs are found on the builder/contractor line item budget.
DIRECTORS AND OFFICERS LIABILITY INSURANCE (D & O LIABILITY INSURANCE)
Insurance that protects both a corporation and its key employees. The standard D & O policy usually includes corporate reimbursement, which covers expenses incurred by the directors and officers for legal costs and judgments indemnified by the corporation. Also included is personal coverage, which protects individual officers and directors against claims not indemnified.
Payments made on behalf of the borrower pursuant to the instructions on the HID Settlement Statement.
A loan-specific schedule that is created as part of the Construction Loan Agreement signed at closing of an OTC loan. The schedule defines the percentage of construction funds that will be disbursed to the borrower(s) and/or builder/contractor at each draw request.
Following a completed bankruptcy proceeding, discharged debts are no longer enforceable. The customer has successfully completed the process and debtors are either paid in full or eliminated based on the plan.
For veterans who were separated before January 1, 1950, the usual method of verifying military service is to present an honorable discharge certificate that shows the character of service and active duty dates. Other types of discharge for this time period were:
- NAV PERS Form 553 (Naval Service)
- WDAGO Form 53-98 (Army)
- NAVMC Form 112PD (Marine Corps)
- NAVCG Form 553 (U.S. Coast Guard)
In loan originations, the amount withheld from loan proceeds by a lender. In secondary market sales, the amount by which the sale price of a Note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upward, either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower, and the rate or terms of the Note.
See FINAL DISPOSITION.
A document issued by the court that dissolves the marriage relation.
Abbreviation for mortgage loan documents.
Form of tax in some states imposed on the transfer of real property.
Rights a widow has to her husband’s property at his death.
Difference between the sale price of real estate and the mortgage amount.
An acronym for debt ratio. See DEBT RATIO.
Advancing of money, such as the periodic advancing of funds according to a schedule of payments in a construction loan agreement. Also known as advance, disbursement, payout, progress payment, or takedown.
DRAW REQUEST FORM
A form submitted by the borrower(s) and/or builder/contractor to the Lender to request a disbursement of construction funds during the construction phase of an OTC loan.
Covenant in the FNMA/FHLMC uniform multifamily mortgage that allows the mortgagee to call the mortgage due and payable if the mortgagor places a subordinate lien against the property without mortgagee approval. It also allows the mortgagee to increase the mortgage interest rate if the mortgagee approves the placement of a subordinate lien.
Clause in a mortgage stating if the mortgagor sells, transfers, or in any way encumbers the property, the mortgagee has the right to implement the acceleration clause making the balance of the obligation due.
Single structure designed with two separate housing/dwelling units.
Earnest Money, also known as a Deposit or Down Payment, is made by a purchaser of real estate as evidence of good faith.
EARNEST MONEY DEPOSIT
Money paid by the purchaser of real estate when the buyer and seller reach an oral agreement for the sale of the property to show that the buyer’s offer is being made in “good faith.”
Right to the limited use or enjoyment of land held by another. An easement is an interest in land to enable sewer or other utilities lines to be laid, or to allow for access to a property. In another word, an Easement is an interest in land/property owned by another that entitles its holder to a specific use or enjoyment.
Loss of value to real estate due to changes outside the particular property (e.g., a decline in the neighborhood or change in zoning).
Estimated period of time during which a property can be utilized profitably.
For purposes of appraisal, the physical age given to a building based on its present condition, which may be shorter or longer than its actual age.
This is the date a new mortgage payment is effective-the month following the rate change date.
EFFECTIVE GROSS INCOME
Income that is verifiable and likely to continue during the first five (5) years of the term of the mortgage.
Right of government bodies, public utilities, and public service corporations to take private property for public use (e.g., schools, roads, etc.) on payment of its fair market value.
Improvement that illegally violates another’s property. Such as a wall, fence or building, that extends onto the property of another.
Amendment that may apply to specific loan programs (e.g., the Spot Relocation enhancement that may be utilized in coordination with non-conforming and conforming loan programs).
Anything that affects or limits the fee simple title to property, such as mortgages, leases, easements, or restrictions.
The act of a payee or holder of a note, bill, check or other negotiable instrument, of assigning and transferring said instrument to another by signing the back of the instrument, with or without qualifications.
An addition to a title insurance policy that adds or subtracts coverage.
Amount of guaranty available to an eligible veteran.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
Federal law passed in 1974 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.
An ownership interest in a property that is demonstrated by actions such as the payment of the current mortgage, property taxes or property insurance rather than by legal ownership.
Net ownership, the difference between fair market value and current indebtedness. Also known as the owner’s interest.
EQUITY LINE OF CREDIT (HELOC)
A combination of a line of credit and equity loan secured by real property. A maximum loan amount is established based on credit and equity. A mortgage is recorded against the potential borrower’s property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the credit line.
ERRORS AND OMISSIONS COVERAGE
Indirect loss insurance that covers losses due to an error or neglect on the part of an employee to whom a specific responsibility has been assigned.
Delivery of something of value by a grantor to a 3rd party for delivery to the grantee upon the happening of a contingent event. In some states, all instruments necessary to the sale are delivered to a 3rd party, with instructions as to their use. Normally, in a residential real estate sale, the attorney for the seller is the “escrow agent” for the deposit money securing the deal until closing.
Person or organization with fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also known as escrow company and escrow depository.
ESCROW DEPOSIT ACCOUNT
Trust account that holds funds allocated for the monthly payment of real estate taxes, hazard insurance, mortgage insurance, lease payments, and other items. Also known as an impound account in some areas.
For purchase transactions, instructions signed by both buyer and seller, which enable the escrow agent to carry out the procedures necessary to transfer real property, a business or other assignable interest.
Portion of a mortgagor’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as impounds or reserves in some states.
Ownership interest an individual has in real property. Sum total of all the real and personal property owned by an individual at the time of death.
Written statement setting forth certain facts about a piece of real estate, such as the precise amount of indebtedness remaining.
Legal term meaning “and wife.” sometimes abbreviated as et ux.
EXCEPTIONS TO GUIDELINES
The consideration of approving a loan having characteristics that don’t fit into Lenders Guide Lines when it makes sense to do so.
EXCEPTIONS TO TITLE
Claims against the property as of the date of the title report.
EXCLUSIVE RIGHT TO SELL AGREEMENT
Exclusive Right to Sell Agreement is an agreement between a broker and a seller which designates the broker as the seller’s sole representative. Under this agreement, a commission is due to the broker even if the apartment is sold directly by the owner.
Judicial order directing an officer of the court to enforce a judgment against the property or person of the judgment to satisfy the judgment.
Person named in a will to administer an estate. The court appoints an administrator if no executor is named. Feminine form is executrix.
The name of a national credit bureau.
EXTERNAL DEPRECIATION (ECONOMIC OBSOLESCENCE)
Loss of value to real estate due to changes outside the particular property (e.g., economic factors or environmental changes).
Any influence negatively affecting a property’s value that falls outside of the specific property site. An example of this would be a property located under an airport flight pattern.
FACE AMOUNT (LIFE INSURANCE)
The amount the surviving party will receive in the event of death.
FAIR HOUSING ACT (“FHA”)
A Federal act that prohibits discrimination in any aspect related to the sale, rental or financing of dwellings on the basis of race, color, religion, national origin, sex, handicap or familial status.
FAIR MARKET VALUE
Price at which property is transferred between a buyer and a seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.
Term commonly used for the Federal National Mortgage Association (FNMA).
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
Quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association (GNMA) bonds to raise funds to finance the purchase of mortgages. Also known as Freddie Mac.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
Tax-paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA as well as conventional home mortgages. Also known as Fannie Mae.
FEDERAL TAX LIEN
A lien attaching to a property for nonpayment of a Federal tax. A Federal tax lien differs from other liens in that it’s not automatically eliminated by a senior lien holder foreclosing on a mortgage or trust deed recorded before the tax lien.
Greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one’s heirs.
FEE SIMPLE ESTATE
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.
FEDERAL HOUSING ADMINISTRATION (FHA)
Part of HUD. It insures mortgages made by private lenders.
Federal Home Loan Mortgage Corporation.
The name given to a numerical score assigned by credit bureaus to measure a borrower’s credit characteristics. See CREDIT SCORE.
Type of bond that is obtained by an employer to protect against economic loss from dishonest acts of its employees.
One who acts in a capacity of a trust and confidence for another.
The “end” of the loan application process, which may happen via denial, withdrawal, incompleteness or funding.
This is the amount of interest, prepaid finance charges, loan fees and certain insurance premiums the customer will pay over the life of the loan.
A Financing Loan is secured by personal property. The stock and lease of a co-operative corporation constitute such personal property. Real estate brokers often refer to these financing loans as mortgages, though technically they are not.
Mortgage that is the primary lien against a property.
FIRST POSITION LIEN
A secured claim against a property that will be the first claim to be repaid should the property owner someday declare bankruptcy or default on the secured loan.
Any 12-month period used for financial reporting and preparation of balance sheets, profit and loss statements, and other financial summations.
Income of a specified and consistent value that is received at specified and consistent intervals. Types of fixed income include social security benefits, VA benefits, pension income, permanent disability benefits, welfare/aid income and child support/alimony.
Sum total of the housing expense and the recurring charges.
Mortgage that provides for only one interest rate for the entire term of the mortgage. If the interest rate changes because of enforcement of the due-on-sale provision, the mortgage is still considered a fixed-rate mortgage.
Fixtures are personal property attached to the land or improvements so as to become part of the real property.
A Flip Tax is a levy issued on the transfer of ownership by a co-operative corporation or condominium association against either the buyer or seller.
Insurance indemnifying against loss by flood damage. Required in federally designated special Flood Hazard Areas. The insurance is private but federally subsidized.
The lowest an adjustable-rate mortgage rate can ever be during the life of the loan.
The start rate on an adjustable-rate program.
Act of refraining from taking legal action even though the mortgage is in arrears. It is usually granted only when a mortgagor makes satisfactory arrangements to pay the arrears at a future date.
Legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction, with the proceeds of the sale being applied to the mortgage debt.
FOSTER CARE AGREEMENT
A document that designates an individual as the foster parent of a child. These agreements usually state the income the individual will receive for being a foster parent.
A foundation endorsement certifies that the project is located within the proper boundaries of the property and that there are no easements or encroachments present. This endorsement is issued by a title company at completion of the foundation work on an OTC loan and is required on properties in states that do not normally require a survey.
FREE AND CLEAR
Real property against which there are no liens, especially voluntary liens.
Property line abutting the most important adjacent property, usually a street, lake, river, or ocean.
FRONT-END DEBT RATIO
This refers to the debt ratio calculation using only principal, interest, tax and insurance divided by gross monthly income. It’s expressed as a percentage. See also DEBT RATIO.
In real estate, revealing all the known facts that may affect the decision of a buyer or tenant.
FULLY ADJUSTED RATE/FULLY INDEXED RATE
The fully indexed rate is equal to the rate index plus the loan’s margin and is used with adjustable-rate mortgages. Example: If LIBOR is 6.50% and the margin on the loan is 4.00%, the fully indexed rate is 10.50%. Same as FULLY ADJUSTED RATE.
Loss of value to real estate due to improvements not providing the same degree of use, utility, or efficiency as a new structure would. It may be curable or incurable.
Reduction in value caused by changes in taste, overcapacity, or inadequacy. Examples are outdated kitchen fixtures and outmoded room arrangements.
The disbursement of loan funds, either by check or by wire transfer to the title company.
Notice to an employer or other asset holder that monies, wages, or property of a debtor must be applied to a specific debt or creditor.
GENERAL LIABILITY INSURANCE
This covers damage to other party’s property or another person due to construction-related project accidents.
Co-owner(s) of a venture liable for all debts and other obligations of the venture as well as for the management and operation of the partnership. The general partner can have control of the business and can take actions that are binding on the other partners.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
Accounting practices that are in widespread use because of convention and tradition, and those that are specifically mandated by recognized rule-making authorities.
Outright gift of funds from an acceptable source. Documentation of transfer of funds must be included in the file, as well as a gift letter stating no repayment is required. Gifts from parties with an interest in the sale of the property are considered sales concessions, must be subtracted from the sales price, and may not be considered assets to close.
A letter to the lender from the donor stating a gift of money has been made to the buyer in order to purchase specific property. The relationship of the donor and donee is stated, as well as the amount of the gift.
Government National Mortgage Association.
GOOD FAITH ESTIMATE (GFE)
The Good Faith Estimate is the written estimate of the settlement costs that the borrower will likely have to pay at closing of the loan. Under the Real Estate Settlement Procedures Act (RESPA), the borrower is required by law to receive a Good Faith Estimate from the mortgage lender within three days of the home loan application date. The settlement costs disclosed in your Good Faith Estimate cover every expense associated with the mortgage loan, including escrow, title insurance, inspections, taxes and more. Additional costs may apply depending on the state of residence, mortgage loan product, points and fees, down payment amount, etc…
The period of time between the contractual due date and the date a late charge will be assessed.
The clause in a law permitting the continuation of a use, business etc., which, when established, was permissible but, because of a change in the law, is now not permissible.
A written instrument used to transfer or convey real property. A grant deed contains warranties against prior conveyances or encumbrances.
The Grantee is the party to whom the title to real property is conveyed. Or a Person to whom an interest in real property is conveyed.
Person conveying an interest in real property.
Forests, woods, parks, or fields surrounding or enclosing urban area.
Total floor area of a building, except that of unenclosed areas, measured from the outside of the exterior walls.
Total income before any expenses are deducted.
GROSS INCOME (BUSINESS)
The total income earned, either actual or estimated, from a business or property.
GROSS MONTHLY INCOME (BORROWER)
The total amount the borrower earns per month, before any expenses are deducted.
GROSS RENTAL INCOME
The monthly rental income received before mortgage payments, taxes and insurance are deducted.
GROSS RENT MULTIPLIER
Figure used to compare rental properties. It gives the relationship between the gross rental income and sales price. Also known as gross income multiplier.
GROUND LEASE OR RENT
Lease of land alone, as distinguished from a lease of land with improvements on it, usually on a long-term basis.
Amount of money paid for the use of land when title to a property is held as a leasehold estate, rather than as fee simple.
Obligation of the United States to repay a specific percentage of a loan upon default of the primary debtor.
Land acquisition and construction costs.
Insurance coverage that compensates for physical damage to the property by fire, wind, or other natural disasters.
HIGHEST AND BEST USE
Available present use or series of future uses that will produce the highest present property value and develop a site to its full economic potential.
(1) Portion of a loan commitment not funded until some additional requirement such as rental or completion is attained.
(2) In construction or interim lending, a percentage of the contractor’s draw is held back to provide additional protection for the interim lender, often an amount equal to the contractor’s profit, which is given over when the interim loan is closed.
HOME MORTGAGE DISCLOSURE ACT (HMDA)
This act requires our mortgage company to report selected information to the Federal government about each application received . HUD (U.S. Department of Housing and Urban Development) uses HMDA to detect discrimination and identify trends in lending patterns.
HOMEOWNERS WARRANTY (HOW) PROGRAM
Program operated by a wholly-owned subsidiary of the National Association of Home Builders through which participating builders provide home buyers with a warranty on the workmanship and materials of a home, and also warrant against major structural defects.
HOMEOWNERS’ ASSOCIATION (HOA)
An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. Unpaid HOA dues can become a lien against a property.
HOMEOWNERS’ ASSOCIATION DUES
A monthly payment paid to the association for the maintenance and care of the common areas.
In some states, the home and property occupied by an owner are protected by law (up to a certain amount) from attachment and sale for the claims of creditors.
Principal, interest, real estate taxes and hazard insurance (PITI) and annual or monthly MIP and/or homeowners association/condo fee, when applicable.
Housing expense/effective gross income.
U.S. Department of Housing and Urban Development, established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency. It is responsible for the implementation and administration of government housing and urban development programs.
HUD-1 (OR HUD-1A)
Final statement of the actual settlement costs of the loan and all other disbursements of a loan’s proceeds. A Federal requirement under RESPA. Same as SETTLEMENT STATEMENT.
IDENTITY OF INTEREST
Any interest between the buyer and seller other than the subject property, i.e., family relationship (parent selling to child), affiliation through business arrangement (employer selling to employee), etc.
Portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as escrows or reserves in some states.
Land having utilities, roads, or other improvements.
Additions to raw land that normally increase its value, such as buildings, streets and sewers.
Practice by which state or local governments impose zoning restrictions that require a specified percentage of new development in a designated area to be set aside to provide housing for low-and moderate-income persons.
Deterioration of an item that it is either impossible or economically infeasible to restore, correct, or replace.
Number derived from a formula to characterize a set of data, which serves as an indicator for determining interest rate changes on ARMs/GPARMs. For any specific interest rate change date, the index will be the value that is most recently available 45 days prior to that date (for our standard plans. FHA ARMs and some negotiated ARM plans may specify a different number of days.)
INDIRECT COSTS (SOFT COSTS)
Construction costs other than labor and materials. These include, but are not limited to, architect fees, building permits, builder profit and overhead, temporary utilities for the job site, soils reports.
INDUCEMENTS TO BUY
See Sales Concessions.
IN-FILE CREDIT REPORT
Objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
INITIAL ADJUSTMENT CAP
This is the 1st rate adjustment on an adjustable rate mortgage loan.
INITIAL INTEREST RATE
Original interest rate of the mortgage when it is closed. This rate changes for adjustable-rate mortgages.
An indication of credit investigations made by companies that are considering granting credit to a person who appears on the credit report.
Ordered by OTC-PC or CMD Construction Lending upon receipt of a Draw Request form from the borrower(s) and/or builder/contractor.
Borrowed money that is repaid in several successive payments, usually at regular intervals, for a specific amount and for a specified term. Example: an automobile loan or furniture loan.
Financial institution that invests in mortgages and keeps them in its own portfolio.
INSTRUCTIONS TO TITLE
A form that instructs the title company how to record a lien against a property and issue a title insurance policy. Same as TITLE INSTRUCTIONS.
Money charged over time for the use of money.
A form of interest calculation in which the loan is charged at a daily or monthly rate on the current outstanding balance.
Percentage paid for the use of money, usually expressed as an annual percentage.
INTEREST RATE BUYDOWN PLAN
Arrangement in which the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage. During the specific period, the mortgagor’s effective interest rate is “bought down” below the actual mortgage interest rate.
A reserve account that holds an estimated interest amount that will be due on the loan during the construction phase of an OTC loan. Most Lenders will advance the interest due as necessary from this account to pay the monthly-accrued interest. Any funds remaining in this account at the completion of construction will be applied to the permanent loan as a principal reduction with new P&I.
Calculation: Loan Amount x Interest Rate x 60%/ 12 x Construction Term.
Money earned from investments of money, such as stock dividends and annuity payments.
Property used for investment purposes.
A lien imposed against property by law or legal action without the consent of an owner. Examples include taxes, special assessments, federal income tax liens, judgment liens, mechanics liens and materials liens. See also LIEN.
Loans that are for a veteran and a non-veteran (who is not the veteran’s spouse) OR two or more individual veterans taking title together and each using an equal portion of his/her available eligibility to guarantee the loan.
Legal title shared by 2 or more persons or entities. Such as joint tenancy, tenancy in common and community property.
Joint ownership by two or more persons giving each tenant equal interest and equal rights in the property, including the right of survivorship.
Final determination by a court of the rights and claims of the parties to an action.
Lien upon the property of a debtor resulting from the decree of a court.
Type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
Any lien that is subsequent to the claims of the holder of a prior (senior) lien.
A certificate attached to a document stating where, when, before whom and by whom the document was signed.
There are no glossary terms matching “K”.
A Landmark is a designation given to a building which places it under protection for the purpose of preservation.
An agreement granting limited permission to use the property. Same as SERVITUDE.
An installment contract for sale with the buyer receiving equitable title and the seller retaining legal title.
Additional charge that a borrower is required to pay as a penalty for failing to pay a regular installment when due.
Written document containing the conditions under which the possession and use of real and/or personal property are given by the owner to another for a stated period and for a stated consideration.
A tenant’s right to occupy real estate during the term of the lease. This is a personal property interest.
Method of holding title to a property in which the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
LEASE OPTION TO PURCHASE
A lease containing a clause that allows the tenant the right to purchase the property under specified conditions.
A method of geographically identifying a parcel of land that is acceptable in a court of law.
The manner in which property ownership is recorded with the county in which the property is located . See also VESTING.
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.
An acronym for London Interbank Offered Rate, one of several published indices. It’s the average rate of interest that major London banks charge as they lend to one another.
Legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt.
The order in which liens will be repaid when the property is transferred to a new owner.
This is the cap that limits how high an interest rate can increase over the life of an adjustable-rate mortgage loan . Example: Start rate + 6% = lifetime Cap
Freehold estate giving a beneficiary all property rights, except the right to sell. The estate is terminated upon the death of the beneficiary.
Partnership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.
LINES OF CREDIT
A type of mortgage loan from which borrowers can write a check or draw funds. Some lines of credit are also balloon loans. Usually the borrower is given 5 to 10 years to use the line of credit. After this period, many lines of credit require the borrower to pay the loan in full. Others may require the loan to be paid in full over the next 10 to 15 years.
LINE ITEM BUDGET/COST BREAKDOWN
A detailed listing of the actual costs of the construction for an OTC loan. This includes the cost of labor, all building materials, and any other costs associated with construction.
Cash or assets, such as checking/savings accounts, stocks/bonds, that are immediately convertible to cash.
Cash position based on assets that can readily be converted to cash.
Latin phrase meaning a notice recorded in the official records of a county to indicate that there is a pending suit affecting the lands within the jurisdiction.
Written authorization to sell or lease real estate. Or a Listing is the term used by brokers for an apartment for sale after it has been “listed” by the broker in its system.
A Listing Agent, also known as the Exclusive Broker, is the broker who represents the interests of the seller.
The amount of money originally lent to a borrower.
LOAN APPLICATION (1003)
The form potential customers must complete to apply for a home loan. This application is commonly referred to as “the 1003” and is produced by the Federal government. See also 1003.
LOAN-TO-VALUE (LTV) PERCENTAGE
Relationship between the unpaid principal balance of the mortgage and the property’s appraised value (or sales price if it is lower). This ratio is expressed to a potential purchaser of property in terms of the percentage a lending institution is willing to finance.
The risk category assigned to a loan, which estimates the probable risk of delinquency and loss in the future.
The loan term is the period of time over which the loan will be paid. First mortgage loans typically have terms of 30, 20 or 15 years.
LOAN TO VALUE RATIO (LTV)
The loan amount in relationship to the appraised value or selling price expressed as a percentage.
With large open spaces and high ceilings, loft buildings are typically found in former commercial manufacturing and office districts. As a result, they are more numerous in downtown Manhattan and parts of Brooklyn, although many new “Loft-style” apartments are being developed city-wide.
LOFT STYLE CONDOMINIUM
Condominium project with units on one or more floors of old warehouse or factory-type buildings in urban areas.
Date on which the index value that will be used to establish the next interest rate change for an ARM is determined. It is a specified number of days (usually 30 to 45) before the interest rate change date.
LOSS PAYABLE CLAUSE
A clause in an insurance policy listing the priority of claims in the event of destruction of the property insured. Generally, a mortgage or beneficiary under a deed of trust is the party appearing in the clause, being paid up to the amount owing under the mortgage or deed of trust before the owner is paid.
Measured parcel of land having fixed boundaries as shown on the recorded plat.
Among the most affordable housing options in New York, low-rises are five or six-story buildings, usually without elevators or doormen, and with few, if any, amenities.
LUXURY HIGH-RISE BUILDINGS
More recent in vintage, today’s modern towers offer expansive views from very high floors, with floor-to-ceiling glass and state-of-the-art systems and amenities.
Maintenance is the monthly charge paid by the co-operative tenant/shareholders to cover the building’s operative costs, real estate taxes and debt service on the building’s underlying mortgage.
MAJOR METROPOLITAN AREA
Large population nucleus, together with adjacent communities having a high degree of social and economic integration with the core. Major metropolitan areas comprise one or more entire counties, except in New England, where cities and towns are the basic geographic units.
MANUFACTURED (AND FACTORY-BUILT) HOUSING UNIT
Single-family residential unit that is factory-constructed in sections, transported to the site (usually by truck), and joined together on a prebuilt foundation.
Amount added to an index value to create the mortgage interest rate for an ARM/GPARM.
The Market Value is the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress. It’s 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.
The probability of selling property at a specific time, price and terms.
Owner’s association in a large condominium or 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.
Any mortgage amount that is within five (5) percent of the highest loan-to-value (LTV) ratio allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90%, or higher, since 95% is the maximum allowable LTV ratio for that product.
A right by a contractor, sub-contractor or material supplier to place a lien on a borrower’s property for payment of work performed or material delivered on the property.
MERGED CREDIT PROFILE (MPR)
A report combining credit information from as many as 3 different credit bureaus.
METES AND BOUNDS
Description in a deed of land location in which the boundaries are defined by directions and distances.
Private or state mortgage insurance company that insures against loss in the event a mortgagor defaults on a conventional mortgage.
MINIMUM LOT ZONING
Type of zoning that regulates the smallest lot size permitted per building.
A property in which a portion is used for commercial or retail purposes and the other portion is used for residential purposes. A property can also be considered mixed use if different combinations of uses are present such as commercial/industrial or residential/industrial. For example, a multi-unit dwelling with the front unit used as a commercial store and the back unit used as a dwelling.
Factory-assembled residence consisting of one or more modules, in which the chassis and wheels are an integral part of the structure, and can be readied for occupancy without removing the chassis and/or wheels.
Act of changing any of the terms of the mortgage.
In the mortgage lending industry, a written directive to the title company to correct a typographical error on instructions to title.
Factory-assembled residence built in units or sections, transported to a permanent site and erected on a foundation. The term excludes mobile homes.
MONTHLY OPERATING INCOME
Income from the rental of an investment property that is determined by reducing the annual effective gross income for the property by the annual operating expenses and dividing the result by 12. We use this in calculating whether a borrower who will occupy one unit of a two (2) to four (4)-family investment property as his or her principal residence qualifies for a mortgage.
Collectively, the security instrument, the Note, the title evidence, and all other documents and papers that evidence the debt.
A non-depository financial institution that specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them.
A Mortgage Broker is the real estate professional who represents an array of banks seeking to issue mortgages. This person meets with a customer, assists with the mortgage application and effectuates the mortgage process on behalf of the borrower and the bank. Generally, the mortgage broker is paid a fee by the bank for this service. Is a firm or individual who brings the borrower and lender together, receiving a commission if a sale results. A mortgage broker does not retain servicing.
MORTGAGE CREDIT CERTIFICATE
Credit given by a government entity through tax rebates. These payments can be considered income if verified in writing using the Mortgage Credit Certificate Commitment. The amount of the credit is added to the gross income.
MORTGAGE CREDIT LIFE INSURANCE
Term life insurance often bought by mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.
See Private Mortgage Insurance.
More than 1 payment due at the same time the most recent payment is due.
MORTGAGE PAYMENT RATIO
Total mortgage payment divided by the effective gross income.
Lender in a mortgage transaction.
Borrower or owner in a mortgage transaction who pledges property as a security for a debt.
MULTI-DWELLING UNIT CONDOMINIUM
Condominium project that permits an individual to hold title to more than one dwelling unit, with ownership of all of his or her owned units evidenced by a single deed and mortgage.
NATIONAL NOTARY ASSOCIATION
An association that sends out necessary application materials and supplies to initiate one’s notary commission.
Amortization means that monthly payments are large enough to pay the interest and reduce the principal on a mortgage loan by its maturity date. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn’t covered is added to the unpaid principal balance. This means even after making many payments, a borrower may owe more than was owed at the beginning of the loan.
NEGATIVE CASH FLOW
Situation in which expenditures required to maintained an investment exceed income received on the property.
NET CASH FLOW
Income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense (which includes PITI for the mortgage, owners’ association dues, leasehold payments, and subordinate financing payments).
NET DISPOSABLE INCOME
Money left after subtracting the principal, interest, taxes and insurance and all other obligations from the monthly net income. The surplus amount the borrower has available for living expenses after housing expenses are subtracted.
The difference between adjusted gross income and operating expenses. May or may not include depreciation.
NET RENTAL INCOME
The monthly gross rental income minus the monthly mortgage payments, insurance, maintenance, taxes and other miscellaneous payments.
Net Worth is one’s assets, less one’s liabilities. Liquid net worth (that which is cash or can be immediately converted to cash) is what cooperatives focus on. Value of all of a company’s (or individual’s) assets, including cash, less its total liabilities. It is used to indicate financial strength.
New construction that has never been occupied.
NON-CONFORMING MORTGAGE LOAN
Mortgage loan in which the LTV ratio, the term, or other aspect of the loan exceeds permissible limits specified in regulations.
Permitted use of real property, even though it does not conform to current zoning laws, because it was lawfully established and maintained before the current zoning laws were in effect.
NON-OCCUPANT BORROWER – INVESTOR
Borrower who does not occupy the property or a unit. One who intends to hold the property for rental purposes.
Depending on where the property is located, items such as washers, dryers, dishwashers, disposals, stoves, carpeting, draperies, window air conditioners, etc., that are included in the sale. Non-realty items that are given value on the appraisal are usually considered sales concessions.
NON-RECURRING CLOSING COSTS
Fees and costs associated with the closing of a loan, such as title, appraisal, notary fees, etc., that occur only once in the transaction and don’t recur.
One who is authorized by the state or Federal government to administer oaths and to attest to the authenticity of signatures.
An agreement containing an expressed and absolute promise of the signer to pay to a named person or bearer a definite sum of money at a specified date or on demand. Usually provides for interest, and if concerning real property, is secured by a mortgage or trust deed.
Starting interest rate for an Adjustable Rate Mortgage (ARM) loan or variable-rate home equity line of credit. At the end of the effective period for the start rate, the interest rate adjusts periodically during the life of the loan based on a specified financial index.
NOTICE OF DEFAULT
(1) Notice recorded after the occurrence of a default under a deed of trust or mortgage (NOD).
(2) A notice required by an interested third party who has insured or guaranteed a loan (MIC).
NOTICE OF RESCISSION
Borrowers’ signed acknowledgement that they wish to cancel their loan. See NOTICE OF RIGHT TO CANCEL.
NOTICE OF RIGHT TO CANCEL
Under Regulation Z, customers must be notified they are entering into a transaction that will result in a lien against their primary residence. This document explains they have the right to cancel the transaction, at no cost, within 3 business days from the date of signing the closing documents on a loan.
NOTIFICATION OF INCOMPLETENESS LETTER
A letter sent to the customer requesting additional information to continue with the loan application process.
Any debt or recurring payment the borrower is obligated to pay, except for mortgage payments.
Condition or process of falling into disuse.
Borrower who is the owner and occupant of the property or a unit.
An Offering Plan, also known as a Prospectus, is a document issued by a sponsor in the process of converting a building to cooperative or condominium ownership (or developing a new building). Its purpose is to provide full disclosure of all relevant data associated with evaluating an investment in the property.
Improvements that are to be made to the adjacent to the subject property. (I.e.) roads, water and sewer, sidewalks, etc. These improvements must be complete prior to the start of actual construction on the financed project.
ONE-TIME CLOSE CONSTRUCTION PROGRAM
A combined construction AND permanent loan program, provides construction and permanent financing of all costs related to building a home in one simple loan transaction.
Costs of maintaining an investment property, including expenses for electricity, gas, fuel oil, water/sewer, trash removal, pest control, license fees, painting/decorating, general repairs/maintenance, supplies, casual labor, professional management fees, and replacement reserves.
Fees charged by a lender to prepare loan documents, make credit checks, inspect, and sometimes appraise a property. The fees are usually computed as a percentage of the face value of the mortgage.
An improvement, excessive in cost or size, in relation to land value or value of surrounding improvements.
Designation given to property used as the owner’s residence.
OWNER OF RECORD
Entity that appears in the public records as the owner of a mortgage; usually the mortgage originator, unless the mortgage is subsequently assigned to someone else and that assignment is recorded.
Nonprofit corporation or association that manages the common areas of a PUD or condominium project. In a condominium project, it has no ownership interest in the common areas. In a PUD project, it holds title to the common areas.
An abbreviation for profit and loss statement. See PROFIT AND LOSS STATEMENT.
The principal amount of a mortgage with no premium or discount.
An agreement between 2 or more individuals or entities to go into business or invest together. Either partner may bind the other, within the scope of the partnership. Each partner is liable for all the partnership’s debts.
Wall built on a line between two adjoining properties and used by both owners.
Happens at the first adjustment of an ARM when the monthly mortgage payments rise so high that the borrower may not be able to afford the payments the loan will require in the future.
The portion of the paycheck the employee retains for his/her records. The pay stub verifies pay-period and year-to-date gross and net earnings.
PAYMENT CHANGE DATE
On an adjustable rate mortgage, this is the date the new mortgage payment is effective after an interest rate change. It is usually the 1st of the month following the interest rate change date.
This schedule outlines the number of payments due, the amount of each payment and the date payments are due.
PENSION AWARD LETTER
Documentation specifying the frequency and amount of pension payments an individual is eligible to receive.
PERIODIC ADJUSTMENT CAP
This cap limits how much the interest rate can change in the future on an adjustable-rate mortgage.
PERMANENT LOAN COMMENCEMENT DATE
The start date of the permanent phase of an OTC loan. This date is defined in the construction loan documents executed at the initial closing. It is the date of the Note and the Deed Of Trust/Mortgage.
Ordered by the borrower(s) and/or the builder/contractor, these represent permission and agreement from local authorities and municipalities that the proposed project can be constructed on the assigned lot and will meet all required specifications and rules that apply to the area.
Borrower’s assets are pledged or subject to claim in addition to a primary security.
PHYSICAL DEPRECIATION (DETERIORATION)
Loss of value by real property resulting from wear and tear, disintegration, or action of the elements that can be either curable or incurable.
See SECONDARY FINANCING.
Principal, interest, taxes, and insurance.
The principal, interest, tax, and insurance payment to income ratio, used in mortgage lending decisions.
An individual or entity who files a legal action against another.
PLANNED UNIT DEVELOPMENT (PUD)
(1) Comprehensive development plan for a large land area. It usually includes residences, roads, schools, recreational facilities, commercial, office, and industrial area.
(2) Subdivision having lots or area owned in common and reserved for the use of some or all of the owners of the separately owned lots.
PLANS AND SPECIFICATIONS
Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.
Map representing a piece of land subdivided into lots with streets, boundaries, easements, and dimensions shown thereon.
A map dividing a parcel of land into lots, as in a subdivision. For example, a Title/Commitment report and an appraisal report will provide a plat map of the subject property, which shows the location of the property within the subdivision.
Amount equal to one (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.
Points are a payment made to a bank as consideration for issuing a mortgage. These are usually based upon a percentage of the loan amount.
POINT OF REFERENCE
A starting point used to put a customer’s canceled checks or mortgage statements in chronological order by establishing either the date and amount of the last mortgage payment made or the date and amount of the next mortgage payment due.
Second layer of mortgage insurance coverage required when the Lender is selling a pool (group) of jumbo mortgage loans to an investor. Pool insurance is required on Jumbo, and non-GSE, mortgage loans and is paid for by the Lender.
Built after World War II, postwar buildings offer spacious, well-planned apartments with L-shaped living areas, wide picture windows, good closets, and air-conditioning. They rarely exceed 20 stories in height.
POWER OF ATTORNEY
Power of Attorney is a written instrument duly signed and executed by a person who authorizes an agent to act on his/her behalf to the extent indicated in the instrument. It’s a Legal document authorizing one person to act on behalf of another.
PRELIMINARY TITLE REPORT (PRELIM)
A report showing all current claims against a property before a sale or loan transaction and identifying those items that must be removed to obtain a 1st lien position. After completion of the transaction, a title insurance policy is issued. Same as TITLE COMMITMENT.
PRELIMINARY TITLE SEARCH
Title search by a title company prior to issuance of a title binder or commitment to insure.
Defined portion of land and the improvements thereon as usually described in a deed, deed of trust, or mortgage.
PREPAID FINANCE CHARGE
The finance charges charged at closing exclusive of interest. Examples include points, processing and application fees, tax certification, etc.
Mortgage interest that is paid in advance of when it is due in order to obtain tax advantages.
PREPAID INTEREST CHARGE
The portion of interest, added on at loan closing, which covers the time period between funding and the beginning of the first 30-day period covered by the first payment. For example, if the loan closed on 2/15, the first payment due on 4/1 retroactively pays interest from 3/1 to 4/1. The prepaid interest would cover the period from 2/15 to 2/28.
A Pre-payment Clause is a clause in the mortgage which gives a mortgagor the privilege of playing the mortgage indebtedness before it becomes due.
Charge a mortgagor may be required to pay during the early years of a mortgage if he/she pays it in full or pays large sums to reduce the unpaid balance.
Today’s worth of moneys to be received in future.
Built prior to World War II, prewar buildings often have larger and wider rooms and commonly feature fireplaces, hardwood floors, high ceilings, and moldings.
The primary borrower on the loan.
The property in which the customer resides the majority of the time.
PRIME RATE INDEX
A rate index which is the prevailing rate that banks charge to lend money to corporations.
The amount of debt on a mortgage, not including interest. The face value of a note, mortgage, etc.
PRINCIPAL AND INTEREST (P&I)
This refers to the principal and interest portions of a monthly mortgage payment.
PRINCIPAL, INTEREST, TAXES & INSURANCE (PITI)
The total of the monthly mortgage payment due, which includes all principal, interest, taxes and insurance.
PRIVATE MORTGAGE INSURANCE (PMI)
Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.
PRO FORMA STATEMENT
Latin meaning “according to form.” A projection of anticipated income, expenses, and cash flow from an investment enterprise.
A written promise by the borrower to pay a debt owed, within a specified time, to the holder of the note under conditions mutually agreed upon.
PROOF OF LOSS
Affidavit or claim form signed by the insured and submitted to the insurer as a claim for an insured loss sustained.
Property to be constructed. The construction is subject to compliance inspections during construction or is warranted as so constructed.
A Proprietary Lease is the lease issued by a co-operative corporation to each tenant/shareholder prescribing the right to occupy a specific apartment pursuant to guidelines mandated by the building.
To allocate proportionate shares of income (such as rents) or an obligation (such as taxes and insurance premiums), paid or due, between seller and buyer at closing.
PROFIT AND LOSS STATEMENT (P&L)
A statement documenting business revenues and expenses for a specified time period to establish whether a business gained a profit or suffered a loss.
Generally, a tax levied on both real and personal property. The amount of the tax is dependent on the value of the property.
Planned Unit Development. A real estate project in which each unit owner has title to a residential lot and building and a non-exclusive easement on the common areas of the project. The owner may have an exclusive easement over some parts of the common areas (for example, a parking space).
List of discrepancies in building plans or other construction flaws written by the original architect during his final inspection of the structure.
Written proposal by a buyer to purchase real estate that becomes binding upon the acceptance of the seller.
Mortgage given to the seller as all or part of the purchase consideration in exchange for property, most commonly used in land purchases, with prior rights over any subsequent lien, unless made subject to subordination.
PURCHASE MONEY TRANSACTION
Acquisition of property through the payment of money or its equivalent.
Deed relinquishing all interest, title, or claim in a property by a grantor, but not representing that such title is valid, nor containing any warranty or covenants for title.
Quality Verification and Questions
RATE AND TERM REFINANCE
Refinance loan with proceeds that are used only to pay off the outstanding principal balance of an existing first mortgage, to pay off the outstanding principal balance of any existing subordinate mortgage that was used in whole to acquire the subject property, to finance closing costs (including prepaid expenses), and to allow cash back to the borrower in an amount no more than the lesser of 2% of the balance of the new refinance mortgage or $2000.
RATE CHANGE DATE
On an adjustable rate loan, this is the date a new interest rate will be put into effect . This change can occur every 6 months, 24 months or 36 months depending on the terms of the note.
Land in its natural state, having no physical improvements such as grading, sewers, or erected structures.
REAL ESTATE OWNED (REO)
Property a lender acquires as the result of foreclosure.
The recording of a deed for a second time to correct an error contained in the deed originally recorded.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A Federal law that requires lenders to disclose, in advance, an estimate of the costs associated with a loan and prohibits “kickbacks” for referring business to 3rd parties associated with a loan.
Real Property is land and generally whatever is erected upon or affixed thereto. It’s a Land and all attachments to the land, such as buildings, crops or mineral rights. Ownership of real property can be divided into various types of interests and rights.
A letter provided by the appropriate municipality, stating a structure on a specific property can be rebuilt as originally constructed in the case of damage or destruction.
To re-amortize the remaining principal balance for the remaining term of the loan. Typically used in negative amortization loans.
The legal remedy for canceling, a contract and restoring the parties to their original positions; a return to status quo.
A Recognition Agreement, also known as an Aztech Form, is generally provided by the lender to be signed by the cooperative. It recognizes the secured rights of a lender to the shares of stock and the proprietary lease on an apartment.
Transfer of the title of land from one person to the immediate proceeding owner. It is used when the performance of debt is satisfied under the terms of a deed of trust.
The act of recording a document such as a deed or mortgage in a public registry thereby giving notice to future purchasers, creditors or other interested parties. Recording is controlled by statute and usually requires the witnessing and notarizing of an instrument to be recorded.
Notification from the title company verifying the lien has recorded as instructed.
The amount charged by a public records office to record the security instrument within the county.
Any debt that matures in more than six (6) months or is continuous in nature, i.e., child support, child care, installment and revolving accounts. Any large monthly debt that matures in less than six (6) months must be given underwriting consideration.
Specified period in which a mortgagor can reclaim foreclosed property by making full payment of the mortgage debt, under a legally enforceable right of redemption in some states.
Repayment of a debt from the proceeds of a new loan using the same property as security. We also consider the current owner’s placement of financing on a property that is not financed as a refinance transaction.
Regulation written by the Federal Reserve Board to implement the Truth-in-Lending Act. It is a comprehensive regulation, containing a full restatement of all the requirements of the act and is enforced by the Federal Trade Commission (FTC). Both new real estate loans and assumptions of existing loans come under Regulation Z’s purview.
Curing of all defaults by a borrower. Restoration of a loan to current status through payment of arrearages.
Borrower’s spouse, child, or dependent or any other individual related to the borrower by blood, marriage, adoption, or legal guardianship.
RELEASE OF LIEN
When a lien against the property is satisfied, the note holder records a document that reflects the discharge of the obligation and releases the lien recorded against the property.
RELEASE OF LIABILITY
Agreement by a lender to terminate the personal obligation of a borrower to pay a debt.
RELEASE OF MORTGAGE
A recordable instrument that transfers title from a mortgagee to the mortgagor when title is held as collateral security for a debt. Most commonly used upon payment in full of a mortgage.
REMAINING ECONOMIC LIFE
Estimated period of time during which a property can be utilized profitably. See the front page of the URAR, Improvement Analysis section for the Estimated Remaining Economic Life of a property. The Remaining Economic Life must equal or exceed the term of the loan.
A contract used by property owners who rent their property to another individual. Rental agreements should state the amount of rent the customer will collect from the renter.
RENT LOSS INSURANCE
Insurance that protects the landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
Money required to reproduce a building using the same or equivalent materials, design, and construction methods, less an allowance for depreciation. Element of the cost-approach method of appraisal.
REQUEST FOR FULL RECONVEYANCE
Written instructions provided by the beneficiary to the trustee to issue a deed of Reconveyance when the conditions of obligation have been fulfilled.
REQUIREMENTS TO BE MET
Exceptions to be cleared and other actions that must be taken for a title company to issue a final title policy per the lender’s instructions.
To void or cancel in such a way as to treat the contract, or other object of the rescission, as if it never existed.
Cancellation or annulment of a transaction or contract by law or by mutual consent.
RESIDENTIAL HOME MORTGAGE
Mortgage that covers a one(1) to four (4)-family dwelling that is used to provide living accommodations.
RESIDENTIAL MORTGAGE CREDIT REPORT
Detailed account of the credit, employment, and residence history (as well as public records information) of an individual.
Real Estate Settlement Procedures Act, a federal law that requires lenders to provide home mortgage borrowers with information of known or estimated settlement costs.
RETENTION (FOR OTC LOANS)
A portion of construction loan funds that are held back from disbursement until the project is complete.
Arrangement for credit, e.g., charge cards, in which the customer receives purchases or services on an ongoing basis prior to payment. Repayment is usually at regular intervals but not for a specified amount or term.
A rider is an addition to the security instrument.
RIGHT OF FIRST REFUSAL
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
Right to enter upon or leave from designated premises.
RIGHT OF FIRST REFUSAL
A Right of First Refusal is a condition found in many condominium by-laws which permits the board to review any party seeking to purchase or rent an apartment. It gives the board permission to refuse the applicant. If the applicant is refused, the condominium must purchase or rent the apartment under the terms and conditions stipulated in the contract or lease.
RIGHT OF SURVIVORSHIP
Co-ownership of property where, if one owner dies, the undivided estate passes to the surviving owner(s) in the case of joint tenancy and tenancy by entirety (husband and wife).
RIGHT OF WAY
Privilege operating as an easement upon land, whereby a land owner, by grant or agreement, gives another the right to pass over land.
Right of owners to the water and land below the eight water mark. These rights vary according to state law.
Real Estate agents generally refer to the size of an apartment based on the following specifications. According to the New York City Rent Guidelines Board, a “room” in Manhattan, except for a kitchen, must be at least 65 square feet and include a window. Baths are not counted as “rooms.”
- Classic Twelve – A prewar apartment comprised of a living room, formal dining room, library, kitchen, four bedrooms, and four maids’ rooms.
- Classic 9 to 11 Rooms – A prewar apartment offering a living room, formal dining room, library, three bedrooms, and two to four maids’ rooms.
- Classic Seven or Eight – A prewar apartment with a living room, dining room, kitchen, three bedrooms, and one or two maids’ rooms.
- Classic Six – A prewar apartment that consists of a living room, dining room, kitchen, two bedrooms, and one maid’s room.
- Classic Five – A prewar apartment that includes a living room, formal dining room, kitchen, and two bedrooms.
- Five Rooms – A living room, kitchen, and three bedrooms.
- Four Rooms – A living room, kitchen, and two bedrooms.
- Three Rooms – A living room, kitchen, and one bedroom.
- Two Rooms – A living room and a kitchen, a.k.a. a “Studio”.
- 1/2 Room – Added to any of the above, typically either a foyer that is large enough to dine in, or a separate alcove intended for dining or, often in the case of a Studio (“2 1/2 Room”) apartment, for sleeping in.
- Duplex – Although in many markets, a duplex refers to a house with two units, in New York City, it is a single apartment with two floors or levels.
- Loft – Open living space, usually with separate bedrooms.
- Loft Area – Additional space created in apartments with very high ceilings, usually accessed by stairs or a ladder and often used for sleeping.
Income a homeowner receives from renting rooms in the same property in which they live.
RULE OF 78S
Method used to calculate an interest rebate when an installment loan that had add-on interest is paid off (or refinanced) prior to its maturity date.
A term used to describe a property’s location. For example, rural properties are in remote locations, on non-paved access roads or streets with support services more than 10 miles away. Rural is also a term used to describe the country as opposed to the city.
Technique in which a seller deeds property to a buyer for a consideration and the buyer simultaneously leases the property back to the seller, usually on a long-term basis.
SALES COMPARISON APPROACH TO VALUE
Method of measuring the value of a property based on an analysis of comparable sales, contract offerings, and listings of properties that are the most comparable to the property that is being appraised. Also known as market data approach.
SALES CONCESSIONS/INDUCEMENTS TO BUY
Considerations made by the seller, as an inducement to purchase the property.
Discharge of an obligation by payment of the amount due, as on a mortgage, trust deed or contract or payment of a debt awarded, such as a satisfaction of a judgment.
SATISFACTION OF MORTGAGE
Recordable instrument given by the lender to evidence payment in full of the mortgage debt. Also known as a release deed.
Schedule A is the list in the Offering Plan of all the apartments being sold in a newly-constructed building or one that is in conversion. It presents allocated shares or unit percentage interest, room count, prices, and other material cost elements including the projected maintenance charges and the tax-deducible portion of the maintenance. It’s a section of the Preliminary Title Report/Title Commitment that lists the name of the proposed insured, amount of title insurance, estate or interest in the land, how legal title is vested and the legal description of the property.
Schedule B is the projected estimated cost of operative a co-operative or condominium during its first year. It’s a section of the Preliminary Title Report/Title Commitment that lists exceptions to title if any.
Mortgage that has been closed for more than one year. Some lenders require 6 months seasoning only.
Maturing of a mortgage. Length of time that has passed since origination.
Mortgage that has rights secondary to the first mortgage, i.e., the proceeds from a foreclosure sale must pay the first mortgage before any funds can go to repay the second mortgage.
A loan secured by a 2nd mortgage or trust deed of real property. Same as PIGGYBACK LOAN.
The financial markets where groups of loans are sold to investors. Example: Primary mortgage lenders originate loans while the secondary market sells funded loans.
A property used by a person as a second residence, not as an investment.
A section of the Federal Truth-in-Lending Act pertaining to high fee loans and the restrictions and compliance issues with which this type of loan transaction must comply.
Party holding a security interest or lien. Also known as the mortgagee, the conditional seller, or the pledgee.
(1) Collateral given, deposited, or pledged to secure the fulfillment of an obligation or the payment of a debt.
(2) Instrument that provides evidence of debt or of rights to share in earnings or the distribution of property.
The security instrument is used to identify and encumber the real property used as collateral for the loan. It’s notarized and then recorded with the county in which the property is located. Once recorded, it secures an interest in, or lien against, the property. The security instrument used is state specific. Examples are, deed of trust, security deed, a trust deed or a mortgage. So, it’s a mortgage or trust deed evidencing the pledge of real estate security as distinguished from the Note or other credit instrument.
Interest of a creditor in the property of a debtor.
Collection of payments and management of operational procedures related to a mortgage.
A burden resting upon one estate for the benefit or advantage of another. An agreement granting limited permission to use the property. Same as LAND BURDEN.
Final statement of the actual settlement costs of the loan. A Federal requirement under RESPA. Same as HUD-1.
Money paid by borrowers and sellers to effect the closing of a mortgage loan. This normally includes an origination fee, discount points, title insurance, survey, attorney’s fee, and such prepaid items as taxes and insurance escrow payments.
Deed given by court order in connection with the sale of property to satisfy a judgment or tax sale.
Interest computed on the unpaid principal balance of a loan, as opposed to compounded interest.
SINGLE FAMILY RESIDENCE (SFR)
A standard home with no common areas, no homeowners’ dues or sharing of common walls. A home intended to be occupied by 1 family.
SINGLE-WIDTH MANUFACTURED HOUSING UNIT
Manufactured housing unit that consists of a single section, which is usually 12 feet wide and from 40 to 64 feet long.
The study of a specific land parcel to determine its suitability for a specific use. For example, if the study of the land parcel reveals it should be used for industrial purposes, yet it’s currently being used for residential purposes, then, upon review of the appraisal report, the reviewer would want to take this information into consideration when determining if the loan’s collateral is sound.
A concrete floor used as a foundation in homes without a basement.
SOCIAL SECURITY AWARD LETTER
Documentation specifying the frequency and amount of Social Security payments an individual is eligible to receive. Social Security Award Letters are re-issued annually.
Legal title in a single individual or an entity.
Ownership of a business, with no formal entity as a vehicle or structure. The sole proprietorship reports its tax information on Federal tax form 1040.
Architectural, engineering, and legal fees, distinguished from land and construction costs.
Any area that shows evidence of declining property values, an over supply of property, or a marketing time of more than six (6) months.
SOURCE OF FUNDS
Source of the buyers funds for the required cash investment.
SPECIAL WARRANTY DEED
Deed containing a covenant whereby the grantor agrees to protect the grantee against any claims arising during the grantor’s period of ownership.
Construction project that is free-standing on a purchased lot and not associated with a specific development, tract or subdivision.
STANDARD COVERAGE POLICY
A title insurance policy used in several states, not having as broad a coverage as the nationally recognized American Land Title Association policies. See AMERICAN LAND TITLE ASSOCIATION.
STANDALONE CONDO (SITE CONDO)
A project built as a condominium project with an HOA. The unit is not connected to other units at any point.
The initial interest rate charged on an adjustable-rate mortgage loan. Also, see Note Rate.
STATEMENT OF INFORMATION
A confidential form filled out by buyer or seller to help a title company determine if any liens are recorded against either. Very helpful when people with common names are involved.
STATEMENT OF SERVICE
DD Form 13, used to verify the military service of an active duty veteran.
One who purchases land or property on behalf of another and holds the title but passes control to the real purchaser. Also known as a dummy purchase, a nominee, or a front.
STREAMLINED REFINANCING DOCUMENTATION
Alternative documentation procedure specifically designed for no cash-out refinance transactions, which allows lenders to use substitute documentation to verify the borrower’s employment and income. It also relies on the lender’s warranty of the property value instead of requiring a new appraisal report under certain circumstances.
Type of foreclosure proceeding used in some states, in which title is invested directly in the mortgagee by court decree without holding a foreclosure sale.
Provisions of the Internal Revenue Code under which certain qualifying small business corporations may elect to eliminate income tax at the corporate level, with the corporation’s income taxed directly to the shareholders.
Housing development that is created by dividing a tract of land into individual lots for sale or lease.
SUBJECT TO FINANCING
Subject to Financing, also known as Financing Contingency, is a term stipulating that the agreement is conditioned upon the buyer obtaining financing from a financial institution in an agreed-upon amount.
Lease executed by a lessee to a third person for a term no longer than the remaining portion of the original lease.
Any mortgage or other lien that has priority lower than that of the first mortgage.
Act of a party acknowledging, by written recorded instrument, that a debt is inferior to the interest of another in the same property. Subordination may apply not only to mortgages, but to leases, real estate rights, and any other types of debt instruments.
This refers to a complete loan application package submitted for loan approval.
A lien taking a legal title position junior to another lien that recorded later. For example, if a mortgage lien recorded in 1996, it can subordinate to a lien recorded in 1999. Subordination may apply not only to mortgages, but also to leases, real estate rights and any other type of debt instruments.
Substitution of one person for another in reference to a debt, claim, or right.
An agreement by which a lien holder agrees to accept a lien position junior to that of a later-recorded lien. For example, when a lien holder agrees to subordinate, a formal agreement must be drawn, signed and recorded to make it a legal transaction. Subordinations may apply not only to mortgages, but also to leases, real estate rights and any other types of debt interests.
SUBSTITUTION OF TRUSTEE
A document that is recorded to change the trustee named in a deed of trust.
The area around a city. Usually residential with some small businesses.
Lien imposed on a piece of property by the government that supersedes all other liens on that property, including a lender’s lien. It is put on the property for violation of environmental and public health and safety rules. Failure of a property owner to clean up its hazardous or toxic wastes is an example of cause for a super lien against that property.
Additional taxes assessed by the city and/or county on property. These taxes are in addition to any taxes impounded in an escrow account.
Obligation of a guarantor to pay a second party upon default by a third party in the performance it owes to the second party.
Measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements.
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
A Tax Abatement is the reduction in the amount of real estate tax due over a period of time.
Deed on property purchased at public sale for nonpayment of taxes.
A lien for outstanding or delinquent property, IRS or state taxes. Tax liens for delinquent property taxes are the most common and attach only to the property upon which the taxes are unpaid. Property tax liens always take priority over other liens.
TEMPORARY DISABILITY AWARD LETTER
A letter issued to employees who are awarded temporary disability benefits because they are unable to work due to medical disability. These employees are expected to return to work once their disability heals.
An individual who registers with a temporary employment agency to be placed on work assignments at companies on a temporary basis.
Holding of real estate under any kind of right of title. Used alone, tenancy implies a hold under a lease.
TENANCY BY ENTIRETY
Joint ownership of property by a husband and wife, where both are viewed as one person under common law that provides for the right of survivorship.
TENANCY IN COMMON
In law, type of ownership created when real or personal property is granted to two or more persons, without express words creating a joint tenancy. There is no right of survivorship.
One who is not the owner but occupies real property under consent of the owner and in subordination to the owner’s title. The tenant is entitled to exclusive possession, use, and enjoyment of the property, usually for a rent specified in the lease.
Estate or condition of leaving a will at death.
TIME IS OF THE ESSENCE
Inclusion of this phrase in a contract means that performance within a specified period of time is an essential element of the transaction.
Exclusive right to occupy a unit in a development during a specified time period.
Evidence of the right to or ownership in property. In the case of real estate, documentary evidence of ownership is the title deed that specifies in whom the legal estate is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift, or through foreclosure of a mortgage.
Any legal right held by others to claim property or to make demands upon an owner.
The process in which the title company oversees the closing or document signing of the loan in close conjunction with the entity performing the escrow function on the loan. Once the loan documents are signed and all contingencies are satisfied, the title company records the security instrument and releases the proceeds of the loan.
A written report showing all current claims against a property before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued. Same as PRELIMINARY TITLE REPORT.
These constitute an enhancement to a standard title policy. Title endorsements are intended to eliminate risk associated with un-plotted easements, foundation placement on the lot, and address and other items listed on the property title that the Lender would not want to have priority over the construction/permanent loan.
TITLE IN LIEU OF
A document that instructs a title company how to record a lien against a property and issue a title insurance policy. Same as INSTRUCTIONS TO TITLE.
TITLE INSPECTION ENDORSEMENT FEES
Fee that covers the cost of what the construction industry considers a “title date down” at completion of each inspection and prior to disbursement of construction funds on an OTC loan.
Title Insurance is an insurance polity which indemnifies the holder for any loss sustained by reason of defects in the title. Insurance against defects in title not listed in the title report or abstract.
TITLE INSURANCE POLICY
Contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee, or otherwise.
A Title Search is an examination of the public records to determine the ownership and encumbrances affecting real property. A review of all recorded documents affecting a specific piece of property to determine the present condition of claims against the property.
TOTAL FIXED PAYMENT RATIO
Total mortgage payments plus total recurring charges divided by the effective gross income.
TOTAL MONTHLY INCOME
Gross monthly income from all income sources, after appropriate deductions are taken.
TOTAL MORTGAGE PAYMENT
Sum of principal, interest real estate taxes, hazard insurance (PITI), (including UFMIP, if financed) and the monthly or annual MIP and, if applicable, homeowner association or condominium fee.
Residential unit on a small lot which has coincidental exterior limits with other similar units. Title to the unit and its lot is vested in the individual buyer with a fractional interest in common areas, if any.
TOWNHOUSES AND BROWNSTONES
These are single-family houses that in many cases have been converted into multi-unit apartment buildings. Most townhouses and brownstones were built in the late 19th or early 20th centuries and offer gardens, fireplaces, beautiful floors, and ornamental interior details.
Facts about Condominiums & Townhouses:
- The purchaser receives a deed to the premises that is recorded in the office of the county clerk.
- Owners are responsible for real estate taxes.
- Financing is readily available.
- Owners need to maintain insurance coverage on the dwelling.
- The title may be held in the name of a corporation or trust.
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.
Credit items reported on a credit report.
TRANSFER OF OWNERSHIP
Any means by which the ownership of a property changes hands, including 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.
Index that is used to determine interest rate changes for certain ARM plans. It is based on the results of auctions that the U.S. Treasury holds for its treasury bills and securities.
Fiduciary relationship whereby legal title to a property is transferred to a trustee, who administers the property for the benefit of another (beneficiary) who holds equitable title to such property.
Instrument given by a borrower (trustor) to a trustee vesting title to a property in the trustee as security for the borrower’s fulfillment of an obligation.
One who holds legal title to property for the benefit of another, or for the purpose of securing performance of an obligation.
This disclosure is required by law under the Federal Truth in Lending Act, which requires a full disclosure of a loan amount, finance charges and APR.
Federal law that is part of the Consumer Credit Protection Act, which requires lenders to fully disclose credit terms and conditions, the annual percentage rate, and other charges, in writing. It is intended to assure borrowers are given meaningful information with respect to the cost of credit to help them make better comparisons between competing financial institutions.
TWENTY-FIVE/SEVENTY-FIVE (25/75) PERCENT RULE
GNMA’s requirement that the veteran’s amount of entitlement must equal at least 25% of the Purchase Price or CRV (whichever is less), plus cash investment.
TWO (2) TO FOUR (4)-FAMILY PROPERTY
Property that consists of a structure that provides living space (dwelling units) for two(2) to four (4) families, although ownership of the structure is evidenced by a single deed.
TYPES OF SECURITY INSTRUMENTS
In a real estate-secured transaction, the borrower and lender enter into a loan agreement that is legally documented or evidenced by a security instrument. This security instrument can be either a mortgage or a deed of trust. See MORTGAGE and DEED OF TRUST.
UNCONDITIONAL LIEN RELEASE
Signed by a contractor, subcontractor or material supplier, this form waives the right to file a mechanic’s lien. This type or release in not dependent on their receiving payment for work released. This release may be submitted throughout the construction phase or at completion of the project for an OTC loan.
Analysis of risk and the matching of it to an appropriate rate and term. Underwriting involves an analysis of the property, as revealed in the appraisal report, as acceptable and adequate security for the loan and of the borrower’s ability and probable willingness to repay the loan. Risk may also be affected by other factors, such as LTV ratios, the presence or absence of mortgage insurance, etc.
UNEARNED OR PASSIVE INCOME
Includes dividend/interest, trust income, child support, alimony or separate maintenance, foster care, unemployment, disability, social security and other retirement income, rental income, installment sales or land contract income, and any other income that is not readily verifiable by an outside, independent third party source. All unearned or passive income that is used to qualify the Borrower must be verified.
UNEMPLOYMENT COMPENSATION AWARD LETTER
A letter issued to employees who are awarded unemployment benefits when their employment is terminated through no fault of their own. The benefits they receive are called unemployment compensation.
UNIFORM RESIDENTIAL APPRAISAL REPORT (URAR)
The most common appraisal form in use. The URAR is used to document the methods used to determine the market value of single-family residences and planned unit developments.
An update to the Preliminary Title Report/Title Commitment that reflects any changes to title since the original title report was prepared. Same as DATEDOWN ADDENDUM.
A term used to describe a property’s location. Urban properties have paved access roads and streets, they are close to neighboring properties and have support services less than 10 miles away. Urban is also a term used to describe a property located in a city or town.
Claims listed on a title report that are for usage rights on the property. Easements for public utilities, property improvement encroachments are examples of usage restrictions found on a title report.
Taking or contracting for a rate of interest greater than permitted by law for a loan.
Basic services associated with developed areas, including electricity, telephone, fuel, water, and garbage collection.
Percentage rate expressing the loss from gross rental income due to vacancy and collection losses.
Estimation of value or price through appraisal.
VALUATION CONDITION (VC)
Exception placed by the Valuation Department on an appraisal.
Approved special charge in construction codes, zoning requirements or other property use restriction.
VARIABLE INTEREST RATE
An interest rate that fluctuates as a result of changes in a controlling index rate . With adjustable-rate mortgages, there are usually maximums as to the frequency and amount of fluctuation.
Party to whom personal or real property is sold.
Seller of personal or real property.
Unpaid seller’s right to a prior lien on property until the purchase price has been recovered.
VERIFICATION OF DEPOSIT (VOD)
Documentation that confirms the customer has access to specified amounts of money through a bank or investment account. Verifications of Deposit are documented on Fannie Mae form 1006.
VERIFICATION OF EMPLOYMENT (VOE)
Documentation of a mortgage applicant’s work history and/or occupation that is intended to assist with the lender’s credit investigation and decision process. Many lending institutions ask potential borrowers to sign employment verification forms and then under the applicant’s signature, make direct inquires to employers about the applicant.
VERIFICATION OF MORTGAGE (VOM)
Documentation that establishes the customer’s mortgage payment history.
VERIFICATION OF SECONDARY FINANCING FUNDS FORM
A form that must accompany all loans that have secondary financing.
Names of the borrowers and the manner in which they hold legal title to the property. May include marital status. See also LEGAL TITLE.
VETERANS ADMINISTRATION (VA)
Independent agency of the federal government created in 1930. The Servicemen’s Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low-down-payment mortgages to eligible veterans by guaranteeing the lender against loss.
A secured financial interest in a property that is created by agreement between a creditor and the borrower. Basically, the borrower is agreeing to use the property as collateral for the loan. The most common example of a voluntary lien is the one created by a mortgage given for a home loan. See also LIEN.
Voluntary transfer of title to the real estate security on a defaulted mortgage by deed from the borrower to the lender as an alternative to foreclosure. By arrangement between the parties, the lender saves the expense of foreclosure and the borrower receives credit for payment of the debt in full.
A document that reports to the Federal government income earned by salaried employees. This document reports employees’ total gross and withholdings made during the previous tax year. Employers must mail W-2s by January 31 of each year for the prior tax year.
A Waiver is the renunciation, abandonment or surrender of some claim, right or privilege.
Deed in which the grantor or seller warrants or guarantees that good title is being conveyed, as opposed to a quitclaim deed that contains no representation or warranty regarding the quality of title being conveyed.
A lender who works only with mortgage brokers and takes completed loan packages and underwrites them. They offer mortgage brokers discounted pricing in return for the up-front work done by the mortgage broker.
Written document providing for the distribution of property at death.
Portion of a loan held back by the lender until a condition is satisfied or met. Usually regarding the appraisal and repairs to be made to the property which secures the loan. Same as HOLDBACK.
WORKER’S COMP INSURANCE
This policy covers injury that might occur on the project site as a result of working on the project. It covers any of the Contractor’s employees assigned to and working on the site. It is generally carried by the builder/contractor. This coverage is not available to tradesman owner builders or owner-builders.
Refinancing technique involving the creation of a subordinate mortgage that includes the balance due on the existing mortgage(s) plus the amount of the new secondary or junior lien. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.
There are no glossary terms matching “X”.
There are no glossary terms matching “Y”.
ZERO LOT LINE
Positioning of a structure on a lot so that one side rests directly on the lot’s boundary line. Although such construction is usually prohibited by setback ordinances, it can be a part of a special space-conserving project.
Act of city or county authorities specifying the type of use to which property may be put in specific areas. See restriction.