1003: 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. See LOAN APPLICATION (1003).
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.
1099: 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. Ameriquest Mortgage Company lends money using 2-4 unit properties as collateral
3 Cs: 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.
A
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.
ACCEPTED FEE APPRAISER PANEL: Panel of authorized fee appraisers that complete property appraisals for Ameriquest Mortgage Company loans
ACCRUED INTEREST: Interest on a note, bond, etc., which has been earned but not yet paid.
ADDENDUM: An attachment to a contract, deed or other document that incorporates additional terms of information to the original.
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.
ADJUSTABLE-RATE RIDER: 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 SECURITY INSTRUMENT.
ADJUSTMENT CAP: The adjustment cap limits the degree of interest rate changes during a specific period, during the life of the loan
ALIMONY: 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
ALTA: An acronym for American Land Title Association. Commonly used in reference to a particular type of Title policy. See AMERICAN LAND TITLE ASSOCIATION (ALTA).
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 TITLE INSURANCE
AMORTIZATION: 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.
ANNUITY: 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
APPRAISAL: 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.
APPRECIATION: 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.
APR: Acronym for Annual Percentage Rate.
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.
ASSESSED VALUE: Value placed upon property for property-tax purposes by the tax assessor
ASSUMPTION: 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
ATTACHMENT: A legal process whereby the judgment creditor may obtain a lien against the debtor's property. See LIEN
ATTORNEY CLOSINGS: 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.
B
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.
BALLOON PAYMENT: A large payment due at the end of a loan contract. Equal to the remaining principal balance plus any interest and charges due.
BANKRUPTCY (BK): Court proceedings to relieve the debts of an individual or business unable to pay its creditors
BENEFICIARY: The entity or lender that funds the loan and to which the loan is owed.
BENEFICIARY'S DEMAND: 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.
BORROWER: One who borrows money and is responsible for repaying it to the lender. Also known as obligor. If the loan is secured by a mortgage, the borrower is known as a mortgagor.
BORROWER SAVINGS: 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.
BROKER: One who acts as an intermediary between parties to a transaction in exchange for a fee or commission.
BUSINESS FOR SELF (BFS): Customers who own their own business. Another word for self-employed.
BUSINESS LICENSE: A license that authorizes a business to operate and is typically required and issued by the city in which the business is located.
C
C C & Rs: An acronym for Covenants, Conditions and Restrictions.
CANCELED CHECK: A check that has been cashed by the bank on which the check was drawn.
CAPACITY: A customer's financial ability to repay debt.
CAPS: The maximum increase of an adjustable-rate mortgage period and lifetime. Example: The original loan is made at 10% with a 6% cap. The interest rate on the loan may never exceed 16%, regardless of index changes.
CASH FLOW: The amount of cash generated from income-producing property or investments after all operating expenses and loan payments have been made.
CASH VALUE: The amount of money one would receive today by selling an asset in the market place.
CASH-OUT: A refinance transaction in which the borrower receives cash that may be used for any purpose.
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.
CASHIER'S CHECK: 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
CEILING: 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 OCCUPANCY: A certificate issued by a local city government to the property owner stating the building is in proper condition to be occupied.
CERTIFIED COPY: A copy attested to be true by the individual or entity holding the original.
CHANGE DATE: 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.
CHARGE-OFF: 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.
CHILD SUPPORT: Periodic payments made under a divorce decree or a written separation agreement for the support of the children.
CLOSING: A meeting between a lender and borrower or a buyer, seller and lender or their agents when the loan documents are signed and the funds legally change hands. Also known as settlement.
CLOSING AGENT: The party designated to conduct the loan closing, and to ensure the mortgage or deed is recorded and the funds disbursed on time.
CLOSING COSTS: Money paid by the borrower to effect the closing of a mortgage loan, including such costs as title insurance premiums, appraisal fees, lender fees, closing agent fees, recording fees, etc.
CLOSING STATEMENT: A statement required by Federal law (the Real Estate Settlement Procedures Act) that itemizes all changes imposed on the borrower and seller (if any) in connection with a mortgage secured loan transaction. Also known as a settlement statement, HUD-1 or HUD-1A.
CO-BORROWER: A 2nd borrower on a loan.
COLLATERAL: 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.
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
COMMERCIAL PROPERTY: A property used for business purposes.
COMMUNITY PROPERTY: Property owned equally by a husband and wife. This classification of property is only used in certain states.
COMPARABLE (COMP): Properties used to determine the value of a specific property for comparative purposes in the preparation of an appraisal.
COMPENSATING FACTORS: Positive characteristics about an applicant's credit, employment history, etc. that contribute to a loan being a sound risk or investment.
CONCESSION: Special or unusual terms offered by the seller that may warrant the buyer paying a higher price for the property
CONDOMINIUM (CONDO): A residential property with 2 or more units where each unit owner holds title to a unit and an undivided interest in the common areas of the project.
CONDOMINIUM ASSOCIATION: An association of owners of condominium units.
CONSUMER CREDIT: Credit owed by the individual, not secured by real estate.
CONVENTIONAL LOAN: A loan that was not underwritten by HUD, the SBA, VA or the FHA.
CONVERSION CLAUSE: 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.
CONVEYANCE: The written instrument by which title to real property is transferred from one party to another.
CORPORATION: 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.
COSMETIC REPAIR: Repairs that improve the appearance of the property.
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 BUREAU: 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.
CREDIT DEPTH: The number of years a borrower has established credit. This information shows up on the borrower's report.
CREDIT HISTORY: The history of whether the borrower has met financial obligations on time in the past.
CREDIT LENGTH: The length of time a customer has had established credit
CREDIT REPORT: A report provided by a credit reporting bureau that provides a detailed account of the applicant's credit history
CREDIT SCORE: 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.
CREDITOR: An individual or entity to whom money is owed.
CURRENT LIBOR INDEX: A interest rate indicator used in adjustable-rate mortgage loans. The LIBOR Index changes daily and is published in The Wall Street Journal.
D
DATEDOWN ADDENDUM: An update to the Preliminary Title Report/Title Commitment that reflects any changes to title since the original title report was prepared.
DEBT CONSOLIDATION LOAN: A loan that combines debt obligations into one debt.
DEBT LOAD: The total amount of debt a customer currently owes.
DEBT RATIO (DR): The percentage of the customers' gross monthly income allocated to pay the monthly installments on their debt owing
DEBTOR: One who owes debt.
DEED: A written instrument by which a property owner, the "grantor," conveys and transfers to a "grantee" an ownership interest in real property.
DEED IN LIEU: A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.
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: A security instrument used in some states in place of a mortgage by which legal title is conveyed to one or more trustees to secure the repayment of a debt.
DEFAULT: Failure to meet legal obligations of a contract such as the failure to make the monthly mortgage payment or the failure to pay property taxes when due or maintain hazard insurance on the property.
DEFERRED MAINTENANCE: Repairs necessary to restore a property to good condition.
DEFICIENCY JUDGMENT: The imposition of personal liability on a borrower for the unpaid balance of a mortgage secured loan after foreclosure has failed to satisfy the full amount due to the lender.
DELINQUENCY: Failure to make payments when due.
DEMAND: 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.
DEMAND FEATURE: A feature that defines circumstances under which the remaining principal and interest amount of the loan is due and payable on demand.
DEPRECIATION: A decrease in value to real property improvements caused by age, deterioration or functional obsolescence.
DEROG LETTER: A letter written by the borrower that explains any derogatory information or reporting on the credit report
DISBURSEMENTS: Payments made on behalf of the borrower pursuant to the instructions on the HID Settlement Statement.
DISCHARGE: 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.
DIVORCE DECREE: A document issued by the court that dissolves the marriage relation
DOCS: Abbreviation for mortgage loan documents.
DOWER RIGHTS: A common law interest that a wife acquires in her husband's property at the time of his death. Dower has been abolished in most states.
DOWN PAYMENT: The difference between the purchase price and the mortgage amount for home purchase transactions.
DR: An acronym for debt ratio.
DEBT CONSOLIDATION LOAN: A loan that combines debt obligations into one debt.
DEBT LOAD: The total amount of debt a customer currently owes.
DEBT RATIO (DR):The percentage of the customers' gross monthly income allocated to pay the monthly installments on their debt owing.
DEBTOR: One who owes debt.
DEED: A written instrument by which a property owner, the "grantor," conveys and transfers to a "grantee" an ownership interest in real property.
DEED IN LIEU: A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.
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: A security instrument used in some states in place of a mortgage by which legal title is conveyed to one or more trustees to secure the repayment of a debt.
DEFAULT: Failure to meet legal obligations of a contract such as the failure to make the monthly mortgage payment or the failure to pay property taxes when due or maintain hazard insurance on the property.
DEFERRED MAINTENANCE: Repairs necessary to restore a property to good condition.
DEFICIENCY JUDGMENT: The imposition of personal liability on a borrower for the unpaid balance of a mortgage secured loan after foreclosure has failed to satisfy the full amount due to the lender.
DELINQUENCY: Failure to make payments when due.
DEMAND: 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
DEMAND FEATURE: A feature that defines circumstances under which the remaining principal and interest amount of the loan is due and payable on demand.
DEPRECIATION: A decrease in value to real property improvements caused by age, deterioration or functional obsolescence.
DEROG LETTER: A letter written by the borrower that explains any derogatory information or reporting on the credit report.
DISBURSEMENTS: Payments made on behalf of the borrower pursuant to the instructions on the HID Settlement Statement.
DISCHARGE: 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
DIVORCE DECREE: A document issued by the court that dissolves the marriage relation
DOCS: Abbreviation for mortgage loan documents.
DOWER RIGHTS: A common law interest that a wife acquires in her husband's property at the time of his death. Dower has been abolished in most states.
DOWN PAYMENT: The difference between the purchase price and the mortgage amount for home purchase transactions.
DR: An acronym for debt ratio.
DUPLEX: Any building containing 2 separate dwelling units.
E
EARNEST MONEY: The cash deposit paid by the prospective buyer of real property, as evidence of good faith intentions, to complete the purchase transaction
EFFECTIVE AGE: Age of a structure based upon its present condition rather than actual age. Takes into account rehabilitation and maintenance
EFFECTIVE DATE: This is the date a new mortgage payment is effective-the month following the rate change date .
ENCROACHMENT: Generally, an improvement, such as a wall, fence or building, that extends onto the property of another
ENCUMBRANCE: A claim, lien, charge or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title subject to such encumbrances
ENDORSE: 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.
ENDORSEMENT: An addition to a title insurance policy that adds or subtracts coverage.
EQUAL CREDIT OPPORTUNITY ACT (ECOA): A Federal act passed in 1974 that prohibits discrimination in lending on the basis of sex, marital status, race, color, religion, national origin, age or receipt of public assistance.
EQUITABLE INTEREST: 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
EQUITY: Interest or value that an owner has in real estate over and above the liens against it.
EQUITY LINE OF CREDIT: 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.
ESCROW: 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
ESCROW INSTRUCTIONS: 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
ESTATE (REAL PROPERTY): Describes the extent and character of a person's rights and interest in real property. Two types of estates frequently financed by mortgage lenders are the fee simple and the leasehold estate. See FEE SIMPLE ESTATE. LEASEHOLD ESTATE
EXCEPTIONS TO TITLE: Claims against the property as of the date of the title report.
EXPERIAN (EXP): The name of a national credit bureau
EXTERNAL OBSOLESCENCE: 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
F
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
FANNIE MAE: The nation's largest mortgage investor created in 1968 by an amendment to Title III of the National Housing Act. This stockholder-owner corporation, a portion of whose board of directors is appointed by the President of the United States, supports the secondary market in mortgages on residential property
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
FEE SIMPLE ESTATE: An estate under which the owner is entitled to unrestricted powers to dispose of the property, and under which the property can be left by will or inherited. Commonly, a synonym for ownership
FICO: The name given to a numerical score assigned by credit bureaus to measure a borrower's credit characteristics.
FINAL DISPOSITION: The "end" of the loan application process, which may happen via denial, withdrawal, incompleteness or funding
FINANCE CHARGE: 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
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
FISCAL YEAR: The accounting year used by corporations for tax purposes. A fiscal year runs 12 months, but does not necessarily begin in January
FIXED INCOME: 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
FIXED-RATE MORTGAGE: A mortgage having a rate of interest that remains the same for the life of the mortgage
FLOOD INSURANCE: Insurance indemnifying against loss by flood damage. Required in federally designated special Flood Hazard Areas. The insurance is private but federally subsidized
FLOOR: The lowest an adjustable-rate mortgage rate can ever be during the life of the loan.
FLOOR RATE: The start rate on an adjustable-rate program
FORBEARANCE: A lender's act of refraining from taking legal action despite the fact a mortgage is in arrears. It's usually granted when a mortgagor makes a satisfactory arrangement by which the arrears will be paid at a future date.
FORECLOSURE: A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner of property in order to sell the property to satisfy a lien against it.
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
FREE AND CLEAR: Real property against which there are no liens, especially voluntary liens
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.
FULL DISCLOSURE: In real estate, revealing all the known facts that may affect the decision of a buyer or tenant.
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%.
FUNCTIONAL OBSOLESCENCE: Anything about the design or construction of a property that negatively affects its value. An example of this would be a property with 5 bedrooms and only 1 bathroom
FUNDING: The disbursement of loan funds, either by check or by wire transfer to the title company
G
GARNISHMENT: A legal proceeding under which a person's money is in control of another and is taken for payment of a debt. The amount that may be taken is set by statute and, in most states, a judgment is necessary before garnishment
GIFT LETTER: 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
GRACE PERIOD: The period of time between the contractual due date and the date a late charge will be assessed
GRANDFATHER CLAUSE: 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
GRANT DEED: A written instrument used to transfer or convey real property. A grant deed contains warranties against prior conveyances or encumbrances
GRANTEE: One who received property rights when a grant is made. Generally, the buyer or purchaser of real property
GRANTOR: One who grants property or property rights to another
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.
H
HAZARD INSURANCE: Insurance protecting real property against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy
HOLDBACK: A portion of a mortgage loan held back by the lender from the customer until a contingency is met by the customer. An example of a contingency would be repairs needed for a property's roof. Upon completing the required repairs, the lender releases the held back funds to the borrower.
HOME MORTGAGE DISCLOSURE ACT (HMDA): This act requires Ameriquest 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' 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.
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.
I
IMPOUND ACCOUNT: Account held by the lender for the payment of taxes, insurance or other periodic debts against real property
INDEX: A published interest rate against which lenders measure the difference between the current interest rate on an adjustable-rate mortgage and that earned by other investments , which is then used to adjust the interest rate on an adjustable-rate mortgage. Examples include LIBOR, the Prime Rate and Treasury indices. The Wall Street Journal publishes index information.
INITIAL ADJUSTMENT CAP: This is the 1st rate adjustment on an adjustable rate mortgage loan
INQUIRIES: An indication of credit investigations made by companies that are considering granting credit to a person who appears on the credit report
INSTRUCTIONS TO TITLE: A form that instructs the title company how to record a lien against a property and issue a title insurance policy
INTEREST: Money charged over time for the use of money
INTEREST BEARING: A form of interest calculation in which the loan is charged at a daily or monthly rate on the current outstanding balance.
INTEREST RATE: Percentage paid for the use of money, usually expressed as an annual percentage.
INVESTMENT INCOME: Money earned from investments of money, such as stock dividends and annuity payments.
INVESTMENT PROPERTY: Property used for investment purposes
INVOLUNTARY LIEN: 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.
J
JOINT OWNERSHIP: Legal title shared by 2 or more persons or entities. Such as joint tenancy, tenancy in common and community property
JOINT TENANCY: A form of holding title in which the property is owned by 2 or more persons who may have rights of survivorship
JUDGMENT: The decision of a court of law; debts resulting from a court order for payment. Money judgments, when recorded, become a lien against the defendant's property
JUDICIAL FORECLOSURE: A court supervised foreclosure process used in states using a mortgage or security deed.
JURAT: A certificate attached to a document stating where, when, before whom and by whom the document was signed
K
L
LAND:Undeveloped land
LAND BURDEN: An agreement granting limited permission to use the property
LAND CONTRACT: An installment contract for sale with the buyer receiving equitable title and the seller retaining legal title
LEASE OPTION TO PURCHASE: A lease containing a clause that allows the tenant the right to purchase the property under specified conditions
LEASEHOLD: A tenant's right to occupy real estate during the term of the lease. This is a personal property interest
LEASEHOLD ESTATE: A kind of real estate ownership through which the property owner doesn't hold title to the property , but instead has use of the property subject to the terms of the lease.
LEGAL DESCRIPTION: A method of geographically identifying a parcel of land that is acceptable in a court of law
LEGAL TITLE: The manner in which property ownership is recorded with the county in which the property is located .
LIABILITIES: The debts of a person or business
LIBOR: 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
LIEN: A secured financial interest or legal encumbrance on a property. For example, a secured loan appears as a lien on the property's title report.
LIEN POSITION: The order in which liens will be repaid when the property is transferred to a new owner
LIFETIME CAP: 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.
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
LIQUID ASSETS: Cash or assets, such as checking/savings accounts, stocks/bonds, that are immediately convertible to cash
LIS PENDENS: A notice filed or recorded for the purpose of warning all persons that the title or right to the possession of certain real property is in litigation; literally "suit pending"; usually recorded so as to give constructive notice of pending litigation
LOAN AMOUNT: 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.
LOAN RISK: The risk category assigned to a loan, which estimates the probable risk of delinquency and loss in the future.
LOAN TERM: 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
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
M
MARGIN: A constant number, set in the terms of the note, added to an rate index to compute the interest rate on an adjustable-rate mortgage. This fixed number is added to an index to determine the new interest rate when a new change period begins
MARKET VALUE: The highest price a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time
MARKETABILITY: The probability of selling property at a specific time, price and terms
MECHANICS LIEN: A lien created by state law for debts owed to a carpenter, contractor, plumber or other entity hired by the property's titleholder for services performed or materials provided to repair or improve the property
MERGED CREDIT PROFILE (MPR): A report combining credit information from as many as 3 different credit bureaus
MIXED-USE PROPERTY: 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.
MODIFICATION AGREEMENT: In the mortgage lending industry, a written directive to the title company to correct a typographical error on instructions to title.
MORTGAGE: A written instrument that creates a lien upon real estate as collateral for the payment of a specified debt. The borrower retains possession and use of the property
MORTGAGE BANKER: 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
MORTGAGE BROKER: A mortgage broker is one who arranges financing for a borrower by placing loans with lenders. Mortgage brokers are paid a fee by the borrower or the lender when the loan closes
MORTGAGE LATE: More than 1 payment due at the same time the most recent payment is due
MORTGAGEE: The lender.
MORTGAGOR: The borrower
N
NATIONAL NOTARY ASSOCIATION: An association that sends out necessary application materials and supplies to initiate one's notary commission
NEGATIVE AMORTIZATION: 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.
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
NET INCOME: 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: The difference between total assets and total liabilities of an individual, corporation, etc
NON-CONFORMING USE: A property that doesn't conform to the present zoning of the area it's in
NOCASH-OUT REFINANCE: A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).
NON-LIQUID ASSET: An asset that cannot easily be converted into cash
NON-OWNER OCCUPIED: A property used as a residence by a renter/tenant instead of the owner of the property
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
NOTARY PUBLIC: One who is authorized by the state or Federal government to administer oaths and to attest to the authenticity of signatures
NOTE: 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
NOTE RATE: The interest rate stated on a mortgage note
NOTICE OF DEFAULT (NOD): A notice filed with a county records office to show that the borrower under a mortgage or deed of trust is in default
NOTICE OF RECISION: Borrowers' signed acknowledgement that they wish to cancel their loan.
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
O
OBLIGATIONS: Any debt or recurring payment the borrower is obligated to pay, except for mortgage payments
OBSOLESCENCE: Condition or process of falling into disuse
ORIGINAL PRINCIPAL BALANCE: The total amount of principal owed on a mortgage before any payments are made
ORIGINATION FEE: A 1-time setup fee charged by the lender. One of the lender's charges to a borrower for handling a loan transaction
OTC: (The Office of Thrift Supervision). Charters federal thrifts, serves as the primary federal examiner and regulator of federal and state-chartered savings associations, and administers laws governing savings and loan holding companies
OVERIMPROVEMENT: An improvement, excessive in cost or size, in relation to land value or value of surrounding improvements
OWNER OCCUPIED: Designation given to property used as the owner's residence
OWNER FINANCING: A property purchase transaction in which the property seller provides all or part of the financing
P
P & L: An abbreviation for profit and loss statement
PAR: The principal amount of a mortgage with no premium or discount
PARTNERSHIP: 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
PAY STUB: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 ADJUSTMENT PERIOD: The length of time (typically a year) between changes to the AML borrower's P&I payment
PAYMENT BUY DOWN: Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.
PAYMENT CAP: A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.
PAYMENT DISCOUNT: In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers
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
PAYMENT SCHEDULE: 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 RATE CAP: This cap limits how much the interest rate can change in the future on an adjustable-rate mortgage
PERIODIC PAYMENT CAP: A limit on the amount that payments can increase or decrease during any one-adjustment period
PERSONAL PROPERTY: Any property that is not real property
PITI: Acronym for principal, interest, taxes and insurance
PLAINTIFF: An individual or entity who files a legal action against another
PLANNED UNIT DEVELOPMENT (PUD): A single-family residence located in a community with association dues and other required monthly payments
PLAT MAP: 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
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
POINTS: Each point is an amount equal to 1% of the principal amount of an investment or note
POWER OF ATTORNEY: An authority by which 1 person authorizes another to act on his or her behalf. A power of attorney can be limited to specific areas or be general
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
PREPAID FINANCE CHARGE: The finance charges charged at closing exclusive of interest. Examples include points, processing and application fees, tax certification, etc
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
PREPAYMENT: Payment of mortgage loan, or part of it, before due date.
PREPAYMENT PENALTY: A charge which is assessed when the loan is paid before it's due to compensate the investor for the loss of anticipated interest income
PRIMARY CUSTOMER: The primary borrower on the loan
PRIMARY RESIDENCE: 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
PRINCIPAL: 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 against a loss by a lender normally required in the event the lender has lent more than 80% of the value of the property securing the loan. The premium is paid by the borrower and is included in the mortgage payment
PRO RATE: To divide in proportionate shares, such as taxes, insurance, rent or other items that buyer and seller share as of the time of closing, or other agreed upon time
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
PROMISSORY NOTE: 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
PROPERTY TAXES: Generally, a tax levied on both real and personal property. The amount of the tax is dependent on the value of the property
PUBLIC AUCTION: A meeting in an announced public location to sell property to repay a mortgage that is in default
PURCHASE AGREEMENT: The agreement made between the buyer and seller of a property, containing the purchase price and contingencies of the sale
PURCHASE MONEY TRANSACTION: The acquisition of property through the payment of money or its equivalent.
Q
QUALIFYING RATIOS: Guidelines applied by lenders to determine how large a loan to grant a homebuyer
QUITCLAIM DEED: A deed operating as a release; intended to pass any title, interest or claim that the grantor may have in the property, but not containing any warranty that such title is valid, nor containing any warranty or covenants for title
R
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
RATE CAPS: (Also called "Interest Rate Caps"). A limit on the amount of which the interest rate charged to the borrower can be changed
RATE LOCK: A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.
RE-RECORDING: The recording of a deed for a second time to correct an error contained in the deed originally recorded
REAL ESTATE BROKER: A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner
REAL ESTATE OWNED: (REO). A term frequently used by lending institution as applied to ownership of real property acquired for investment or as a result of foreclosure.
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: 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
REALTOR: A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
REBUILD LETTER: 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
RECISION: The legal remedy for canceling, a contract and restoring the parties to their original positions; a return to status quo
RECONVEYANCE (RECON): An instrument used to transfer title from a trustee to the property owner when title is held as security for a debt. Most commonly used upon payment in full of a mortgage or trust deed
RECORDING: 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
RECORDING CONFIRMATION: Notification from the title company verifying the lien has recorded as instructed
RECORDING FEES: The amount charged by a public records office to record the security instrument within the county
REFINANCE (REFI): The creation of a new loan to pay off existing debts
REGULATION Z (REG Z): Federal Reserve regulation issued under the Truth-in-Lending Law, which requires a credit purchaser be advised in writing of all costs connected with the credit portion of the purchase
REHABILITATION MORTGAGE: A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property
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 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 BALANCE: The amount of principal that has not yet been repaid
REMAINING TERM: The original amortization term minus the number of payments that have been applied.
RENTAL AGREEMENT: 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
REPAYMENT PLAN: An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."
REPLACEMENT RESERVE FUND: A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc
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
RESCIND: To void or cancel in such a way as to treat the contract, or other object of the rescission, as if it never existed
RESTRICITVE COVENANTS: Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)
REVOLVING LIABILITY: A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
RIDER: A rider is an addition to the security instrument
RIGHT OF FIRST REFUSAL: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others
RIGHT OF INGRESS OR EGRESS: The right to enter or leave designated premises
RIGHT OF SURVIVORSHIP: If one property owner dies, all ownership rights automatically belong to the surviving owner
ROOM RENTS: Income a homeowner receives from renting rooms in the same property in which they live
RTC: (Resolution Trust Corporation). Formed to resolve thrift failures over the next three years and dispose of their assets and liabilities.
RURAL: 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
S
SATISFACTION: 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
SCHEDULE A: 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: A section of the Preliminary Title Report/Title Commitment that lists exceptions to title if any
SECOND MORTGAGE: A 2nd loan, on the same property, that is in a junior lien or subordinate position
SECONDARY MORTGAGE MARKET: The buying and selling of existing mortgages
SECONDARY FINANCING: A loan secured by a 2nd mortgage or trust deed of real property
SECONDARY MARKET: The financial markets where groups of loans are sold to investors. Example: Primary mortgage lenders originate loans while the secondary market sells funded loans.
SECONDARY RESIDENCE: A property used by a person as a second residence, not as an investment
SECTION 32: 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
SECURITY INSTRUMENT: 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.
SELLER PROVIDER FUNDS: (Also called "Seller Contributions"). Seller-provided funds include all transaction cost paid by the seller except the real estate agent's (or brokers) fee
SERVICING: The operations a lender or servicer performs post-origination to manage a loan, such as collection of payments, payment of taxes, insurance, property inspections and so on
SERVITUDE: A burden resting upon one estate for the benefit or advantage of another. An agreement granting limited permission to use the property
SETTLEMENT STATEMENT: Final statement of the actual settlement costs of the loan . A Federal requirement under RESPA.
SIMPLE INTEREST: 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
SITE ANALYSIS: 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
SLAB: 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
SOLE OWNERSHIP: Legal title in a single individual or an entity
SOLE PROPRIETORSHIP: 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
SPECIAL ASSESSMENTS: A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, streetlights, etc.
SPECIAL LIEN: A Lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See Lien.)
SPECIAL WARRANTY DEED: A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.
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
START RATE: The initial interest rate charged on an adjustable-rate mortgage loan.
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
SUBMISSION: This refers to a complete loan application package submitted for loan approval
SUBORDINATE: 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
SUBORDINATION AGREEMENT: An agreement by which a lienholder agrees to accept a lien position junior to that of a later-recorded lien. For example, when a lienholder 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
SUBURBAN: The area around a city. Usually residential with some small businesses
SUPPLEMENTAL TAXES: Additional taxes assessed by the city and/or county on property. These taxes are in addition to any taxes impounded in an escrow account
SURETY BOND: Obligation of a guarantor to pay a second party upon default by a third party in the performance it owes to the second party
SURVEY: A document prepared by a licensed surveyor that verifies the accuracy of a property's legal description, plat maps, easements or other information found in a title search
T
TAX LIEN: 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
TEASER RATE: Similar to a Payment Discount, but implies either an unusually large initial rate discount or an attempt by the lender to lure an otherwise unqualified borrower into the mortgage
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
TEMPORARY WORKER: An individual who registers with a temporary employment agency to be placed on work assignments at companies on a temporary basis.
TENANCY BY THE ENTIRETY: A form of ownership by husband and wife whereby each holds title to the entire property with right of survivorship. In the event of the death of one, the survivor takes the entire property to the exclusion of the deceased's heirs
TENANCY IN COMMON: A form of holding title in which the property is owned by 2 or more persons whereby each tenant holds an undivided interest in the property and no right of survivorship
TENANT STOCKHOLDER: The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement
THIRD-PARTY ORIGINATION:A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market
TITLE:The right or ownership in land; also, the evidence of such ownership
TITLE CLOSING: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.
TITLE COMMITMENT: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
TITLE INSTRUCTIONS:A document that instructs a title company how to record a lien against a property and issue a title insurance policy
TITLE INSURANCE: Insurance against certain loss resulting from undisclosed defects of title to a specifically described parcel of real property
TITLE SEARCH: A review of all recorded documents affecting a specific piece of property to determine the present condition of claims against the property
TOTAL DEBT RATIO: Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio
TOTAL EXPENSE RATIO: Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts
TOTAL MONTHLY INCOME: Gross monthly income from all income sources, after appropriate deductions are taken
TRADELINE: Credit items reported on a credit report
TRADE EQUITY: Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased
TRANSFER OF OWNERSHIP: Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.
TRANSFER TAX: State or local tax payable when title passes from one owner to another.
TREASURY INDEX: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.
TRUSTEE: A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.
TRUST DEED: An instrument used in many states in place of a mortgage. Grants an interest in the property as collateral for a loan and, when recorded with the county, creates a lien having priority over later-filed mortgages or trust deeds
TRUTH-IN-LENDING DISCLOSURE: 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
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.
Two- to four-family property: A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed
U
UNDERWRITING: The analysis of a customer's credit capacity and the loan's collateral upon which a risk is given
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
UNSECURED LOAN: A loan that is not backed by collateral
UPDATE ADDENDUM: An update to the Preliminary Title Report/Title Commitment that reflects any changes to title since the original title report was prepared
URBAN: 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
USAGE RESTRICTION: 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
USURY: The laws of a jurisdiction regulating the changing of interest rates. A loan that changes interest in excess of those permitted is a usurious loan
V
VACANCY FACTOR: A multiple by which gross monthly rental income is multiplied. The vacancy factor reduces the owner's monthly rental income to allow for months when units are vacant and the owner is not receiving full rental income
VALUATION: The estimating of value
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
VERFICATION OF MORTGAGE (VOM): Documentation that establishes the customer's mortgage payment history
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 that confirms the customer works in the job and at the employer listed on the handwritten loan application and receives a stream of income from this source. Verifications of Employment confirm the customer's position title, date of hire, employment type, hours of work per week, frequency of payment and salary
VERIFICATION OF SECONDARY FINANCING FUNDS FORM: A form that must accompany all loans that have secondary financing
VESTING: Names of the borrowers and the manner in which they hold legal title to the property. May include marital status.
VOD: Acronym for Verification of Deposit
VOE: Acronym for Verification of Employment
VOLUNTARY LIEN: 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
VOM: Acronym for Verification of Mortgage
VOR: Acronym for Verification of Rent
W
W-2: 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
WARRANTY DEED: A deed used in many states to convey fee title to real property. A deed in which the grantor or seller warrants or guarantees good title is being conveyed as opposed to a quitclaim deed that contains no representation or warranty as to the quality of title being conveyed
WHOLESALE LENDER: 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
WITHHOLD: 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
WRAPAROUND MORTGAGE: A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee
X
Y
Z
ZONING: The division of a city or county by legislative regulations into areas specifying the permitted uses allowable for the real property in these areas.
ZONING ORDINANCE: The acts of an authorized local government establishing building codes, and setting forth.