Mortgage Dictionary

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Realtor

A real estate professional who is a member of the National Association of Realtors.

Real Estate Broker

An individual who often owns a real estate company or is in a management position, and who is licensed to represent a buyer or a seller in a real estate transaction.

Real Estate Settlement Procedure Act (RESPA)

A law that states how mortgage lenders must treat those who apply for real estate loans on property with 1-4 units.

Example : A lender is required to provide a good faith estimate of closing costs within 3 days of an application being filed.

Redlining

The practice of refusing to provide loans or insurance in a certain neighborhood.

Refinancing

Repaying an existing loan from the proceeds of a new loan on the same property.

Reconveyance

When a mortgage is paid off in full, the lender conveys the property back to the owner.

Recording

The act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property.

Recision

The cancellation of a contract. When refinancing a mortgage on a principal residence the law gives the homeowner three days to cancel the contract

Recourse

The right of the holder of a note secured by a mortgage or deed of trust to claim money from the borrower in default in addition to the property pledged as a collateral.

Regulation Z (Reg Z)

A federal regulation requiring creditors to provide full disclosure of the terms of a loan including the terms of the loan and the annual percentage rate (APR).

Real Estate Investment Trusts (REIT)

A trust that uses investors money to purchase and manage real estate. Investors realize some of the tax advantages in owning real estate.

Right of survivorship

The right of a surviving joint tenant to acquire the interest of a deceased joint owner.

Reverse Mortgage

A mortgage used by the elderly that provides income as long as they live in exchange. Payments made cause the loan principal to increase.

Rollover Loan

A loan that is amortized over a long period of time (e.g. 30 years) but the interest rate is fixed for a short period (e.g. 5 years). The loan may be extended or rolled over, at the end of the shorter term, based on the terms of the loan.

Restrictive Covenants

Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer.

Sales Agreement or Sales Contract

See Agreement of Sale.

Savings & Loan

Depository institutions that specialize in originating, servicing and holding mortgage loans primarily on owner occupied residential property.

Secondary Mortgage Market

The market where banks, savings & loans and mortgage bankers can sell mortgages to investors like Fannie Mae or Freddie Mac.

Second Home

Also known as a vacation home. This home is different from an investment property as it is not rented, but used occasionally by the owners.

Second Mortgage

A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages generally carry a higher rate than a first mortgage since they represent a higher risk for an investor.

Section 8 Housing

Privately owned rental units participating in the low-income rental assistance program. Landlords receive subsidies on behalf of qualified low-income tenants, allowing the tenants to pay a limited proportion of their incomes toward the rent.

Section 1031

The section of the IRS that deals with tax free exchanges of certain property. General rules for tax free exchanges are :
The properties must be :

• Exchanged
• Similar
• Used for business or as an investment

Security

Property that serves as collateral for a debt.

Servicing

The act of billing, collecting payment, filing reports, managing impound accounts and handling defaults on a mortgage.

Settlement Cost (HUD guide)

A booklet that provides an overview of the lending process and is required to be given to consumers after the loan application is completed.

Settlement Statement

See HUD 1

Special Assessment

A special tax imposed on property, individual lots or all property in the neighborhood to pay for improvements - street lights, sidewalks, etc.

Special Warranty Deed

The grantor does not warrant against title defects arising from conditions that existed before he/she owned the property. The seller warrants that he/she has done nothing to impair title.

Shared Appreciation Mortgage

A residential loan with a fixed interest rate that is below market, with the lender entitled to a specified share of appreciation of the property over an agreed upon time interval.

Sheriff's Deed

A deed given at the sheriff's sale in the foreclosure of a mortgage.

Single Family Housing (SFR)

A type of residential structure designed to include one dwelling.

Example : Town houses, detached units.

Spec House

A single family dwelling constructed by a builder in anticipation of finding a buyer.

Specific Performance

A legal action in which the court requires a party to a contract to perform the terms of the contract when the party has refused to fulfill its obligations.

Standard Uniform Loan Application (Form 1003)

A

standard loan application widely used in the mortgage industry.

Subdivision

A tract of land divided into lots suitable for home building purposes.

Subordination

A loan in a lower priority, for example a second mortgage is subordinate to a first.

Subject To (Purchasing subject to a mortgage)

The buyer agrees to make payments on the existing mortgage, without notifying the lender. The seller remains liable for making payments on the loan if the buyer does not make the mortgage payment. The buyer is not personally liable for mortgage payments, but must make payments to keep the property. See also Assumable Mortgage

Survey

Map made by a licensed surveyor who measures land and charts its boundaries, improvements and relationship to the property surrounding it.

Sweat Equity

Value added to a property due to improvements made personally by the owner.

Takeout Financing

A commitment to provide permanent financing upon completion of construction. The take out loan normally pays off the construction loan.

Tax Lien

Lien for nonpayment of taxes

Tax Sale

Public sale of a property at an auction by a government authority as a result of non-payment of taxes.

Teaser Rate

A low initial interest rate on a mortgage.

Tenancy at Sufferance

Tenancy established when a person who had been a lawful tenant wrongfully remains in possession of property after expiration of a lease.

Tenancy at Will

A license to use or occupy land and buildings at the will of the owner. The tenant may decide to leave the property at any time or must leave at the landlords will.

Tenancy by the Entirety

A form of ownership by husband and wife whereby each owns the entire property. In event of the death of one, the survivor owns the property without probate

Tenancy for Years

Created by a lease for a fixed term, such as 6 months, 2 years, etc.

Tenancy in Common

Ownership of a property by 2 or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the deceased is inherited by the beneficiary designated on the owner's will.

Tenancy in Severalty

Ownership of property by one person.

Time is of the Essence

Legal phrase in a contract requiring all references to specific dates and times noted in the contract be interpreted exactly.

Time Share

A form of property ownership under which a property is held by a number of people, each with the right of possession for a specified time interval. Time sharing is used mostly for vacation properties.

Title

Evidence that the owner of the property is in lawful possession. Evidence of ownership.

Title Insurance

An insurance policy which protects the insured against loss arising from defects in title. Title insurance policies are typically obtained for the buyer and the lender.

Title Report

A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects.

Title Search

An examination of the public records to determine the ownership and encumbrances affecting the property.

Town House

Residence which normally has 2 or more floors and is attached to other similar units. Town houses are commonly found in planned unit developments (PUDs) and condominiums.

Tract

A parcel of land, generally held for subdividing.

Transfer Tax

Tax paid to the city, county, state or other government entity upon sale of a property.

Triple-Net Lease

One in which the tenant pays all operating expense of the property. The landlord receives the net rent.

Trust Account

A separate bank account maintained by a broker or escrow company to handle all money collected for clients. A broker may not commingle these funds with his/her own funds.

Trust Deed

See Deed of Trust.

Trustee

A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

Truth in Lending

See Regulation Z.

Two-Step Mortgage

A mortgage in which the borrower receives a fixed rate for a specified number of years (most often 5 or 7), and then receives a new interest rate based on the terms in the note.

Underwriting

The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc.

Undivided Interest

An ownership right to use and possess a property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.

Unincumbered Property

Real estate with free and clear title.

Unimproved Property

Land that has received no development.

Unrecorded Deed

A document that transfers title from the grantor to the grantee without recording (i.e. providing public notice).

Usury

Charging a rate of interest greater than that permitted by law.

Vacation Home

See second home.

VA Loan

Home loan guaranteed by the U.S. Veterans Administration, enabling a veteran to buy a home with no money down.

Variable Rate Mortgage

See Adjustable Rate Mortgage

Verification of Deposit (VOD)

A document signed by the borrower's bank or other financial institution verifying the account balance and history.

Verification of Employment

A document signed by the borrower's employer verifying his/her starting date, job title, salary and probability of continued employment.

Waiver

The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege.

Warehousing

Mortgage bankers and other financial institutions make loans that are then periodically sold on the secondary market. After the loan is made but before it is sold - the loan is said to be in the lenders warehouse.

Warranty Deed

A deed conveying the title to a property with a warranty of a clear marketable title.

Wraparound Mortgage

A loan arrangement whereby the existing loan is retained an a new loan is added to the property.

Example : The seller sells his/her property for $200,000. The buyer puts $80,000 down. The seller has an existing loan balance of $100,000 for a remaining period of 25 years at an interest rate of 6%. The seller then makes a wraparound mortgage to the buyer, (where the seller acts as a lender) for $120,000 at 8%. The seller has to continue making payments on his old loan. They buyer has to pay the seller on the new loan. The buyer may at a later date refinance the property and close both loans.

Zero Lot Line

A form of housing where individual units are on separate lots, but are attached to one another. Example : PUD, townhouse.

Zoning

Areas may be zoned to specify use of a property i.e. residential, commercial, agricultural. These zoning ordinances are normally enforced by the city or the county.