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14-Finance

TermDefinition
Adjustable Mortgage Rate A formal declaration made by the garantor in the presence of an individual official, usually a public notary, that the deed was signed voluntarily
Alienation Clause -Due-On-Sale Clause Mortgage loan provision which allows the lender to demand the entire balance due if the property is sold, or the lender can allow the loan to be assumed by a credit worthy buyer and with an interest rate increase
All Inclusive Mortgage-Wraparound Mortgage-Constant Mortgage Plan A junior mortgage which includes the amount of any exitisting loan(s) plus the balance of the seller's equity after deducting the buyer's down payment.
Amoritized Loan-Full Amoritized Mortgage A long-term repayment plan which provides for equal monthly payments of principal and interest.
Assume and Agree to Pay When a purchaser assumes and agrees to pay an existing loan, they become primarily liable for repayment.
Balloon Payment A lump sum pay off of the unpaid balance of a loan, usually at the end of the loan term.
Beneficiary The lender when a trust deed is used in lieu of a mortgage
Blanket Mortgage A mortgage loan arrangement where several parcels of land are pledged as security, used primarily with subdivision financing
Budget Mortgage Mortgage loan in which monthly payments include not only principal and interest but also one-twelfth of the annual cost for taxes and insurance
Certificate of N oDefense-Estoppel Certificate The borrower's written acknowledgement fo the loan balance.
Certificate of Sale Issued to the successful bidder at a foreclosure if the state provides a statutory period of redemption to the defaulting ownder.
Chattel Mortgage-Security Agreement An instrument which gives a lender a security interest in personal property pledged as collateral for a loan
Closed Mortgage One which does not allow the borrower to pay off the loan before maturity
Closing Costs Prorated charges by the lender including costs ofmaking the loan and a service charge can be paid by the buyer or seller
Collateral Property pledged to a lender as security for a loan
Conditional Commitment An official apraisal of a specific property. Referred to as cost of acquisition. Used to determine the amount of loan the FHA will insure.
Construction Loan A short-term interim loan to finanace the cost of labor and materials necessary to complete construction of a building or other project
Converntional Loan One that is neither insured nor guaranteed by the government
Credit Report A written report detailing the credit history of a prospective borrower, used by a lender to help determine credit worthiness
Deed in Lieu of Foreclosure A deed given to a lender by a defaulting borrower who wishes to avoid foreclosure preceedings. The lender may or may not accept the deed.
Deficiency Judgement A judgement ordered by the court against the borrower when the proceeds from a foreclosure sale are insufficient to satisfy the debt.
Demand Deposits A bank's deposit which are available to the depositor with no advance withdrawal notice required
Discount Rate The rate of interest the Federal Reserve System cahrges memener banks to borrow money
Disintermediation Occurs when withdrawals exceed deposits from savings and loan associations or other similar institutions because alternative investments offer a more attractive return.
Due-On-Sale Clause -Alienation Clause Mortgage loan provision which allows the lender to demand the entire balance due if the property is sold, or the lender can allow the loan to be assumed by a credit worthy buyer and with an interest rate increase
Entitlement The amount of loan guantee that a veteran is eligible to reveive for a VA loan
Equitable Title The buyer's interest in a property from the time they enter into a contract intil legal title is conveyed at closing. The ultimate right to receive legal title
Equity The difference between the value of a property and the outstanding loan balance.
Equity of Redemption The borrower's right to redeem property at any time after default but before a foreclosure sale, by paying off the debt to the lender's satifaction.
Estoppel Certificate The borrower's written acknowledgement fo the loan balance.
Exculpatory Clause Mortgage loan provision in which the lender waives the right to seek a deficiency judgment against the borrower. The borrower's personal liability on the note is eliminated, leaving the property itself as the lender's sole security for the debt.
Fannie Mae An agency which buys loans from lenders, to assure them of a continuimng flow of fund. Owned by the stockholders
Federal Reserve System Agency responsible for regulating and monitoring the lending practices of federally chartered commercial banks. Alos influences credit activity by regulationg the amount of funds tht these banks must keep on reserve.
FHA Insured Loan A loan fully insured by the Federal Housing Administration
Firm Commitment A commitment to insure that a loan will be available for a given buyer.
First Mortgage-Subordination Clause-Senior Mortgage One that has the earliest recording date in most instances
Foreclosure A legal procedure whereby mortgaged property is either sold to a third party or transferred to the lender in order to satify the debt
Foreclosure by Advertisement-Foreclosure by Power of Sale-Nonjudicial Foreclosure A legal procedure whereby the lender is authorized by the loan agreement to sell the mortgaged property upon default and to apply the proceeds tot he debt. Sale must be advertised and an auction sale must be help
Freddie Mac - (FHLMC) Federal Home Loan Mortgage Corporation A seondary mortgage market company, simila to RNMA, reporting to its own Board of Directors
Ginnie Mae - (GNMA) Govt National Mortgage Association Pass Through Securities was established in order to buy special assistance mortagages carrying below market interest rates. Under HUD, deals only in VA and FHA mortages
Good Faith Estimates RESPA required estimate of all settlement charges to be assessed against the borrower at closing. Lender provide this when applying within 3 days
Graduated Payment Mortgage (GPM) A mortgage loan which provides for reduced payments in the first 5-10 years in exchange for higher tha usual payments which then remain fixed for the balance of the term.
Holder in Due Course One who, in good faith and without notice of defect, pays valuable consideration to receive a note before it is due
Impounds Monthly payments of taxes and insurance collected by the lender to assure payment of these items when they become due.
Installment Land Contract-Land Contract-Contract for Deed The buyer typically makes a small down payment, takes possession, pays the taxes, and makes installment payments of principal and interst tot he seller until the purcahse price is paid in full. Seller retains title until contract is met.
Lien Theory The legal position adopted by some states, holding that a mortgage only creates a lien rather than conveying title to the lender.
Loan Discount Prepaid interest, paid by a borrower in seeking a loan, designed to increase the lender's yield or profit.
Loan Servicing The lender's administrative duties after a loan is placed for instance, mailing out bill, keeping records of loan payments, maintaining, excrow accounts, making payments for taxes and insurance, and sending out delinquent notices.
Loan Transfer Fee A charge for changing the lender's records when a buyer takes over the seller's existing loan
Loan-To-Value Ratio The % relationship between the amount of loan and the value of the property pledged as security.
Lock-In Clause Mortgage provision which prevents the loan from being paid off early
Maggie Mae- Mortgage Guaranty Insurance Corporation A private secondary mortgage market program designed to provide an outlet where lenders can sell their conventioanl loans insured by MGIC
Mortgage Aninstrument which secures a promissary note by either giving the lender a lien against certain property or conveying title to, depending on state law.
Mortgage in Possession A lender who petitions the cout to appoint a receiver to manage income producing property during the period after default but before a foreclosure
Mortgaging Clause In lien theory state, this provision gives the lender a lien int he property pledged as security.
Mortgagor Borrower
Natioanl Banks Commercial banks which are chartered by the Federal Reserve System
Negative Amortization An increase in the principal loan balance due to an innsufficiaent amount of monthly payment to cover the accrued interests
Negotiable Instrument A written promise to pay a certain sum of money which may be trasnferred by endorsement or by delivery
Nonjudicial Foreclosure-Foreclosure by Power of Sale-Foreclosure by Advertisement A legal procedure whereby the lender is authorized by the loan agreement to sell the mortgaged property upon default and to apply the proceeds tot he debt. Sale must be advertised and an auction sale must be help
Notice of Lis Pendens Recorded notice which indicates that a lawsuit is pending
Open Mortgage A mortgage loan which allows the borrower to pay off part of all of principal without penalty at any time before it becomes due
Open-end Mortgage Entitle the borrower to recieve future advances of funds up to but not exceeding a specified limit
Owner's Rent Clause A mortgage provision which abligates defaulting borrowers to pay rent while remaining in possession
Package Mortgage A financing arrangment where the borrower pledges both real and personal property as a security for a loan
Partial Release Clause A provision in a blanket mortgage which obligates the lender to release each parcel help as securtiy upon payment of a specified sum.
Pass Through Securities An investment in a pool of mortgages wich allows different investors to participate in the same mortgage rather than in individual ones.
Pledge The transfer of property to be held by the lender as security for a loan
Pledged Account Mortgage (PAM) A mortgage loan which requires the borrower to make graduated payments and at the same times provides the lender with full monthly payments
Power of Sale Clause Mortgage provision which enables the lender to foreclose without filing a lawsuit against the defaulting borrower
Prepayment Clause-Priviledge Mortgage provision which allows the borrower to pay off part or all of the loan without penalty at any time before it become due
Prepayment Penalty A charge for paying off part or all of a loan before it becomes due
Prepayment Priviledge-Prepayment Clause Mortgage provision which allows the borrower to pay off part or all of the loan without penalty at any time before it become due
Primary Mortgage Market Where individual homebuyers go to obtain mortgage loan financing
Promissary Note The borrower's written promise to repay a loan. The note specifies the exact terms and conditions under which the debt is to be paid
Property manager One who is given the repsonsibility of maintianing, preserving, and enhancing an owner's property and a t the same time generating the highest possible net retrun from it
Purchase Money Mortgage A finance arrangement where the purchaser give the seller a note secured by a mortgage as part payment of the purchase price
Real Estate Settlement Procedures Act (RESPA) A federal law which requires lenders toinform potential homebuyers about various costs involved in arranging mortgage finances and which attempts to standardize settlement practices
Reciever A court-appointed official responsible for managing a property during the period beginning after default and continuing until foreclosure
Receiver Clause A mortgage provision which permits a court to appoint a receiver to manage income producing property during a period of default
Reconveyance Deed-Release Deed-Quitclaim Deed A deed executed by a trustee and delivered tot he trustor for the purpose of returning title upon full payment of a loan
Redling The unlawful practice of a lender refusing to make a loan soley on the basis of the particular neighborhood involved.
Regulation Z Adopted by the Federal Reserve to implement the Truth-in-Lending Law. The regulations provided lenders and those who help arrange credit for borrowers specific guidlelines to follow in disclosing to borrowers their exact cost of credit
Request for Reconveyance A lender's official request of the trustee to execute and deliver a reconveryance deed to the trustor as a result of paying off the loan
Reserve Requirements A federal regulation which requires certain lending institutions to keep a spcified amount of their funds on and and unavailable for loans or other use in order to influence the availability of credit
Sale Lease Back A financing arrangment which enables a business property owner to sellowned property with an agreement to lease it back on a long-term, net-lease basis fromt he investor who bought it
Satisfaction of Mortgage-Satisfaction of Piece a mortgage's written statement which cancels the debt and terminates all right in the property held as collateral.
Seasoned Loan One which has a history of prompt payments
Secondary Mortgage Market The market where loans are bought from local lenders in order to provide them with a constant supply of cash to originate more loans to homebuyers
Security Agreement-Chattel Mortgage An instrument which gives a lender a security interest in personal property pledged as collateral for a loan
Security Deed A security instrument which conveys title to the lender until the debt is satified. At which time the instrument is cancelled
Senior Mortgage-First Mortgage One that has the earliest recording date in most instances
Shared Appreciation Mortgage (SAM) A financing arrangment in which the borrower recieves a below-market interest rate by allowing the lender to share in the property's future appreciation in value
Statutory Right of Redemption A delinquent borrower's right to redeem property by paying off the debt within a specified period of time after a foreclosure sale
Straight-Term Mortgage The borrower makes periodic pauments ofinteres only for the term of the loan plus a balloon payment at maturity
Strict Foreclosure A legal procedure which enables the lender to take the title from a defaulting borrower without a foreclosure sale. If the debt is not paid, title is awarded tot he lender
Subject to A method of taking over a seller's exisiting loan without assuming any personal liability for the payment
Subordination Clause A mortgage provision which makes the lien automatically subordinate in priority to a specified existing loan or anticipated future lien
Swing Loan A short term allowing the purchaser to purchase a new property based on the strength of the equity from theproperty the purchaser is selling
Take-Out Commitment A lender's commitment to a contractor that permanent financing will be available to pay off a construction loan whenthe building is completed
Thrift Insitutions Saving and Loan Association and Saving Banks
Time Deposits A banks savings deposit that may be used to finance real estate pledged as security of the debt
Title Theory The legal position adopted by some states holding that the mortgage conveys title to the lender
Trust Deed-Deed of Trust A deed used in many states in lieu of a mortgage. Title is held by a trustee on behalf of a lender (beneficiary) until the borrower (trustor) repays the loan
Trustee A neutral 3rd party who hold title on behalf of a lender until the debt is paid
Trustor Borrower who executes a trust deed
Usury The legal limit of interest imposed by state laws, does not apply to VA and FHA loans
VA Guaranteed Loan A mortgage loan where the VA guarantees a lender against the loss at foreclosure up to a certain amount for a qualified veteran
Warehousing A loan correspondent's practice of holding mortgages in their own name until they can be assembled into a package of loans and sold to an investor.
Wraparound Mortgage A junior mortgage which includes the amount of any exitisting loan(s) plus the balance of the seller's equity after deducting the buyer's down payment.
Created by: judylwaters