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URE-FINANCE
| Question | Answer |
|---|---|
| Acceleration Clause | Allows a loan to become due and payable immediately if certain requirements are not met, such as making payments, maintaining the physical condition of the property or paying property taxes and hazard insurance. |
| Adjustable Rate Mortgage (ARM) | A loan where the interest rate is periodically adjusted based on a specific economic indicator. |
| Alienation Clause | A clause which allows the lender to call the loan due and payable immediately if the property is sold or the loan is assumed. |
| Amortized Loan | A loan which has regular monthly payments of both principle and interest. |
| Balloon Mortgage | A loan with a balloon payment at the end of its term. It could be a partially amortized or a straight loan or note. |
| Balloon Payment | Required payments larger than the regular payment. These payments are often made at the end of the loan, retiring the loan early |
| Blanket Mortgage | A loan that uses two or more parcels of real property as security. |
| Bridge, Gap, or Swing Loan | A short term loan to help the buyers have up-front funds to get into their new home, when the sale on the old one is going to close later than the closing to purchase the new one. |
| Certificate of Eligibility | Endorsement from the Veterans Administration indicating the right of a veteran to obtain a VA loan and the amount of his eligibility. |
| Certificate of Reasonable Value | The document required for a VA loan that verifies the value of property being used as security for the VA loan (VA appraisal). |
| Chattel Mortgage | A loan secured by personal property. |
| Collateral | A term that refers to security used for a loan. It may be real or personal property. |
| Compound Interest | Interest is paid on earned interest as well as on the principal. It is used in savings accounts. |
| Credit | An amount of money which will reduce what the buyer has to bring to closing, or increase the amount the seller gets at closing. |
| Debt Service | Mortgage payments of principle and interest. |
| Defeasance Clause | A clause in most loans written in favor of the borrower. It requires the lender to reconvey all interest in the property after the loan has been paid off. |
| Deficiency Judgment | A judgment obtained when a foreclosure sale fails to completely pay off a debt. |
| Discount Points | Money paid when a loan is initially obtained which is considered prepaid interest and lowers the interest rate. |
| Discount Rate | The rate charged by the Federal Reserve to member banks for money they borrow. It, along with reserve requirements, is one of the ways the Federal Reserve controls the economy. |
| Discounted Loan or Note | Selling a loan to the secondary money market for less than its face (original) value. This increases the yield (profit) on the loan. |
| Equity | The market value of a property minus the debts secured by the property. |
| Escalation Clause | A clause written into a loan or lease that allows for payments to be increased at specified times by stated amounts. |
| Federal Home Loan Mortgage Corporation (FHLMC) | Federal Home Loan Mortgage Corporation |
| Federal National Mortgage Association (FNMA) | Federal National Mortgage Association, a major secondary money market. It is privately owned, but Federally regulated. (FANNIE MAE) |
| Federal Reserve Bank | The bankers' bank |
| FHA Insured Loan | A government loan with a low down payment, insured by the borrower's payment of the Mortgage Insurance Premium (MIP). |
| Fully Amortized Loan | A loan that requires payments of both principal and interest. When the last payment is made, the loan is retired. |
| Government National Mortgage Association (GNMA) | Government National Mortgage Association. A Federal corporation which operates in the secondary market. (GINNIE MAE) |
| Graduated Payment Mortgage (GPM) | (GPM) A loan utilizing reverse or negative amortization. Payments begin below the normal, fully amortized payment and are then increased at a fixed rate for a set period of years. The low payment generates unpaid interest which is added to the balance |
| Growing Equity Mortgage | A loan where payments increase each year, thereby allowing the loan to be paid off many years sooner and a substantial amount of interest dollars to be saved. |
| Hazard or Homeowner’s Insurance | An insurance policy which indemnifies real property against loss resulting from physical damage to the property such as fire, vandalism, etc. |
| Impound, Reserve or Escrow Account | A trust account established to set aside funds for future needs relating to a parcel of real property. Those needs typically include such things as property tax and hazard insurance. |
| Index Lease | Rent payments are periodically adjusted based on an economic indicator, such as the consumer price index. |
| Interest Rate | Money paid during the term of a loan that is profit to the lender. It represents the return, or yield, on the lender's investment. |
| Interest Rate | Money paid during the term of a loan that is profit to the lender. It represents the return, or yield, on the lender's investment. |
| Jumbo Loan | |
| Junior Lien | Any loans or encumbrances which come after the one which was recorded first against the property. |
| Lender Guidelines | |
| Leverage | Using as much of other people's money and as little of your own as possible in order to buy property. |
| Lien | An encumbrance which is secured by real estate. |
| Loan to Value Ratio (LTVR) | The amount of debt secured by the property compared to the worth of the property, expressed as a percentage. |
| Mortgage | A document used to secure a loan. It is a judicial agreement, meaning if non-payment takes place, the holder of the promissory note can take it to court and the court will order the sheriff to foreclose. |
| Mortgagee | One who receives a mortgage as security for a loan or debt. |
| Mortgagor | A borrower who hypothecates property as security for a loan through the use of a promissory note and a mortgage. |
| Negative or Reverse Amortization | A loan that requires payments of no principal and only part of the interest. The unpaid interest is added to the principal. This technique is used on some graduated payment mortgages. |
| Non-disturbance Clause | A clause in a mortgage which protects the rights of the lessee if the property should be foreclosed by the lender upon the owner's default. |
| Non-recourse Loan | The terms of the loan stipulate that even if the lender receives less than the balance owed as a result of a foreclosure action, the debt is satisfied and the lender may not go after the borrower's personal assets. |
| Open-End Mortgage | A loan which can be increased up to an agreed upon maximum, similar to the way a credit card works. It is often used for construction loans and home equity loans. |
| Origination Fee | A fee (profit) charged by the lender to initiate a loan. |
| Package Mortgage | A loan that uses both real and personal property as security. |
| Par (interest rate) | The interest rate charged on a loan when there are no discount points involved. |
| Partially Amortized Loan | A loan requiring payments of both principal and interest, but when the final payment is made, a balloon payment is required to retire the loan. |
| Partially Disclosed Principle | The "other party" knows who the agent is, knows there is a principal, but is not told who the principal is. |
| Participation Loan | A loan where the lender becomes an investor or owner in the project for which the money is being loaned. |
| Prepayment Penalty Clause | This clause in a loan penalizes the borrower for paying off the loan earlier than agreed. It usually is placed in loans in times of falling interest rates to discourage refinancing. |
| Prepayment Privilege Clause | This clause in a loan allows the borrower to pay the loan off early. The amount of the monthly payments can be increased, with all of the extra payment applying to the principal |
| Primary Money or Mortgage Market | Those who originate loans of any type, regardless of the priority of the loan, are in this financial market. |
| Prime Rate | The interest rate that is charged a lender's most favored clients and is established by the major banks or lenders of America. |
| Purchase Money Mortgage | The seller is the lender and may be lending all or only part of the purchase price. |
| Reconveyance of Deed | The document a lender uses to return all interest in the property after the debt has been satified under a Trust Deed and Note. This is in accordance with the defeasance clause. |
| Refinancing | Obtaining a new loan, often at a lower interest rate, out of which the old loan is paid off. If the new loan is for more than the balance of the old, it generates tax-free cash for various uses, and the interest paid on it is deductible. |
| Release Clause or Partial Release Clause | When a blanket loan has been given, this clause will allow part of the property to be removed as security for the loan when certain requirements have been met, sometimes called a partial release clause. |
| Reverse Annuity Mortgage | When the mortgagee makes regular monthly payments to the mortgagor. The payments create the loan. It is used for elderly people who's homes are paid off or nearly so. The debt is not repaid until they either sell the house or die. |
| Satisfaction of Mortgage | The document used by the lender to reconvey all of his interest in a property, as required by the defeasance clause under a mortgage. |
| Seasoned Loan | A loan with a payment history. This feature of a loan is preferred by the secondary money market. |
| Secondary Money Market | Individuals or financial institutions who purchase existing loans. |
| Senior Lien | Refers to first mortgages or trust deeds or the debt first recorded against the real property. |
| Simple Interest | The type of interest that is computed each month on the unpaid principal balance. It is used in most mortgages. |
| Straight Note | A loan that requires payments of interest only, sometimes called a term loan. Usually the entire principal is paid off in one balloon payment at the end of the loan. |
| Subordination Clause | The clause in a loan that can alter the priority of a loan. |
| Take Out Loan | Once construction is completed and an appraisal obtained, this is a term referring to the permanent, long-term financing for the property. |
| Usury | Interest rates above the legal rate, or statutory limit. |
| VA Guaranteed Loan | A government loan that is guaranteed and does not require a down payment. |
| Waste | When the owner of the property commits destructive acts on the property or fails to keep up with maintenance requirements. |
| Wraparound Mortgage or All Inclusive Trust Deed (AITD) | A loan that encompasses one or more existing loans. It can be created with an All Inclusive Trust Deed. |
Created by:
ryan0099
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