Glossary A-B

Glossary A-C

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ABSTRACT OF TITLE: A written history of ownership of a parcel of land, summarizing the material parts of any occurrence affecting title of said land.

ACCESS RIGHTS: A right to ingress from one's property; may be implied or expressed.

ACCRUED INTEREST: Interest earned for the period of time elapsed since interest was last paid.

ACKNOWLEDGMENT: A formal declaration attached to or part of an instrument, made before a duly authorized officer (usually a notary public) by the person who has executed that instrument, the execution being a free act and deed.

ACTION TO QUIET TITLE: A court action to remove any interest or claim in or title to real property; to remove a cloud on title.

ADJUSTABLE RATE MORTGAGE: A mortgage loan or deed of trust which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan. Also called variable rate mortgages (VRM).

AD VALOREM TAXES: Real estate taxes on the assessed value of property.

AFFIDAVIT: A sworn statement in writing, usually requiring notarization.

AMERICAN LAND TITLE ASSOCIATION (ALTA): A national association of title insurance companies, abstractors and attorneys specializing in real property laws. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.

AMORTIZATION: Repayment of a mortgage debt with equal periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.

AMORTIZATION SCHEDULE: A table showing the amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made.

ANNUAL MORTGAGE STATEMENT: A report prepared by the lender or servicing agent for the mortgagor, stating the amount of taxes, insurance and interest that was paid during the year and the outstanding principal balance.

ANNUAL PERCENTAGE RATE (APR): A term defined in section 106 of the federal Truth in Lending Act (P1-90-321; 15 Usc 1606), which expresses on an annualized basis the charges imposed on the borrower to obtain a loan (defined in the Act as "finance charges"), including interest, discount and other costs.

APPLICANT: A prospective borrower who has completed an application. An application is a series of steps, usually including the completion of documents a lender requires of those seeking a loan.

APPRAISAL: An opinion or estimate of value. Also refers to the process by which a value estimate is obtained.

APR: See annual percentage rate.

ARREARS: The situation in which mortgage interest and real estate taxes are paid at or after the end of the period for which they are levied. Late payment is also described as being in arrears.

ASSESSMENT: A value factor assigned to real property and used to determine real property taxes. The process of reaching the assessed valuation. Also, an add-on tax to raise money for a special purpose

ASSIGNMENT: The transfer of ownership, rights or interests in property, as is in a mortgage, lease or deed of trust.

ASSIGNMENT OF MORTGAGE: A document that evidences the transfer of a mortgage from one party to another.

ASSUMPTION AGREEMENT: A written agreement by one party to pay an obligation originally incurred by another.

ASSUMPTION FEE: The amount paid a lender for the paperwork and processing of records necessary to approve and document a new debtor.

ASSUMPTION OF MORTGAGE: A buyer's acceptance of primary liability for payment of an existing note secured by a mortgage or deed of trust. The seller remains secondarily liable, unless specifically released by the lender.

AUTOMATIC LENDER: A VA program that enables eligible single-family lenders to conduct the processing and closing of VA single-family loan applications without VA's prior review. The VA is, however, responsible for performing the appraisal report for all VA loans including those performed via the Automatic Lender program

BALLOON MORTGAGE: A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date, usually at the end of the term.

BANKRUPT: An individual firm, or corporation who through a court proceeding, is relieved from payment of all debts. Bankruptcy may be declared under one of several chapters in the federal bankruptcy code: Chapter 7, which covers liquidation of individual or business assets; Chapter 11, which covers reorganization of bankrupt businesses; Chapter 12, which covers certain farm bankruptcies; and Chapter 13, which covers workouts of debts by individuals.

BI-WEEKLY MORTGAGE: A mortgage with payments due every two weeks, totaling 26 payments a year.

BLANKET: The coverage of more than one piece of property under on instrument, such as blanket insurance policy, blanket deed of trust, blanket assignment or blanket survey

BOND LOAN: A state-sponsored method of assisting low income borrowers and first time homeowners in the purchase of a home at a reduced interest rate.

BORROWER: One who receives funds in the form of a loan with the obligation of repaying the loan in full with interest.

BUY-DOWN MORTGAGE: A mortgage with a below-market interest rate made by a lender in return for an interest rate subsidy in the form of additional discount points paid by the builder, seller or buyer.

CAPS (INTEREST): Consumer safeguards on an adjustable-rate mortgage which limit the amount the interest rate may change per year and/or over the life of the loan

CARRYBACK FINANCING: An agreement in which the seller takes back a note for part of the purchase price secured by a junior mortgage, wrap-around mortgage or contract of deed.

CASH OUT FINANCING: When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding of the existing mortgage being refinanced, and all or a portion of the equity is converted to cash.

CERTIFICATE OF ELIGIBILITY: A document issued by the Veteran's Administration which verifies a veteran's eligibility for a VA mortgage guarantee

CERTIFICATE OF REASONABLE VALUE (CRV): A document issued by the Veteran's Administration which establishes a maximum value and loan amount for a VA guaranteed mortgage.

CERTIFICATE OF TITLE: A confirmation written by a title attorney or company stating that the title to parcel of real property is legally vested in the present owner.

CHAIN OF TITLE: A chronology of documents which have transferred title to a parcel of real property from the original owner to the present owner.

CLEAR TITLE: Unencumbered title to real property, free of liens or defects. Also, "free and clear"

CLOSED-END MORTGAGE: A mortgage under which the mortgagor is prohibited from borrowing additional funds under the same mortgage.

CLOSING: In real estate, the delivery of a deed, financial adjustments, the signing of notes and the disbursement of funds necessary to consummate a sale or loan transaction.

CLOSING COSTS: Fees paid to effect the closing of a mortgage, such as an origination fee, discount points, title insurance fees, survey fees and attorney's fees.

CLOSING STATEMENT: A financial disclosure giving an account of all funds received and expected at closing, including escrow deposits for taxes, hazard insurance and mortgage insurance. All FHA, VA and most conventionally financed loans use a uniform settlement statement called the "HUD 1"

CLOUD ON TITLE: Any outstanding claim or encumbrance which, if valid, would affect or impair title. It can be removed by a quit-claim deed, release or court action.

COLLATERAL: Property pledged as security for a debt, for example, mortgaged real estate.

COMMITMENT: An agreement, often in writing, between a lender and a borrower, to loan money at a future date, subject to specified conditions. In secondary marketing, an agreement, in writing, between a lender and an investor to buy and sell mortgages under specific terms.

COMMITMENT FEE: Any fee paid by a potential borrower to a potential lender for the lender's promise to loan money at a specified date in the future. The lender may or may not expect to fund the commitment. In secondary marketing, a fee paid by the loan seller to the investor in return for the investor's promise to purchase a loan or package of loans at a future date.

COMMUNITY ASSOCIATION: A group composed of property owners that serve to protect and maintain a neighborhood or commonly owned properties.

COMMUNITY PROPERTY: In some states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

CO-MORTGAGOR: A second borrower who signs a mortgage loan with a mortgagor. The co-mortgagor's income, assets and debts are combined with the mortgagor's for underwriting and ratio analysis purposes. The co-mortgagor's name must appear on the FHA Certificate of Commitment and the mortgage or deed of trust. For full guarantee under the VA's program, the co-mortgagor must be either a spouse or another eligible veteran.

CONDITIONS OR RESTRICTIONS: Limitations on the use of land and resulting penalties for failure to comply. Commonly used by land subdividers on newly plotted areas.

CONDOMINIUM: A form of property ownership whereby the purchaser receives title to a unit in a multiunit structure and a proportionate interest in common areas.

CONFORMING MORTGAGE LOAN: A mortgage loan which meets all requirements (size, type and age) to be eligible for purchase or securitization by federal agencies.

CONVENTIONAL FINANCING: In real estate, mortgage financing which is not insured or guaranteed by a government agency such as HUD/FHA, VA or the Farmers Home Administration.

CONVERTIBLE MORTGAGE: A type of adjustable-rate mortgage that may be converted to a fixed-rate mortgage at specified intervals during a predetermined time period. In income property lending, a mortgage in which lender-provided funds converts to equity ownership after a predetermined period of time.

CONVEY: The act of transferring title to real property from one party to another.

CONVEYANCE: The document, such as a deed, lease or mortgage used to effect a transfer.

CO-SIGNER: One who agrees to assume a debt obligation if the principal borrower defaults on mortgage payments. A co-signer assumes only personal liability and has no ownership interest in the property; his or her income and obligations are used in the underwriting process to reinforce the credit of the principal borrower.

CREDIT LIFE: Declining term life insurance taken out by a borrower as an added source of funds for the repayment of a loan.

CREDIT RATING: A rating given to a person or company that establishes creditworthiness based upon present financial condition, experience and past credit history.

CREDIT REPORT: A report to a prospective lender on the credit standing of a prospective borrower, used to aid in the determination of creditworthiness.

CUSTODIAN: Usually a commercial bank which holds for safekeeping mortgages and related documents backing a mortgage-backed security. Custodians may be required to examine and certify documents.

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