Glossary C

Glossary C

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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 morl:gage 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.