Glossary L-Q
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| L |
| LAND CONTRACT: An agreement to transfer title to a property once conditions of the contract have been fulfilled. |
| LATE CHARGE: An additional charge that a borrower is required to pay as a penalty for failure to pay a regular installment when due. |
| LEASEHOLD: An estate or interest in real property held by virtue of a lease. |
| LEGAL DESCRIPTION: A property description recognized by law that is sufficient to locate and identify the property without oral testimony. |
| LIEN: A legal hold or claim of a creditor on the property of another as security for a debt. Liens are always against property, usually real property. |
| LOAN GUARANTEE CERTIFICATE: A VA document that states the portion of a loan that is guaranteed. |
| LOAN SUBMISSION: A package of pertinent papers and documents regarding a specific property of properties, delivered to a prospective lender to obtain financing. |
| LOAN-TO-VALUE RATIO: The ratio of mortgage amount to appraised value or sales price of real property. Used by lenders to determine maximum loan amounts set by law. |
| LOCAL HOUSING AUTHORITY: A government agency that monitors and implements programs to satisfy community housing development needs. |
| LOCK-IN PERIOD: The period of time during which a lender guarantees a borrower a specific interest rate on a mortgage. |
| LOSS DRAFT: Insurance payments in settlement of a claim for damage to mortgaged property. Drafts are usually made out to both the mortgagee and mortgagor. |
| M |
| MARGIN: (1) In futures trading, an amount set by each exchange that buyers and sellers must deposit as a guarantee of performance. (2) In stock transactions, the down payment required when borrowing from a broker to finance stock purchases. In this case, margin requirements are set by the Federal Reserve Board and are expressed as a percentage of the purchase price or market value. (3) In an adjustable rate mortgage, the spread between the index and the mortgage interest rate. |
| MATURITY: The date on which an agreement expires; termination of a mortgage note. |
| MAXIMUM: Highest loan dollar amount allowed under federal or conventional guidelines. In commercial real estate, the highest loan dollar amount that property can support based on projected income. |
| MECHANIC'S LIEN: A claim created by law to secure priority of payment for work performed and materials provided by a vendor. Land may be attached as well as buildings, equipment or other property. |
| MERCHANTABLE TITLE: A title that a court of equity considers so clear that it will force acceptance of it by a purchaser. Also referred to as a marketable title. |
| METES AND BOUNDS: A description of a parcel of land in a deed in which the boundaries are defined by directions and distances. |
| MIDGETS: Ginnie Mae pass-through securities that are similar in structure to the original 30-year Ginnie Mae security, but have only a 15-year term. |
| MIP: See mortgage insurance premium. |
| MORTGAGE: A pledge of property, especially real property, as security debt. By extension, the document evidences the pledge. In many states, this document is a deed of trust. The document may contain the terms of repayment of the debt. By further extension, "mortgage" is used to describe both the mortgage proper and the separate promissory note evidencing the debt providing the terms of the debt's repayment. |
| MORTGAGE BANKER: An individual, firm or corporation that originates, sells and/or services loans secured by mortgages on real property. |
| MORTGAGE BROKER: A firm or individual who for a commission, matches borrowers and lenders. A mortgage broker does not retain servicing, does not use its own firms and is not a principal. |
| MORTGAGE COMMITMENT: An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term and amount. |
| MORTGAGE INSURANCE (MI): Insurance which protects mortgage lenders against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments. The federal government offers MI through HUD/FHA; private entities of MI for conventional loans. |
| MORTGAGE INSURANCE CERTIFICATE (MIC): Certificate issued by HUD/PHA as evidence that a mortgage has been insured, and that a contract of mortgage insurance exists between HUD/FHA and the lender incorporating the HUD/FHA regulations identified in the certificate. |
| MORTGAGE INSURANCE PREMIUM (MIP): The amount paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance company. |
| MORTGAGE LIFE INSURANCE: Term life insurance paid by the borrower in which the amount of coverage decreases as the mortgage balance declines. In the event the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. |
| MORTGAGE NOTE: A written promise to pay a sum of money at a stated interest rate during a specified term. A mortgage note is secured by a mortgage. |
| MORTGAGEE: The lender in a mortgage transaction |
| MORTGAGEE CLAUSE: A clause that may be attached to an insurance policy stipulating that the lender will receive a portion of insurance proceeds sufficient to satisfy the unpaid amount of a loan in the event of a loss. |
| MORTGAGOR: The borrower in a mortgage transaction who pledges property as a security debt. |
| N |
| NEGATIVE AMORTIZATION: The unpaid interest which is added to the mortgage principal in a loan where the principal balance increases rather than decreases because the mortgage payments do not cover the full amount of interest due. |
| NON-ASSUMPTION CLAUSE: A mortgage clause that prohibits the assumption of a mortgage by a third party without the prior approval of the lender. |
| NONCONFORMING MORTGAGE LOAN: A mortgage loan in which the loan amount, the loan-to-value ratio, the term or some other aspect of the loan exceeds permissible limits as specified in regulations. |
| NOTE: A general term for any kind of paper or document signed by a borrower that is an acknowledgement of the debt |
| O |
| ORIGINATION: The process of creating both commercial and residential mortgages. |
| ORIGINATION FEES: The lender's fee charged a borrower to prepare documents, make credit checks, inspect and sometimes appraise a property. Usually stated as a percentage of the face value of the loan. |
| ORIGINATOR: A person who solicits builders, brokers and others to obtain applications for mortgage loans. Often called a loan officer. |
| P |
| PARTY WALL: A wall built on a line between two adjoining properties and common to both owners. |
| PITI: Acronym for the items included in a monthly mortgage payment: principal, interest, taxes and insurance. |
| PLANNED UNIT DEVELOPMENT (PUD): A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision having lots or areas owned in common and reserved for the use of some or all the owners of the separately owned lots. |
| POINT: An amount equal to one percent of the principal amount of a mortgage. Loan discount points are a one-time charge assessed at closing by the lender to buy down the interest rate on the loan. |
| POOL: A collection of mortgage loans grouped by one or more similar characteristics. |
| POWER OF ATTORNEY: A legal document authorizing one person to act on behalf of another. |
| PRELIMINARY TITLE SEARCH: A title search by a title company prior to issuance of a title binder or commitment to insure. |
| PREPAID INTEREST: Mortgage interest that is paid in advance of when it is due to obtain tax advantages. |
|
PREPAYMENT: The payment of all or part of a mortgage debt before it is due. |
| PREPAYMENT PENALTY: A charge the mortgagor pays the mortgagee for the privilege to prepay the loan. |
| PRIME RATE: The interest rate commercial banks charge their most creditworthy customers for short-term loans. Prime is a yardstick for trends in interest rates, and it is often a baseline for establishing interest rates on high risk loans. |
| PRINCIPAL: The original balance of money lent, excluding interest. Also, the remaining balance of a loan, excluding interest. |
| PRIVATE MORTGAGE INSURANCE (PMI): Insurance written by a private company protecting the mortgage lender against financial loss occasioned by a borrower defaulting on the mortgage. |
| PROCESSING: The preparation of a mortgage loan application and supporting documents for underwriting. |
| PROMISSORY NOTE: A written promise to pay a specific amount at a specified time. |
| Q |
| QUALITY CONTROL: Policies and procedures designed to maintain optimal levels of quality, accuracy and efficiency in the production, selling and servicing of mortgage loans. |
| QUIET TITLE ACTION: Legal action taken to eliminate any interest or claim to property by others; the procedure used to perfect title when a quitclaim deed is unobtainable. |
| QUIT CLAIM DEED: A deed relinquishing all interest, title or claim an owner has in a property. A quit claim deed implies no warranty. |
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