GLOSARY.

Abstract of Title -
A summary of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record which may impair the title to real property.

Acceleration Clause -
A clause in trust deed or mortgage giving the lender the right to call all sums owing him to be immediately due and payable upon the happening of a certain stated event.

Acceptance -
A legal term referring to the acceptance of an offer. A buyer offers to buy and the seller accepts the offer.

Acknowledgment -
A formal declaration before a duly authorized officer by a person who has executed an instrument that such execution is his act and deed.

Ad Valorem -
"According to value." A method of imposing a tax on the ownership of real property.

Adverse Possession -
The open and notorious possession and occupancy under an evident claim or right, in denial or opposition to the title of another claimant.

Affidavit -
A statement or declaration reduced to writing and sworn to or affirmed before some officer who has authority to administer an oath or affirmation.

Affirmation -
A solemn declaration made under the penalties of perjury by a person who conscientiously declines taking an oath. This is equivalent to an oath.
Agency -
The relationship between an agent and principal. One who represents another from whom he has derived authority.

Agreement of Sale -
A written contract between seller and buyer in which they reach a meeting of minds on the terms and conditions of the sale.

Amortization -
The liquidation of a financial obligation on an installment basis; also recovery, over a period, of cost or value.

Appraisal -
An estimate of value of property resulting from an analysis of facts about the property. An opinion of value.

Appurtenance -
Something belonging to the land and transferred with it, such as buildings, fixtures, rights

Assemblage -
Putting together two or more lots to form a large parcel.
Assessed Value -
A value placed upon property by the tax assessor.

Assessment -
The valuation of property for the purpose of levying a tax, or the amount of the tax levied.

Assessor -
One appointed to assess property for taxation.

Assignment -
A transfer or making over to another of the whole of any property, real or personal, or of any estate or right therein. To assign - to transfer or make over to another.

Assumption of Mortgage -
When a grantee takes a title to real property and the deed
contains an assumption agreement, or grantee executes a separate assumption agreement, the grantee becomes the principal guarantor for unpaid portions of the note and is primarily liable for the amount of any deficiency judgment.

Attachment -
Seizure of property by court order, usually done to have it available in event a judgment is obtained in a pending suit.

Attorney-in-Fact -
One who is authorized to perform certain acts for another under a Power of Attorney; may be limited to a specific act or acts, or be general.

Balloon Payment -
Where the final installment payment on a note is greater than the
preceding installment payments and it pays the note in full, such final installment is termed a balloon payment.

Beneficiary -
(1) One entitled to the benefit of a trust; (2) One who receives profit from an estate, the title of which is vested in a trustee; (3) The lender on the security of a note and deed of trust.
Blanket Encumbrance A single mortgage or trust deed which covers more than one piece of real estate.

Bona Fide -
In good faith, without fraud or deceit; authentic; sincere.

Breach -
Violation of an obligation in a contract.

Capitalization -
In appraising it is a method of determining the value of property by interpreting the property's net income with a percentage which represents a reasonable return on invested capital.

Capitalization Rate -
The rate of interest which is considered a reasonable return on the investment. It is used in the process of determining value based upon net income.

Cash Flow -
Income generated by a property which is determined by subtracting vacancy allowances and collection costs, operating expenses and debt-servicing costs from the property's scheduled gross income.

Caveat Emptor -
"Let the buyer beware." The buyer must examine the goods or property and buy at his own risk.

Chain of Title -
A history of conveyances and encumbrances affecting the title from the time it passed from government ownership, or as far back as records are available.

Closing Statement -
The written statement provided by the escrow company to each of the parties to the loan transaction showing the amounts received and the amounts paid out for various items.

Cloud on Title -
Any conditions revealed by a title search which affect the title to property; usually relatively unimportant items but which cannot be removed without a quitclaim deed or court action.

Codes -
A systematic collection of laws in writing.

Collateral Security -
A separate obligation attached to another contract to guarantee
performance of the contract.

Collusion -
An illegal agreement between two or more persons to defraud another of his rights by the forms of law, or to obtain an object forbidden by law.

Color of Title -
That which appears to be good title but which is not title in fact

Commingling -
The broker's unauthorized and improper mixing of office funds, which are personal or business monies, with trust funds, which are client customer monies.

Commission -
A payment for the performance of specific duties in real estate; a percentage of the selling price of property, percentage of rentals, etc.

Compound Interest -
Interest paid on the original principal and on interest accrued from time it became due.

Condemnation -
The act of taking private property for public use by the sovereign powers; a declaration that a structure is unfit for use.

Conventional Loan -
A loan that's neither guaranteed nor insured by Federal
Housing Administration (FHA) or Veterans' Administration (VA).

Conveyance -
The transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.

Convenants -
Agreements written into deeds and other instruments promising performance or non-performance of certain acts or stipulating certain uses or non-uses of the property.

Damages -
The indemnity recoverable by a person who has sustained an injury either in his person, property or relative rights, through the act or default of another.

Deed -
A written instrument which, when properly executed and delivered, conveys title to real property.

Deed in Lieu of Foreclosure -
A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Default -
Failure to fulfill a duty or promise or to discharge an obligation, or to perform any act in an instrument in writing, that has been agreed upon.

Deferred Maintenance -
Existing but unfulfilled requirements for repairs and rehabilitation.

Deficiency Judgment -
A judgment given when the security pledged for a loan does not
satisfy the debt upon its default.

Depreciation -
Loss of value in real property brought about by age, physical deterioration or functional or economic obsolescence.

Deterioration -
Reflecting the loss in value brought about by wear and tear, disintegration, use in service, and the actions of the elements.

Discount Fee -
Sometimes referred to as "points," a fee charged by the lender in order to obtain a higher earning than the interest stated in the mortgage note.

Documentary Transfer Tax -
A state enabling act allows cities and counties to adopt a
documentary transfer tax to apply on all transfers of real property located within their jurisdictions.

Duress -
Unlawful constraint exercised upon a person whereby he is forced to do some act against his will.

Easement -
Created by grant or agreement for a specific purpose, an easement is the right privilege or interest which one party has in the land of another. (Example: right of way.)

Economic Life -
The period over which a property will yield a return on the investment, over and above the economic or ground rent due the land.

Eminent Domain -
The right of the government to acquire private property for public use by condemnation. The owner must be compensated fully.

Encroachment -
Trespass; the building of a structure or construction of any improvements partly or wholly on the property of another.

Encumbrance -
Anything which affects or limits the fee simple title to property, such as mortgages, trust deeds, easements or restrictions of any kind which do not prevent alienation of the fee title by the owner. Liens are special encumbrances which make the property security for the debt.

Enforceable -
That which can be made to effective; to cause to take effect. An agreement or contract between persons in which one or other party can legally compel the performance of another or other parties.

Equity -
The interest or value which an owner has in real estate over and above the liens against it.

Escheat -
The reverting of property to the state in the absence of heirs or other claimants.

Escrow -
The deposit of instruments and funds with instructions to a third party to carry out the provisions of an agreement or contract; when everything is deposited to enable carrying out the instructions, it is called a complete or perfect escrow.

Estate -
The degree, quantity, nature and extent of interest which a person owns in real property.

Estoppel -
A legal theory under which a person is barred from asserting or denying a fact because of the person's previous acts or words.

Exchange -
A means of trading equities in two or more real properties, treated as a single transaction through a single escrow or as a deferred exchange through two or more escrows.

Exclusive Agency Listing -
A written instrument giving one agent the right for a specified
time to sell a property, but reserving the right of the owner to sell the property himself without payment of a commission to the agent.

Exclusive Right to Sell Listing -
A written agreement between an owner and an agent
giving the agent the right to collect a commission if the property is sold by anyone during the term of his agreement.

Execute -
To complete, to make, to perform, to do, to follow out. To execute a deed is to make a deed, including especially the signing, sealing, and delivery; to execute a contract is
o perform the contract, to follow it out to the end, to complete it.

Executed Contract -
A contract that is fully performed.

Execution of Contract -
To sign a contract.

Executory Contract -
A contract not yet fully performed.

Executor -
A person named in a will to carry out its provisions as to the disposition of the
estate of a deceased person.

Executor's Deed -
A legal deed to real property given by an executor of an estate.

Fee Simple -
The terms "fee" and "fee simple" are substantially
synonymous. The term "fee" is of old English derivation. "Fee simple absolute" is an estate in real property by which the owner has the greatest power over the title which it is
possible to have, being an absolute estate. In modern use, it expressly established the title of real property in the owner, without limitation or end. They may dispose of it by sale, or
trade or will, as he chooses.

FHA Loan -
A loan that is underwritten to the standards of the Federal Housing Administration, which grants approval of the loan and insures the lender against financial loss.

Fiduciary -
A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under rules of agency.
Fixtures - Appurtenances affixed to buildings or land, usually in such a way that they cannot be moved without damage to themselves or the property; plumbing, electrical fixtures, fences, trees, shrubbery, etc. Fixtures are real property.

FNMA (Fannie Mae) -
A private corporation dealing in the purchase of first or second mortgages, at discounts.

Foreclosure -
procedure whereby property pledged as security for a debt is sold to pay the
debt in event of default in payments or terms.

Forfeiture -
Loss of money or anything of value due to failure to perform, such as a deposit given to insure performance.

Fraud -
The intentional and successful employment of cunning, deception, collusion; or artifice used to cheat or deceive another person whereby that person acts upon it to the loss
of his property and to his legal injury.

Gift Deed -
A deed for which the consideration is love and affection and where there is no material consideration.

GI Loan -
Analyzed by - and approval granted by - Veterans' Administration. Also called VA loan. Only eligible veterans may apply. Veterans' Administration guarantees a portion
of the loan to the lender against loss.

Graduated Lease -
A type of long-term lease agreement which provides for a fixed rental fee during the initial period of the lease with increases and/or decreases in rental amount at
stated times during the balance of the contract term.

Grant Deed -
A technical legal term in a deed of conveyance bestowing an interest in real property on another. The words "convey" and "transfer" have the same effect.

Grantee -
The purchaser; the person to whom a grant is made.

Grantor -
Seller of property; one who signs a deed.

Gross Income -
Total income from property before any expenses are deducted.

Guarantee of Title -
The opinion of a title company backed by its assets as to the true condition of the title to a certain piece of land at a particular time, as shown by the public records in the recording office.

Homestead -
A home upon which the owner or owners have recorded a Declaration of Homestead, as provided by California statutes; protects home against judgments up to specified amounts.

Hypothecate -
To give a thing as security without the necessity of giving up possession of it. To mortgage real property.

Implied -
Not expressed in writing; presumed or inferred.

Income Property -
Property which produces income from residential or commercial rentals and profits attributable to real estate other than rent.

Incompetent -
One who is mentally incompetent, incapable; any person who, though not insane, is, by reason of old age, disease, weakness of mind, or any other cause, unable unassisted to properly manage and take care of himself or his property.

Injunction -
A writ or order issued under the seal of a court to restrain one or more parties to a suit or proceeding from doing an act which is deemed to be inequitable or unjust in regard to the rights of some other party or parties to the suit.

Installment Note -
A note which provides that payments of a certain sum or amount be paid on the dates specified in the instrument.

Instrument -
A legal document in writing to create, alter, modify or terminate a right.

Interest Rate -
The percentage of a sum of money charged for its use.

Investment -
Money put in property or other ventures with the expectation of making a profit, with sufficient security to return and protect the capital; not speculation.

Involuntary Conveyance -
Sheriff's deed; tax deed; an instrument against the will of the
owner.

Involuntary Lien -
A lien imposed against property without consent of owner. Examples: taxes, assessments, federal income tax liens, judgments, etc.

Joint Tenancy -
Joint ownership by two or more persons with right of survivorship.

Judgment -
Final decision, determination, decree or sentence of a court of law.

Land Contract -
An agreement for the purchase or sale of real property. (See agreement of sale, conditional sales contract.)

Lease -
A contract between the owner of real property, called the lessor, and anotherperson, called the lessee, covering conditions under which the lessee may occupy and use
the property.

Legal Description -
A written description by which property can be located definitely by reference to government surveys or approved recorded maps.

Leverage -
The use of a small amount of cash to control a large amount of property values.

Lien -
A charge or encumbrance upon property for the payment or discharge of a debt.

Life Estate -
An interest in real property, which is held for the duration of the life of some
certain person. It may be limited by the life of the person holding it or by the life of some
other person.

Liquidate -
Disposal of property or settlement of debts.

Liquidity -
The ability of property to be exchanged for cash.

Lis Pendens -
A notice recorded for the purpose of warning all persons that the title or right of possession of certain real property is in litigation. Gives constructive notice of such litigation.

Listing -
An employment contract between owner and broker authorizing broker to perform services involving the principal's property.

Loan Costs -
The actual expense for services rendered in obtaining a loan. Includes appraisal fees, attorney fees, survey fees, loan commissions. Usually itemized for the benefit of the borrower.

M.A.I. -
Designates a person who is a member of the American Institute of Real Estate Appraisers

Marketable Title -
Merchantable title; one free and clear of objectionable liens or encumbrances.

Market Price -
The price the property brings in a given market.

Market Value -
The price a willing buyer would pay and a willing seller would accept, both being fully informed and the property being exposed for sale for a reasonable time period.

Mechanic's Lien -
A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.

Moratorium -
Temporary suspension, usually by statute, of the enforcement of liability for an obligation.

Mortgage -
An instrument by which property is hypothecated to secure the payment of a debt.

Mortgage Broker -
One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.

Mortgagor -
One who borrows money on his property and gives a mortgage as security.

Mortgage Insurance -
See private mortgage insurance (PMI)

Mortgage Note -
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Multidwelling Units -
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

Multifamily Mortgage -
A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.

Negative Amortization-
An increase in principal balance which occurs when the monthly payments do not cover all of the interest cost. The interest cost which is not covered by the payment is added to the unpaid principal balance.

Net Effective Income -
The borrowers gross income minus federal income tax.

No-Doc Loan -
A loan requiring very little loan documentation. These loans usually require large (25%) down payments.

Nonconforming loan -
Loans that do not comply with Fannie Mae or Freddie Mac guidelines.

Notary Public -
One authorized to take acknowledgments of certain types of documents, such as deeds, contracts, and mortgages.

Note -
The Note is a promissory note, which is signed with loan documents and states the loan amount, interest rate and loan terms.

Notice of default -
A letter sent to the defaulting party as a reminder of the default.

Offer -
An expression of willingness to purchase a property at a specified price.

Offeree -
One who receives the offer. When the buyer makes an offer to the seller the seller is an offeree.

Offeror -
One who makes the offer. When the buyer makes an offer to the seller the buyer is an offeror.

Office of Comptroller Currency -
The oldest federal financial regulatory body that oversees the nation's federally chartered banks.

Office of Thrift Supervision -
The OTS charters federal thrift institutions and is the primary regulator of all federal and many state-chartered thrift institutions.

Open-end Mortgage -
A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.

Open House -
A method of showing a home for sale to prospective buyers where the home is left open for inspection by those who may be interested in making a purchase.

Option Arm -
The Option Arm loan program, commonly referred to as the negative amortized loan, has a low starting payment rate. Typically the starting rate is 1 to 2 percent. The initial monthly loan payment is calculated based on the starting rate, but the note rate will adjust to the Index plus the Margin after the first one to three months. The payment remains the same for the entire year, and is only adjusted yearly on the anniversary date. Since the interest charges may exceed the monthly payment, the interest that is not paid is added to the loan balance. This increases the loan amount, rather than decreasing the loan balance as in a fully amortized loan. Thus we have a negative amortization, or increasing loan balance, during the initial years of this loan.

Optionee -
One who receives or purchases an option.

Optionor -
One who gives or sells an option.

Oral Contract -
A verbal agreement. Verbal agreements for the sale or use of real estate are normally unenforceable.

Origination Fee -
See Loan Origination Fee.

Owner Financing -
A property purchase transaction in which the property seller provides all or part of the financing.

Owner of Record -
The individual named on a deed that has been recorded at the county recorders office.

Owner Occupant -
A tenant of a residence who also owns the property.

Package Mortgage
Mortgage covering both real and personal property.

Paper
A mortgage, deed of trust or land contract provided in lieu of cash.

Partial Release
A provision in a mortgage that allows some of the property secured to be freed from serving as collateral.

Participation Mortgage
A mortgage that allows the lender to share in part of the income or resale proceeds.

Pass-through Certificates
Interests in a pool of mortgages sold by mortgage bankers to investors. Money collected as monthly mortgage payments is distributed to those who own certificates.

Permanent Loan or Mortgage
A mortgage for a long period of time. Often referred to as the mortgage that pays off a construction loan on a completed property.

Permit
A document issued by a government regulatory authority that allows the bearer to take some specific action. An occupancy permit allows the owner of a building to occupy or rent the building.

Phishing
Email phishing, also referred to as brand spoofing or carding, is a variation on "fishing," the idea being that bait is thrown out with the hopes that while most will ignore the bait, some will be tempted into biting. An example of receiving this kind of spam email is "We have been trying to contact you regarding your loan request. Your loan is approved. Click here to complete your loan application." Another example is a request for information using a bank's website header, so it looks like it's coming from the bank, but is actually a fake.

PITI
Principal, Interest, Taxes and Insurance. Your mortgage loan payment usually includes the principal and interest amounts. When you borrow more than 80 percent of the value of your home, lenders usually require that you also pay the taxes and insurance payments with your
loan payment.

Planned Unit Development (PUD)
A zoning classification that allows flexibility in the design of a subdivision. PUD's include individually owned units as well as some common space that is jointly owned.

Plat
A plan or map of a specific land area.

Plat Book
A public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels.

Pledged Account Mortgage (PAM)
When the borrower places money in a pledged savings account, and these funds, plus interest earned, are gradually used to reduce mortgage payments.

Points
Fees paid to lenders. 1 point = 1 percent of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points.

Portfolio Loan
A loan that is held as an investment by a bank or savings and loan, and NOT sold on the secondary market to investors.

Power of Attorney
A written document authorizing a person to act on the behalf of another person. That person does not have to be an attorney. See Attorney-In-Fact.

Prepaid Interest
Prepaid interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest.

Prepayment
Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan.

Prepayment Penalty
Fees paid by the borrower if they pay the loan before its due date.

Pre-Qualification
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

Primary Mortgage Market
Companies that originate and service mortgage loans (banks, savings & loans, credit union, mortgage bankers, institutional lenders) make up the primary mortgage market. See also secondary mortgage market.

Prime Rate
The rate offered to a bank's best customers.

Principal
The outstanding balance on a loan.

Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 2 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance payments are normally made annual or monthly. An impound account may be required.

Probate
Court process to establish the validity of the will of a deceased person.

Property Tax
A government levy based on the market value (as assessed by the county assessor's office) of the property.

Public Sale
An auction of property with notice to the general public.
Purchase Agreement
A real property agreement between a buyer and seller specifying the price and terms of the sale.

Purchase Money Mortgage
A mortgage used to finance the purchase of a property.

Qualification Rate
Rate of interest used to calculate whether or not a borrower qualifies for a mortgage.

Qualification Requirements
Guidelines used by lenders to decide whether to loan money to an applicant.

Qualified Acceptance, Conditional Acceptance
Acceptance for a loan (or other contract) provided that certain conditions are met.

Qualified Buyer
A person who has been pre-approved for a mortgage loan.

Qualifying Ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

Quiet Title (Action)
A court action to settle a title dispute.

Quit Claim Deed
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

Radon
A radioactive gas which seeps up from the ground and can cause health problems. A radon test is often part of the home inspection.

Real Property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Realtor
A real estate professional who is a member of the National Association of Realtors.

Real Estate Broker
An individual who often owns a real estate company or is in a management position, and who is licensed to represent a buyer or a seller in a real estate transaction.

Real Estate Settlement Procedure Act (RESPA)
A law that states how mortgage lenders must treat those who apply for real estate loans on property with one to four units.
Example : A lender is required to provide a good faith estimate of closing costs within three days of an application being filed.

Recapture tax
Some government sponsored or insured programs, like HUD Low Income Housing programs, require that the buyer occupy the property and retain ownership for a specific period of time. If the buyer sells the property and in some cases moves out of the property, the tax benefits or subsidies received are recaptured, meaning charged to the homeowner. This is a penalty assessed for selling the house too early.

Recession
A recession is usually defined as a fall of a country's real Gross National Product in two or more successive quarters of a year. A recession may also involve falling prices, which can lead to a depression. In a free market economy, recessions come and go at fairly regular intervals, often five to ten years, in what is known as the business cycle.

Reconveyance
When a mortgage is paid in full, the lender conveys the property back to the owner.

Recording
The act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property.

Recording Fees
Money paid to the lender for recording a home sale with local authorities, making it public record.

Recision
The cancellation of a contract. When refinancing a mortgage on a principal residence the law gives the homeowner three days to cancel the contract.

Recourse
The right of the holder of a note secured by a mortgage or deed of trust to claim money from the borrower in default in addition to the property pledged as collateral.

Redlining
The practice of refusing to provide loans or insurance in a certain neighborhood.

Refinance
Obtaining a new mortgage loan on a property already owned, often to replace existing loans.

Regulation Z (Reg Z)
A federal regulation requiring creditors to provide full disclosure of the terms of a loan including the terms of the loan and the annual percentage rate (APR).

Real Estate Investment Trusts (REIT)
A trust that uses investors' money to purchase and manage real estate. Investors realize some of the tax advantages in owning real estate.

Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer.

Reverse Annuity Mortgage (RAM)
A mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral.

Reverse Mortgage
A mortgage used by the elderly that provides income as long as they live in exchange. Payments made cause the loan principal to increase.

Right of First Refusal
A portion of an agreement that requires a property owner to give one party the opportunity to buy or lease the property before the property is made available to other potential buyers.

Right of Ingress or Egress
The right to enter or leave designated premises.

Right of survivorship
The right of a surviving joint tenant to acquire the interest of a deceased joint owner.

Rollover Loan
A loan that is amortized over a long period of time (e.g., 30 yrs) but the interest rate is fixed for a short period (e.g., 5 yrs). The loan may be extended or rolled over, at the end of the shorter term, based on the terms of the loan.

Sales Agreement or Sales Contract
See Agreement of Sale.

Savings & Loan
Depository institutions that specialize in originating, servicing and holding mortgage loans primarily on owner occupied residential property.

Second Home
Also known as a vacation home. This home is different from an investment property as it is not rented, but used occasionally by the owners.

Second Mortgage
A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages generally carry a higher rate than a first mortgage since they represent a higher risk for an investor.

Secondary Mortgage Market
The market where banks, savings & loans and mortgage bankers can sell mortgages to investors like Fannie Mae or Freddie Mac.

Section 1031
The section of the IRS that deals with tax free exchanges of certain property. General rules for tax free exchanges are
The properties must be :

• Exchanged
• Similar
• Used for business or as an investment

Section 8 Housing
Privately owned rental units participating in the low-income rental assistance program. Landlords receive subsidies on behalf of qualified low-income tenants, allowing the tenants to pay a limited proportion of their incomes toward the rent.

Security
Property that serves as collateral for a debt.

Servicer
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

Servicing
The act of billing, collecting payment, filing reports, managing impound accounts and handling defaults on a mortgage.

Settlement Cost (HUD guide)
See Buying Your Home: Settlement Costs and Information (HUD guide)

Settlement Statement
See HUD 1

Shared Appreciation Mortgage
A residential loan with a fixed, below-market interest rate in which the lender is entitled to a specified share of property appreciation during an agreed upon time period.

Sheriff's Deed
A deed given at the sheriff's sale in the foreclosure of a mortgage.

Simple Interest
Interest which is computed only on the principal balance.

Single Family Home (SFR)
A type of residential structure designed to include one dwelling. E.g., town home, detached unit.
Example : Town houses, detached units.

Soft Market
A market where houses aren't selling much or quickly, so the sales price is likely to be significantly lower than the asking (listing) price. It's a good time for buyers to buy, but not the best time for prospective sellers to sell.

Spec House
A single family dwelling constructed by a builder in anticipation of finding a buyer.

Special Assessment
A special tax imposed on property, individual lots or all property in the neighborhood to pay for improvements - street lights, sidewalks, etc.

Special Warranty Deed
The grantor does not warrant against title defects arising from conditions that existed before he/she owned the property. The seller warrants that he/she has done nothing to impair title.

Specific Performance
A legal action in which the court requires a party to a contract to perform their obligations under the terms of the agreement.

Stock Cooperative
A common interest development in which a corporation holds title. Stock and exclusive right to occupancy are given to individual members (stock holders) of the stock cooperative.

Standard Uniform Loan Application (Form 1003)
A standard loan application widely used in the mortgage industry.

Subdivision
A tract of land divided into lots suitable for home building purposes.
Subject To Clause
A clause stating that the grantee takes title "subject to" an existing mortgage or trust deed. The original mortgagor remains responsible for any deficiency in the event of foreclosure. See Assumable Mortgage.

Subordinate Financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Subordination
A loan in a lower priority, for example a second mortgage is subordinate to a first.

Subsidized Second Mortgage
An alternative financing option known as the Community Seconds mortgage for low- and moderate-income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.sx3

Survey
Map made by a licensed surveyor who measures land and charts its boundaries, improvements and relationship to the property surrounding it.

Sweat Equity
Value added to a property due to improvements made personally by the owner.

Takeout Financing
A commitment to provide permanent financing upon completion of construction. The take out loan normally pays off the construction loan.

Tax Lien
Lien for nonpayment of taxes.

Tax Sale
Public sale of a property at an auction by a government authority as a result of non-payment of taxes.

Teaser Rate
A low initial interest rate on a mortgage.
Tenancy at Sufferance

Tenancy established when a person who had been a lawful tenant wrongfully remains in possession of property after expiration of a lease.

Tenancy at Will
A license to use or occupy land and buildings at the will of the owner. The tenant may decide to leave the property at any time or must leave at the landlords will.

Tenancy by the Entirety
A form of ownership by husband and wife whereby each owns the entire property. In event of the death of one, the survivor owns the property without probate.

Tenancy for Years
Created by a lease for a fixed term, such as 6 months, 2 years, etc.

Tenancy in Common
Ownership of a property by 2 or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the deceased is inherited by the beneficiary designated on the owner's will.

Tenancy in Severalty
Ownership of property by one person.

Time Share
A form of property ownership under which a property is held by a number of people, each with the right of possession for a specified time interval. Time sharing is used mostly for vacation properties.

Time is of the Essence
Legal phrase in a contract requiring all references to specific dates and times noted in the contract be interpreted exactly.

Title
Evidence that the owner of the property is in lawful possession. Evidence of ownership.

Title Insurance
An insurance policy which protects the insured against loss arising from defects in title. Title insurance policies are typically obtained for the buyer and the lender.

Title Report
A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects.

Title Search
An examination of the public records to determine the ownership and encumbrances affecting the property.

Total Expense Ratio
Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.

Town House
Residence which normally has 2 or more floors and is attached to other similar units. Town houses are commonly found in planned unit developments (PUDs) and condominiums.

Tract
A parcel of land, generally held for subdividing.

Trade Equity
Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.

Transfer Tax
Tax paid to the city, county, state or other government entity upon sale of a property.

Transfer of Ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.

Treasury Bill (T-Bill)
Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of three months, six months and one year. Each Treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate). The rate determines the T-bill Index rate, which is used in many variable rate loan programs.

Triple-Net Lease
One in which the tenant pays all operating expense of the property. The landlord receives the net rent.

Trust Account
A separate bank account maintained by a broker or escrow company to handle all money collected for clients. A broker may not commingle these funds with his/her own funds.

Trust Deed
See Deed of Trust.

Trustee
A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

Truth in Lending
See Regulation Z.

Two-Step Mortgage
A mortgage in which the borrower receives a fixed rate for a specified number of years (most often 5 or 7), and then receives a new interest rate based on the terms in the note.

Two- to Four-Family Property
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

Underwriting
The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc.

Undivided Interest
An ownership right to use and possess a property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.

Unimproved Property
Land that has received no development.

Unencumbered Property
Real estate with free and clear title.

Unrecorded Deed
A document that transfers title from the grantor to the grantee without recording (i.e. providing public notice).

Usury
Charging a rate of interest greater than that permitted by law.

Vacation Home
See second home.

VA Loan
Home loan guaranteed by the U.S. Veterans Administration, enabling a veteran to buy a home with no money down.

Variable Rate Mortgage
See Adjustable Rate Mortgage

Verification of Deposit (VOD)
A document signed by the borrower's bank or other financial institution verifying the account balance and history.

Verification of Employment
A document signed by the borrower's employer verifying his/her starting date, job title, salary and probability of continued employment.

Waiver
The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege.

Walk-Through Inspection
A final walk-through immediately prior to closing to verify that no changes have taken place and no new damage has occurred.

Warehousing
Mortgage bankers and other financial institutions make loans that are then periodically sold on the secondary market. After the loan is made but before it is sold, the loan is said to be in the lender's warehouse.

Warranty Deed
A deed conveying the title to a property with a warranty of a clear marketable title.

Wear and Tear
Normal use and the resulting reduction in value of a property.

Web Portal
Commonly referred to as simply a portal, a Web site or service that offers a broad array of resources and services, such as e-mail, forums, search engines, and on-line shopping malls. The first Web portals were online services, such as AOL, that provided access to the Web, but by now most of the traditional search engines have transformed themselves into Web portals to attract and keep a larger audience.

Wraparound Mortgage
A loan arrangement whereby the existing loan is retained and a new loan is added to the property.

Example : The seller sells his/her property for $200,000. The buyer puts $80,000 down. The seller has an existing loan balance of $100,000 for a remaining period of twenty-five years at an interest rate of 6 percent. The seller then makes a wraparound mortgage to the buyer, (where the seller acts as a lender) for $120,000 at 8 percent. The seller has to continue making payments on his old loan. They buyer has to pay the seller on the new loan. The buyer may at a later date refinance the property and close both loans.

Zero Lot Line
A form of housing where individual units are on separate lots, but are attached to one another. Example: PUD, townhouse.

Zero Lot Line
Laon modification audit software for Obama guidelines on Freddie Mac and Fannie Mae Loans.

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