Knowledge is Power!
Glossary of Mortgage Terms

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ABSTRACT OF JUDGEMENT
a summary of of the essential provisions of a court judgement, which when recorded in the country recorder's office, creates a lien upon the property of the defendant in that country, both presently owned or after acquired

ACCELERATION CLAUSE
allows the lender to speed up the rate at which your loan becomes due or even to demand immediate payment of the entire outstanding balance of the loan, should you default on your loan. (see also: Alienation Clause).

ACCEPTANCE
voluntarily agreeing to the price and terms of an offer

ACCESS
a general or specific right of ingress and egress to a particular property.

ACCRUE
to grow or mature. Accrued interest on a note is interest earned but not yet paid.

ACCRUED INTEREST
interest on a note, bond, etc., which has been earned but not yet paid. SInce interest is usually paid in arrears, accrued interest does not necessarily indicate a delinquency in payment.

ACKNOWLEDGEMENT
a written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own violation.

ADDENDA
more than one addendum

ADDENDUM
something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, ect.

ADDITIONAL DEPOSIT
a buyer of real estate property will generally give a small deposit with an officer, and more substantial deposit with an offer, and a more subsantial deposit after the offer has been accepted. The second desposit is the "additional deposit."

ADJACENT
Close to. May or may not be contiguous (touching).

ADJOINING
Touching or contiguous to.

ADJUSTABLE RATE MORTGAGE (ARM)
a mortgage loan in which the interest rate is adjusted periodically based on a preselected index; i.e., "11th District Cost of Funds", "6-month and 1-year Treasury Bills", "Prime Rate", "Libor", and others.

ADJUSTMENT INTERVAL
on an ARM loan, it is the time between changes in the interest rate and/or monthly payment, typically one, three, or five years, depending on the index.

ADMINISTRATOR
a person given the authority by a proper court to manage and distribute the estate of a deceased person when there is no will

AFFIANT
one who makes an affidavit. Also called a deponent, although technically not the same.

AFFIDAVIT
a written statement for an oath when a person objects to taking an oath.

AFFIRMATION
a substitution for an oath when a person objects to taking an oath.

AGENCY
any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter.

AGREEMENT
a general term usually describing a common view of two or more people regarding the rights and obligations of each with regard to a given subject. The word actually ranges in meaning from a single mutual understanding to a bindin obligation, such as a formal contract.

ALIENATION CLAUS
a type of acceleration clause, calling for a debt under a mortgage or deed of trust to be due in its entirety upon transfer of ownership of the secured property. Also called a "due on sale" clause.

ALTA (AMERICAN LAND TITLE ASOCIATION)
an organization, composed of title insurance companies, which adopted certain insurance policy forms to standardize coverage of a national basis

AMORTIZATION SCHEDULE
a schedule showing each payment of a loan to be amortized and breaking down the payment into the amount applied to a principal and the amount applied to interest.

AMORTIZE
the gradual repayment of a debt by means of systematic payments of principal and interest over a set period; at the end of the period there is zero balance; a loan that is fully amortized, has NO BALLOON payment. An amortization schedule shows each payment of the loan and the amount applied to principal and interest, throughout the life of the loan.

ANNUAL PERCENTAGE RATE (APR)
an interest rate reflecting the cost of a mortgage loan as a yearly rate. This rate is usually higher than the note rate, because it takes into account the costs to obtain the loan; i.e., loan origination fees, discount points, and other costs.

APPRAISAL
an estimate of the value of property, made by a qualified professional called an "Appraiser".

APPURTENANCE
something belonging to someone else, either attached or not, such as a barn to a house or an easement to land. The appurtenance is part of the property and passes with it upon sale or other transfer.

ARREARS
payments made at or after the end of the prior for which they are due. The opposite of paying in advance. Most mortgage payments pay interest in arrears.

ARTICLES OF INCORPORATION
the instrument by which a private corporation is formed and organized under general corporation laws. More specific rules of the corporation would be contained in the by-laws.

AS IS CONDITION
use of expression in sales agreement that goods are sold "as is" implies that buyer is taking delivery of good in some ways defective and upon espress condition that he must trust tp his own examination

ASSESSED VALUE
value placed on a property for tax purposes by the tax assessor

ASSESSMENT
an official valuation of real property for tax purposes

ASSESSOR
county official who assigns an assessed value to a real property. This assessed value is the basis for real property taxes.

ASSESSOR'S MAP
county map used by county assessor for property tax purposes. Not a survey.

ASSIGNEE
the party to whom the assignment is given

ASSIGNOR
the party who gives the assignment, the person who assigns his/her interest. The party who executes the assignment.

ASSUMPTION OF MORTGAGE OR DEED OF TRUST
an agreement by a Buyer to assume the liabilitiy under an existing note secured by a mortgage or deed of trust. The lender myst approve the new debtor in order to release the existing debtor (usually the seller) from liability

ATTORNEY AT LAW
an advocate, counsel, or official agent employed in preparing, managing and trying cases in the courts. Must be licensed by the state.

ATTORNEY-IN-FACT
one who is appointed to act (as agent) for another (principal) under a power of attorney. The scope of the agent's authority is limited to that given by the power of attorney, which may be limited to one specific act or may be broader.

BALLOON (PAYMENT) MORTGAGE
usually a short-term loan which involves small payments for a certain period of time and one larger payment for the remaining loan balance and unpaid interest.

BANKRUPTCY
proceedings under federal bankruptcy statues to relieve a debtor (bankrupt) from insurmountable debt. The bankrupt's property is distributed by the court to the creditors as full satisfaction of the debts, in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned by the debtor; involuntary by the creditors.

BENEFICIAL INTEREST
the equitable, rather than legal ownership of property, such as under a land contract.

BENEFICIARY
(1)one for whose benefit a trust is created. (2) in states in which deed of trust are commonly used instead of mortgages, the lender is called the beneficiary

BENEFICIARY’S DEMAND
Written instructions by a beneficiary under a deed of trust stating and demanding the amount necessary for issuance of a reconveyance, whether a full or partial amount.

BENEFICIARY’S STATEMENT
a statement by a lender under a deed of trust, setting forth the pertinent information necessary to assume the obligation under the deed of trust, such as the unpaid balance, monthly payment, and interest rate, etc.

BIANNUAL
1. Twice a year; 2. Once every two years. If you are going to use this word in the body of any instrument or document, you must define it.

BILATERAL INSTRUCTIONS
one document signed by both parties to the escrow. Any changes or additions to the bilateral instructions are accomplished by amendments or supplements

BILL OF SALE
A written instrument by which one transfers the interest in personal property to another

BIMONTLY
1. Twice a month; 2. Once every two months. If you are going to use this word in the body of any instrument or document, you must define it.

BINDER
1. A report issued by a title insurance company setting forth the condition of title to certain property as of a certain date and also setting forth conditions which, if satisfied, will cause a policy of title insurance to be issued. Also called a commitment. 2. A policy of title insurance (used primarily by investors or developers) calling for a reduced rate for future policy if the property is sold within a specific period.

BLANKET
(blanket mortgage, blanket deed of trust) a deed of trust which covers more than one piece of property and usually has release provisions for reconveyance of individual pieces. For example, a builder may obtain a construction loan to build 5 houses on different lots in a subdivision; however, only one note and deed of trust is signed, covering all 5 lots. Then when one is sold, a partial payment is made to the lender, who then reconveys just one lot.

BOND
An interest bearing certificate issued by a government as a means of financing real estate projects and community improvements such as schools, parks and so on. General obligation bonds are designed to be repaid out of property taxes.

BROKER (MORTGAGE)
an individual or company, in the business of assisting and arranging financing for a client, but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

BROKER (REAL ESTATE)
an individual or company in the business of assisting and arranging the sale/purchase of property. Acts as a intermediary for and/or between the Buyer or Seller. Also known as a Realtor®.

BUY-DOWN (TEMPORARY)
when the lender and/or homebuilder subsidizes the mortgage payment by lowering the effective interest rate during the first few years of the loan. While the payment are initially low, they increase annually until the subsidy expires.

CASHIER’S CHECK
A check that is (1) drawn on a bank, (2) signed by a bank officer or employee on behalf of the bank as a drawer, (3) a direct obligation of the bank and (4) provided to a customer of the bank or acquired from the bank for remittance purposes.

CCR’S, CC&R’s (COVENANTS, CONDITIONS, AND RESTRICTIONS)
terms used in some arrears to describe the restrictive limitations which is placed on a property. Usually a subdivision has the CCR’S recorded before the first sale; therefore neighbors in a subdivision are usually restricted identically.

CERTIFIED COPY
a true copy, attested to be true by the officer holding the original.

CERTIFIED CHECK
a personal check drawn by a individual which is certified (guaranteed) to be god by the individuals bank. The bank holds the funds to pay the certified check when presented for payment. Generally, the bank will not honor a stop payment of a certified check.

CHAIN OF TITLE
A chronological list of recorded instruments affecting title to land

CAPS
consumer safeguards which limit the amount the interest rate and/or monthly payment on an adjustable rate mortgage may change per year and/or for the life of the loan.

CLOSING
the meeting between the Buyer, Seller, Lender and Realtor® or their agents where the property and funds legally change hands. Also called Settlement.

CLOSING COSTS
usually include an origination fee, discount points, appraisal and credit report fees, title insurance and escrow fees, taxes, prepaid interest, fire insurance, deed recording costs and others. The fees vary with the loan type (FHA, VA or Conventional) and lender.

CLOSING STATEMENT (HUD1, SETTLEMENT STATEMENTS)
The closing statement is prepared and distributed at closing to show an account of all monies coming into escrow and how all funds were disbursed

CLOUD ON TITLE
An invalid encumbrance on real property, which if valid, would affect the rights of the owner such as the recording of erroneous deed. The cloud may be removed by a quitclaim deed, or, if necessary, by court action.

COLLATERAL
Something of value given or pledged as security for a debt or obligation

COMMITMENT
an agreement, usually in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

COMMISSION
The compensation paid to real estate broker (usually from the seller) for services rendered in connection with the sale or exchange of real property

COMMUNITY PROPERTY
Property acquired by husband and wife, or either, during marriage, when not acquired as their separate property. Real property conveyed to a married man or woman is presumed to be community property unless otherwise stated.

COMPARABLES
(comps) recently sold properties which are similar to a particular property, to come up with a reasonable value. Usually requested for our customer service department, from real estate agents when trying to determine a sales price for a listing.

COMPETENT
Legally fit. Having the necessary age, ability and authority to accomplish any given acts or duties.

CONDOMINIUM
A structure of two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units.

CONSTRUCTION LOAN
a short-term interim loan for financing the costs of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

CONSERVATOR
A person appointed by a probate court to take care of the person, property, or person and property of a person (conservatee) unable to manage it himself. In escrow, conservator and also identifying the powers of the conservator.

CONSIDERATION
The value inducing another person to enter into a contract, that which is given in exchange for something from another. Consideration distinguishes a contract from a mere gift.

CONSTRUCTIVE NOTICE
Notice given by the public records, pr publishing, of a claim of ownership or interest in property. Generally the law presumes that a person has the same knowledge of instruments properly recorded as if he were actually acquainted with them.

CONTIGUOUS
Being in actual contact; adjoining or touching.

CONTINGENCY
Commonly, the dependence upon a stated even which must occur before a contract is binding, such as; sale contingent on a buyer obtaining the financing

CONTRACT
An agreement between two or more person or entities which creates or modifies a legal relationship. Generally based upon offer and acceptance.

CONVENTIONAL LOAN
a mortgage loan not insured by FHA or guaranteed by VA or the Farmers Home Administration (FmHA).

CONVEYANCE
Transfer of title to land. Includes most instruments buy which an interest in real estate is created, mortgaged or assigned.

CORPORATION
A general term encompassing any group of people “incorporating” by following certain statutory procedures. Most common type of corporation is a private one formed to carry on a business.

CREDIT REPORT
a report documenting the credit history and current status of a borrower's credit rating.

CUSTOMER SERVICE
A department within our title department that provides basic information on ownership, location, size, etc.

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DEBT-TO-INCOME RATIO
the ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long term debts is divided by his/her gross monthly income. See Housing Expenses-to-Income Ratio.

DECENDENT
A deceased person

DECREE OF DISTIBUTION
The final determination of the rights of heirs to receive the property of an estate

DEED
Actually, any one of many conveyancing or financing instruments, but generally a conveyancing instrument, given to pass fee title to property upon sale

DEED OF TRUST
in California, this document is used in place of a mortgage to secure the payment of a note.

DEFAULT
failure to meet legal obligations in a contract. Specifically, failure to make the monthly payments on a mortgage.

DEFENDANT
The person against whom a civil or criminal action is brought

DEFERRED INTEREST - see Negative Amortization.

DELINQUENCY
failure to make payments on time. This can lead to default and foreclosure.

DELIVERY
In conveyancing, the placing of the property in the actual or constructive possession of the grantee. Usually accomplished by delivery of a deed to the buyer, or by recording said deed

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
A federal cabinet department which is active in national housing programs, including urban renewal, public housing, rehabilitation loans, FHA subsidy programs

DEPARTMENT OF VETERANS AFFAIRS (VA)
an independent agency of the federal government which guarantees long-term low- or no- down payment mortgages to eligible veterans.

DEPOSIT RECIEPT
Document used when accepting “earnest money” to bind an offer for property by a prospective purchased; when properly filled out and executed by both parties, it many result in a binding contract

DEPOSIT
Money offered by a prospective buyer as an indication of good faith and in entering into the purchase agreement

DEVELOPER
One who acquires bare land and improves it for residential or commercial use

DISCOUNT POINTS - see Points.

DOCUMENT TRANSFER TAX
A State, County, and/or City tax assessed on the sale of real property, usually based on the selling price or equity being transferred

DOWN PAYMENT
money paid to make up the difference between the purchase price and the mortgage amount. Down payments are usually 5 percent to 20 percent of the sales price on conventional loans, and zero percent to 5 percent on VA and FHA loans.

DUE-ON-SALE CLAUSE
a provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the holder sells the home.

EARNEST MONEY
money given by a Buyer to a Seller (or Seller's agent) as part of the purchase price to bind a transaction or assure payment.

EASEMENT
A right or interest in the land of another which entitles the holder thereof to some use, privilege, or benefit (such as to place pole lines, pipe lines, roads, travel over, etc) out of or over said land. A property owner out in the country may have an easement over his neighbor’s property for access onto his property

ENCUMBRANC (INCUMBRANCE)
A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title

ESTATE
The interest or nature of the interest which one has in property, such as a life estate, the estate or the deceased, etc

ETHICS
With regard to professions, a code of professional standards, containing aspects of fairness and duty to the profession and general public

EQUAL CREDIT OPPORTUNITY ACT (ECOA)
is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age (provided the person has the capacity to contract), sex, marital status, handicap, familial status (having children under the age of 18), or receipt of income from public assistance programs.

EQUITY
the difference between the fair market value and current indebtedness, also referred to as the Owner's Interest.

ESCROW
refers to a neutral third party who carries out the instructions of both the Buyer and Seller and to handle all the paperwork of settlement of "closing". Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments.

EXCHANGE
Under various sections of the Internal Revenue Code, exchange defer payment of taxes on capital gains. An consideration for the purchase of real property is the transfer of another property of a like kind. In other words, 2 owners actually swapping properties. If done correctly, this is a way for the property owner (exchanger) to defer his capital gains tax

EXECUTOR
One who is appointed under a will to carry out (execute) the terms of the will

FAIR MARKET VALUE
Price that probably would be negotiated between a willing seller and willing buyer in reasonable time. Usually arrived at by comparable sales in the area

FANNIE MAE - see Federal National Mortgage Association.

FARMERS HOME ADMINISTRATION (FmHA)
a federal agency, which operates under the control of the Department of Agriculture, and provides financing to homebuyers who are unable to obtain loans elsewhere. Loans are restricted to rural-type areas.

FARM PACKAGE
Information on a specific area containing maps and ownerships.

FEDERAL HOME LOAN BANK BOARD (FHLBB)
a regulatory and supervisory agency for federally charted savings institutions.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
also called "Freddie Mac", is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

FEDERAL HOUSING ADMINISTRATION (FHA)
a division of the Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
also known as "FannieMae". A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages, as well as those insured by FHA or guaranteed by VA.

FEDERAL TAX LIEN
A lien attaching to property for non payment of a federal tax (estate, income, etc.) A federal tax lien differs from other liens in that it is not automatically wiped out by foreclosures

FEE SIMPLE; FEE
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership

FHA LOAN
a loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($151,150), they are generous enough to handle low and moderate-priced homes in the greater Sacramento area.

FHA MORTGAGE INSURANCE
FHA requires (for most FHA loans) an "up front" premium of 3.8% of the loan amount to be paid at closing. The premium can be financed (added to the loan amount) and paid monthly for the life of the loan. Additionally, FHA requires an annual premium to be paid, in the amount of .5% (.005) of the unpaid loan balance. The annual premium is added to the monthly mortgage payment and continues for 10 years.

FIDUCIARY
One acting in a relationship of trust, regarding financial transactions. Commonly, the escrow holder

FINAL DECREE
A decree completely deciding all pending matters before a court, and obviating the need for further litigation

FIXED-RATE MORTGAGE
a mortgage on which the interest rate is set for the term of the loan.

FORECLOSURE
a legal process in which property securing debt is sold by the lender to buy the defaulting borrower's debt.

FORGERY
A false signature or material alteration with intend to defraud

FRAUD
A deception, intended to wrongfully obtain money or property from the reliance of another on the deceptive statements or acts, believing them to be true

FREDDIE MAC - see Federal Home Loan Mortgage Corporation.

FREE AND CLEAR
Real property against which there are no liens, especially voluntary liens (mortgages)

FUNDING PACKAGES
After loan documents have been executed (signed) in escrow, the Escrow Officer must return all documents (except the original deed of trust which must be recorded) to the lender, along with nay other requirements the lender may have for lenders final approval, then the lender issues their FUNDING CHECK, which is their disbursement of the loans

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GIFT DEED
A deed for nominal consideration

GINNIE MAE - see Government National Mortgage Association.

GOOD FAITH
Something done with good intentions, without knowledge of fraudulent circumstances, or reason to inquire further

GOOD FUNDS
Funds that are collected, immediately available, or for which payment is normally assured

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
also known as "Ginnie Mae", provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

GRACE PERIOD
A period of time past the due date for a payment (mortgage, insurance, etc) during which time a payment may be made and not considered delinquent

GRADUATED PAYMENT MORTGAGE (GPM)
a type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of loan has negative amortization built into it.

GRANT DEED
One of many types of deeds used to transfer real property. Contains warranties against prior conveyances or encumbrances. When title insurance is purchased, warranties in a deed are of little practical significance.

GRANT
To transfer an interest in real property; either the fee or a lesser interest such as an easement

GRANTEE
One to whom a grant is made. Generally the buyer

GRANTOR
One who grants property or property rights

GROSS MONTHLY INCOME
the total amount the borrower earns per month, before any expenses are deducted.

GUARANTY
a promise by party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

GUARDIAN
One who is court appointed to manage the affairs of a minor or incompetent

HAZARD INSURANCE
a form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

HEIR
One who by law, rather than by will, receives the estate of a deceased person

HOMEOWNERS ASSOCIATION
(1)An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. (2) An association formed by the builder of condominiums or planned developments, and required by a statute in some states. The builder’s participation as well as the duties of the association are controlled by statute.

HOMEOWNERS INSURANCE
Includes the coverage of hazard insurance plus added coverage such as personal liability, theft away from the home and other such coverages

HOUSING EXPENSE-TO-INCOME RATIO
the ratio expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See Debt-to-Income Ratio.

IMPOUND
that portion of a borrower's monthly mortgage payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, and other items as they become due. Also known as "reserves".

IMPOUND ACCOUNT
Account held by a lender for payment of taxes, insurance or other periodic debts against real property

IMPROVEMENTS
Generally, buildings, but may include any permanent structure or other development, such as a street, utilities, etc

INDEX
a published interest rate against which lenders measure the difference between the current interest rate or an adjustable rate mortgage and that earned by other investments (such as one-, three- or five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average cost of funds incurred by savings and loans.) These are then used to adjust the interest rate on an adjustable mortgage up or down.

INCOMPETANT
One who is mentally or physically unable to handle his property without help. A court will appoint someone to handle the financial affairs of such a person

INSTALLMENT NOTE
A note calling for payment of both principal and interest in specific amounts, or specified minimum amounts, at specific intervals

INSTITUTIONAL LENDERS
Banks, savings and loan associations, and other businesses which make loans to public in the ordinary course of business

INSTRUMENT
Any writing having legal form and significance, such as a deed, mortgage, will, lease, etc

INSURANCE
A contract under which, for consideration, one party (the insurer) agrees to indemnify another (the insured) for possible loss under specific conditions. May be loss of life, health, property, or property rights

INTEREST
(1)A share or right in some property. (2)Money charged for the use of money (principal).

INTEREST RATE
The percentage of an amount of money which is paid for its use for a specified time. Usually expressed as an annual percentage

INVESTOR - a money source for a lender.

JOINT PROTECTION POLICY
A policy of title insurance which insures both the owner and the lender under the same policy

JOINT TENANTS
An undivided interest in property, taken by two or more joint tenants. The interest must be equal, accruing under same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased

JUDGEMENT LIEN
A lien against the property of a judgment debtor. An involuntary lien

JUDGEMENT
The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant

JUMBO LOAN
a loan which is larger (more than $202,300) than the limits set by FannieMae and Freddie Mac. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

LATE CHARGE
A penalty for failure to pay an installment payment on time. Usually not allowed as interest for tax deductions. May or may not be included as usury. If not, the amount of late charge is either set by statute or must be “reasonable”

LEGAL DESCRIPTION
A method geographically identifying a parcel of land, which is acceptable in a court of law

LEGAL OWNER
The term has come to be used as a technical difference from the equitable owner, and not as opposed to an illegal owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than a lien

LENDER
Any person or entity advancing funds which are to be repaid. A general term encompassing all mortgages, and beneficiaries under deeds of trust.

LEVY
A seizure of property and/or funds by judicial process

LIABILITY
A general term encompassing all types of debts and obligations

LIABLE
Obligated, responsible

LICENSEE
A person to whom a license is issued or granted. In real estate, a person who has completed the requirements (including passing the examination) for a broker’s or salesperson’s license

LIEN
a claim upon a piece of property for the payment or satisfaction of a debt or obligation.

LIQUIDATED DAMAGES
A definite amount of damages, set forth in a contract, to be paid by the party breaching the contract. A predetermined estimate of actual damages from a breach.

LIS PENDENS
A legal notice recorded to show pending litigation relating to real property, and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation

LISTING
An agreement between an owner of a real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee commission

LOAN ORGANIZATION FEE
A one time set up fee charged by the lender

LOAN POLICY
A title insurance policy insuring a mortgage, or beneficiary under a deed of trust, against loss caused by invalid title in the borrower, or loss of priority of the mortgage or deed of trust

LOAN PACKAGE
The file of all items necessary for the lender to decide to give or not to give a loan. These items would include the information on the prospective borrower (loan application, credit report, financial statement, employment letters, etc). These may be charge for “packaging” the loan.

LOAN-TO-VALUE RATIO (LTV)
the relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

LOSS PAYABLE CLAUSE
A clause in a fire insurance policy, listing the priority of claims in the event of destruction of the property insured. Generally, a mortgagee or beneficiary under a deed of trust, is the party appearing in the clause, being paid to the amount owing under the mortgage or deed of trust before the owner is paid

LOT
Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision

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MAKER
One who executes (signs) as the maker (borrower) of a note

MARGIN
the amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

MARKET VALUE
the highest price that a Buyer would pay and the lowest price a Seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MATURITY
(1) Termination period of a note. For example: a 30 year mortgage has a maturity of 30 years (2) in sales law, the date a note becomes due

MECHANICS LIEN
A lien created by a 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 the property and which attaches to the land as well as the improvements

MELLO-ROOS DISTRICTS
Allows for the creation of community facilities districts. A community facility district is a government entity formed by local agencies, (I.E. Board of Supervisors, City Council, School Districts, etc) for the sole purpose of providing certain additional public services and to finance a broad range of public capital facilities through the levy of special taxes

METES AND BONDS
A common method of describing a piece of property by identifying the shape and boundary dimensions of the parcel using terminal points and angles. It starts at a well known point of beginning and follows the boundaries of the land by courses and metes and returns to the true point of beginning

MORTGAGE INSURANCE
money to be paid to insure the mortgage when the down payment is less than 20% for conventional loans, or for any FHA loan, regardless of down payment.

MORTGAGEE - see Broker (Mortgage).

MORTGAGOR - the Borrower or Homeowner.

NEGATIVE AMORTIZATION
occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan.

NET EFFECTIVE INCOME
the borrower's income after deductions for withholding taxes, social security and long-term debts are made from the monthly gross income.

NONASSUMPTION CLAUSE
a statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

ORIGINATION FEE
the fee charged by a lender to process the loan paperwork, prepare loan documents and other services for the borrower; usually expressed as a percentage of the loan amount.

OWNER OCCUPIED
Property physically occupied by the owner

OWNER’S POLICY
Title insurance for the owner of property, rather than a lien holder

OWNERSHIP
Rights to the use, enjoyment, and alienation of property (conveyance of property to another) to the exclusion of others. Concerning real property, absolute rights are rare, being restricted by zoning laws, restrictions, liens etc

PAPER
A note of land contract, which is given instead of cash. A seller would take back “paper” if he or she received a note or land contract as part of the purchase price

PARTNERSHIP
As defined by the Uniform Partnership Act. “An association of two or more persons to carry on as co-owners, a business for profit.” The business must be lawful and the partners must agree to share in the profit or loss (but not necessarily equally).

PER ANNUM
Yearly, annually

PER DIEM
Daily

PERSONAL PROPERTY
Any property which is not designated by law as real property

PI: P&I (PRINCIPAL & INTEREST)
Used to indicate what is included in a monthly payment on real property. If the payment includes only principal and interest then the property taxes and hazard insurance would make the total payment higher (see PITI)

P.I.T.I.
Principal, Interest, Taxes and Insurance. Also called monthly housing expense. The four major portions of a usual monthly payment.

PLAINTIFF
The party bringing a civil action against a defendant

PLANNED UNIT DEVELOPMENT (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one of more other parcels. The lots are usually small, being the exact size of the improvements.

PLAT (PLAT MAP)
A map dividing a parcel of land into lots, as in a subdivision

PLOT PLAN
A layout showing the planned improvements. It usually is not flat, and includes location, dimensions, parking areas, landscaping, etc.

POINTS
Also known as Loan Discount Points. Prepaid interest assessed at closing by the lender. Discount points are required by the investor when the interest rate is below market. Each "point" is equal to 1 percent of the loan amount (i.e., 2 points on a $100,000 loan would equal $2,000).

POSSESSION
Being in physical control of land or personal property, whether the owner or not, possession may be lawful or wrongful

POWER OF ATTORNEY
a legal document authorizing one person to act on behalf of another.

PRELIMINARY REPORT
A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued

PREPAIDS
expenses necessary to create an escrow account or to adjust the Seller's existing escrow account. Can include taxes, hazard insurance, mortgage insurance and other assessments.

PREPAYMENT
a privilege in a mortgage permitting the borrower to make payments in advance of their due date.

PREPAID INTEREST
Interest paid before becoming due

PREPAID ITEMS
Those expenses which are paid in advance. Some prepaid items are prorated upon sale, such as taxes, rent etc

PREPAYMENT PRIVILEGE
The right to prepay a loan without penalty, either in full or in part.

PREPAYMENT PENALTY
money charged for an early repayment of debt. Prepayment penalties are normally not charged on FmHA, VA or FNMA/FHLMC conventional loans.

PRINCIPAL
the amount of debt, not including interest, left on a loan.

PRIORITY
That which comes first in time or importance. Regarding liens, the time recording establishes priority

PRIVATE MORTGAGE INSURANCE (PMI)
for conventional loans, in the event a borrower does not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance, which insures the lender against losses which may result if the borrower is unable to make housing payments. PMI companies will require an initial premium payment at closing, the amount dependent upon the loan-to-value ratio, loan type and other lender criteria. Additionally, an annual renewal premium will be pro-rated on a monthly basis and added to the monthly payment.

PROBATE SALE
Originally, the providing that a will was valid. Modernly, any action over which probate court has jurisdiction

PROBATE COURT
A court having jurisdiction of estates, whether of a deceased, a minor, or an incompetent person

PROMISSORY NOTE
A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer

PROPERTY TAX
Generally, a tax levied on both real and persona; property; the amount of the tax is dependent on the value of the property

PROPERTY
Anything which is owned by someone

PRORATE (PRORATION)
To divide in proportionate shares, such as taxes, insurance, rent or other items which buyer and seller share as of the tome of closing, or other agree upon time

PUBLIC RECORDS
Usually at a county level, the records of all documents which are necessary to give notice. The records are available to the public. All transactions for real estate sales should be recorded

PURCHASE AGREEMENT
An agreement between a buyer and a seller of real property, setting forth the price and terms of the sale.

PURCHASE MONEY LOAN
A loan given from buyer to seller to secure all or a portion of the purchase price, secured by mortgage or deed of trust against the land

QUITCLAIM DEED
A deed of conveyance operating by way of release; that is, intended to pass any title, interest, or claim which the grantor may have in the premises, but not professing that such title is valid, nor containing any warranty or covenants for the title.

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REAL ESTATE BOARD
A board composed of regular members (real estate brokers and salespersons), and affiliate members (lenders, title companies, etc) for the purpose of furthering the real estate business in a given area

REAL ESTATE
Land and anything permanently affixed to the land, such as buildings, fences, and those things attached to the buildings such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property if not attached. The term is generally synonymous with real property, although in some state a fine distinction may be made.

REALTOR®
a real estate broker or an associate holding membership in a local real estate association affiliated with the National Association of Realtors®.

REASSESSMENT
Re-estimating the value of a property for tax assessment purposes

RECIEPT
A written acknowledgement or admission that something has been received. Has no other legal effect, and does not in itself affirm any contractual obligation.

RECISION
the cancellation of a contract. With respect to mortgage refinancing, the law gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

RECITAL
Setting forth in a deed or other writing some explanation for the transaction

RECONVEYANCE (DEED OF RECONVEYANCE, RECON)
The act of conveying title in property back to the owner. It is the document used to release the lien of a deed of trust

RECORD
To enter into the book of public records at the County Records Office. In Escrow, we record the Deed, Deed of Trust and other documents to give constructive notice. Our recorder (from our title plant) goes out to the recorder’s office, at the county offices, to record.

RECORDING FEES
money paid to the lender or escrow for recording a home sale with the local recorder's office, thereby making it part of the public records.

REFINANCE (REFI)
To obtain a new loan to pay off an old loan. Property owners commonly obtain a new loan when interest rates are low, to pay off the existing mortgage at a higher interest rate

RENEGOTIABLE RATE MORTGAGE (RRM)
a loan in which the interest rate is adjusted periodically. See Adjustable Rate Mortgage.

REQUEST FOR NOTICE
A document recorded requesting that a party be notified in the event the first Deed of Trust goes into foreclosure. Usually the holder of the second requests this notice to be sent to them if the first goes into foreclosure.

RESPA
short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after loan application, and once prior to or at settlement. The laws requires lenders to furnish the information after loan application only.

REVERSE ANNUITY MORTGAGE (RAM
form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security. Also called Reverse Equity Mortgage (REM) and Home Equity Conversion Mortgage (HECM).

SATISFACTION
Satisfaction is usually the document used to release an abstract of judgment. A satisfaction of judgment is issued when a judgment has been paid in full. The satisfaction must be recorded.

SECOND
A mortgage (deed of trust) that is junior and subordinate to a first mortgage. Because of the risk involved to the lender, in a second the interest rate is usually higher. Second lenders usually require title insurance insuring their position in second place, therefore an order is opened and handled through our lender unit.

SERVICING
all the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

SETTLEMENT/SETTLEMENT COSTS - See Closing/Closing Costs.

SHARED APPRECIATION MORTGAGE (SAM)
also called a Shared Equity Mortgage, is a mortgage in which a borrower receives financial assistance from an investor or family member, who in turn receives a portion of the future appreciation in the value of the property. May also apply to mortgages where the borrower shares the monthly payment and another party in exchange for a part of the appreciation.

SIGN-UP
The act of getting signatures on buyers and sellers closing papers including Escrow Instructions, Grant Deeds, Loan documents and any other necessary documents required to close escrow. Usually a sign up is done within 1 to 5 days of actual closing.

STANDARD COVERAGE POLICY
A title insurance policy used in several states, not having as broad a coverage as the nationally recognized American Land Title Association (A.L.T.A) policies.

STATEMENT OF INFORMATION (IDENTITY)
A confidential form filled out by buyer and seller to help a title company determine if any liens are recorded against either. Very helpful when people with common names are involved.

STATUTE
A law which comes from a legislative body. A written law, rather that law established by court cases.

STRAIGHT NOTE
A promise to repay a loan, signed by the debtor and containing the date executed, amount owning and to whom, date due (or on demand), rate of interest and how it is payable. A straight note is not amortized.

SUBJECT TO
Liable, subordinate, subservient, inferior to. Commonly a term used when buyer acquires title “subject to” the existing lien or mortgage. The original Trustor/Mortgagor may be responsible for any deficiency, should there be foreclosure or the lien. Differs from an “assumption” whereby the buyer formally “assumes” and agrees to pay the existing deed of trust or mortgage.

SUBORDINATE
To make subject to or junior to

SUPPLEMENT TAXES
Additional taxes assessed on real property. This supplements the Regular County taxes on Real property and are triggered by one of the two events. A notice of completion, which increases the assessed value by reason of the Improvement or a Change of Ownership, which increases the assessed value by reason of Proposition 13.

SURVEY
The process by which boundaries are measure and land areas are determined; the on-site measurement of lot lines, dimensions, and position of houses in a lot including the determination of any existing encroachments or easements.

SURVIVORSHIP
Gaining an interest in property by outliving (surviving) another who had the interest.

TAX LIEN
(1) A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid. (2) A federal income tax lien. May attach to all property of the owning the taxes

TAXES
A mandatory contribution of money to meet the expenses of a government, whether, federal, state, or local.

TAX SERVICE CONTRACT
a service provided by a company (usually a title company), whereby the company's employees physically inspect the tax records for a property, at least once a year, and issue a report to the lender regarding status of tax payments, particularly if the status is "delinquent."

TENANCY IN COMMON
An individual ownership in real estate by two or more persons under different titles, but in unity of possessions. The interests need not be equal, and in the event of the death of one of the owners no right of survivorship in the other owners exists.

TENANT
(1) A holder of property under a lease or other rental agreement. (2) originally, one who had the right to possession, irrespective of the title interest.

TERMS
The considerations, other than price, in a sale, lease, mortgager etc. For example: the way the money will be paid, time to take possession, conditions etc

TERM MORTGAGE - See Balloon (Payment) Mortgage.

THIRD PARTY
A general term which includes anyone not a party to a contract, agreement, instrument, etc. However, statutes or court decisions may limit the definition in certain cases to, for instance, exclude representatives of the parties to a contract, etc.

THIRD PARTY FINANCING
Financing provided by someone other than the seller

TIME IS OF THE ESSENCE
Clause used in contract to bind one party to performance at or by a specified time in order to bind the other party to performance

TITLE EXAMINER
The person who examines the legal documents affecting a piece of real estate and determines the effects of those documents on the title to the real property

TITLE
a document that gives evidence of an individual's ownership of property.

TITLE INSURANCE
a policy, usually issued by a title insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is usually paid by the Buyer and/or Seller.

TITLE SEARCH
an examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

TITLE PLANT
A filing of all recorded information to real property, paralleling the records of the country recorder’s office, although the filing systems may be different

TITLE SEARCHER
The person who compiles the maps and documents necessary to examine and prepare a preliminary report.

TITLE INSURANCE COMPANY
A company which issues insurance regarding title to real property

TRUTH-IN-LENDING
a federal law requiring disclosure of the Annual Percentage Rate (APR) to homeowners shortly after they apply for the loan.

TRACT
A lot of parcel of land, a certain development. When we are handling the first sale outs from the Developer to the individual buyers, of a given subdivision, these are called Tract Orders, and the subdivision is called Tract.

TRANSFER
The act by which the title to property is conveyed from person to another

TRANSFER TAX
Tax on the transfer of a real property. Based on purchase price or money changing hands. Amount of tax varies and occasionally an additional city transfer is also assessed

TRUST ACCOUNT
An account used by brokers, escrow agents, or anyone holding money in trust for another

TRUST
A fiduciary relationship under which one holds property (real or personal) for the benefit of another. The party creating the trust is called the settler, the party holding the property is the trustee and the party for whose benefit the property is held is called the beneficiary

TRUSTEE
(1)One who is appointed, or required by law, to execute a trust. (2) One who holds title to real property under the terms of a deed of trust.

TRUSTOR
The borrower under a deed of trust. One who deeds his property to a trustee as security for the repayment of a loan

TWO-STEP MORTGAGE
a mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often five or seven), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30-days notice at the end of five or seven years.

UNDERLYING FINANCING
A mortgage, deed of trust, etc. prior to (underlying and existing) a land contract, all-inclusive deed of trust, etc, on the same property

UNDERWRITING
the decision whether to make a loan to a potential Buyer based on credit, employment, assets, and appropriate rate and term or loan amount.

UNDIVIDED INTEREST
A particle interest by two or more people in the same property, whether the interest of each is equal or unequal

UNENCUMBERED
Free of liens and other encumbrances. Free and Clear.

UNINCORPORATED AREA
AN area of a country which has not formed a municipal corporation

UNMARKETABLE TITLE
Note saleable. A title which has serious defects

UNRECORDED INSTRUMENT
A deed, mortgage, deed of trust, etc., which is not recorded in the country recorder’s office and therefore not protected under recording status. Valid between the parties involved, but not against innocent third parties

UNSECURED
Generally referring to an obligation which has only a promise as security. A note could be unsecured, a note and deed of trust would be secured

VA LOAN
a long-term low- or no-down payment loan guaranteed by the Department of Veteran Affairs. Restricted to individuals qualified by military service or other entitlements.

VALUABLE CONSIDERATION
A legal term meaning any consideration sufficient to support a contract. The word “valuable” does not mean of great value by merely having value.

VALUE
The monetary worth of an object

VA MORTGAGE FUND FEE
a "user" fee that varies depending upon the percentage of down payment. Typically ranges from .50% to 1.25% (.005-.0125) of the sales price.

VARIABLE RATE MORTGAGE - See Adjustable Rate Mortgage.

VERIFICATION OF DEPOSIT (VOD)
a document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VERIFICATION OF EMPLOYMENT (VOE)
a document signed by the borrower's employer verifying his/her position and salary.

VERIFICATION
Confirmation of trust, correctness, or authenticity. Done by affidavit, oath or deposition, all of which require sworn statements.

VEST
To give an immediate interest, as opposed to a contingent or future interest

VESTED
Present ownership rights, absolute and fixes. Modernly, ownership rights, even though on a land contract or subject to a mortgage of a deed of trust.

VESTING, TYPES OF

VIOLATION
Breech of any law or agreement

VOID
Having no legal force or binding effect

VOIDABLE
May be voided, but not void itself.

VOLUNTARY LIEN
A lien placed against real property by the voluntary act of the owner. Most commonly, a mortgage or deed of trust.

WAIVE
To knowingly abandon, relinquish, or surrender a right, benefit, or claim.

WAIVER
The relinquishment of a right

WILL
A written expression of the desire of a person as to the disposition of that person’s property after death. Must follow certain procedures to be valid

WRAP-AROUND
results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the Seller who then forward the payments to the first lender, after taking the additional amount off the top.

ZONING
The division of a city or country in legislative regulations into areas (zones), specifying the uses allowable for the real property in these areas

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