Finance Glossary Sorted by Category
I. Notes & Debt Terms (Payments, Interest, Modification)
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Term
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Definition
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Source(s)
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adjustable rate mortgage (ARM)
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A variable interest rate note, often starting out with an introductory teaser rate which resets in a few months or years based on a particular index.
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allonge
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An attachment to a note occurring between preparation of the note and closing the transaction providing information necessary to update entries on the note at the time it becomes effective.
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balloon payment
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Any final payment on a note which is greater than twice the amount of any one of the six regularly scheduled payments immediately preceding the date of the final/balloon payment.
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compounding on default
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An interest provision triggered by a delinquency in a payment causing interest to accrue on the amount of interest contained in the delinquent installment at the note rate until the delinquent payment is paid, a type of late charge.
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conversion adjustable rate mortgage (ARM)
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An adjustable rate mortgage (ARM) which may be converted to a fixed rate mortgage (FRM) during the mortgage term.
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debt service
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The amount of principal and interest paid on a debt periodically, also referred to as the loan payment amount.
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discount point
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The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate.
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fully indexed rate
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The highest rate possible on the adjustable rate mortgage (ARM) during the first five years of its term.
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graduated payment mortgage
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A mortgage providing for installment payments to be periodically increased by predetermined amounts to accelerate the payoff of principal.
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hybrid adjustable rate mortgage (ARM)
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A type of adjustable rate mortgage (ARM) which features a fixed rate for an introductory period and thereafter a periodically adjusted interest rate based on a predetermined formula.
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index
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A regularly issued composite market interest rate for an investment such as Treasury Securities or inter-bank loans used to set the basis for periodic interest rate adjustments.
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initial interest rate cap
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A limit on the amount the interest rate may change on the first adjustment of an adjustable rate mortgage (ARM).
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installment note
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A note calling for periodic payments of principal and interest, or interest only, until the principal is paid in full by amortization or a balloon payment.
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interest-only adjustable rate mortgage (ARM)
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A type of adjustable rate mortgage (ARM) which features an initial period of interest-only payments.
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introductory interest rate
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The initial rate of interest on an adjustable rate mortgage (ARM), typically lower than the fully-indexed note rate and lasting for a set introductory period, allowing for a greater loan amount to be borrowed. Also known as a teaser rate.
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late charge provision
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A provision in a promissory note which calls for an additional charge if payments are not received when due or during a grace period.
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loan level price adjustment
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Adjusted interest rates or fees based on the risk of default a mortgage poses.
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lock-in clause
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A promissory note provision limiting repayment to no more than the regularly scheduled installment amount, in contrast to an “or more” clause.
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margin
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The interest points added to an index by a lender as profit on the adjustment of an adjustable rate mortgage (ARM).
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material breach
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Failure to perform significant obligations called for in an agreement, such as a promissory note.
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negative amortization
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The addition of unpaid interest to the principal balance of a mortgage due to insufficient monthly interest payments.
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nominal interest rate
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The interest rate agreed to between the homebuyer and the lender as stated on the promissory note.
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option adjustable rate mortgage (ARM)
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An adjustable rate mortgage (ARM) giving the borrower the choice of a full monthly payment, an interest-only payment, and a minimum payment typically less than the interest due.
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payment cap
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A limit on the amount of increase in the borrower’s monthly principal and interest at the payment adjustment date on an adjustable rate mortgage (ARM).
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periodic interest rate cap
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A limit on the amount the interest rate can increase with each future adjustment of an adjustable rate mortgage (ARM).
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prepayment penalty
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A levy charged by a mortgage holder to a borrower who pays off the outstanding principal balance on a mortgage prior to its maturity.
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promissory note
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A document given as evidence of a debt owed by one person to another.
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real rate of return
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The nominal interest rate on a mortgage minus the rate of inflation.
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shared appreciation mortgage
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A type of split-rate note calling for the proprty owner to periodically pay interim interest at a fixed rate, and when the balance is due, to further pay the holder of the note as additional interest an agreed fraction of the property’s increased value.
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straight note
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A note calling for payment of the entire amount of principal and accrued interest in a single lump sum when the principal is due.
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II. Legal Structure & Security (Trust Deeds, Contracts, Property)
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Term
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Definition
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Source(s)
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adhesion contract
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An agreement in which one party has dramatically superior bargaining strength, forcing the weaker party to either accept or reject all the agreement’s stated terms, a dynamic present to some degree in all lender/borrower relationships.
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beneficiary
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The holder of a note secured by a trust deed and entitled to the performance of the provisions in the trust deed.
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bill of sale
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A written instrument given to pass title of personal property from vendor to the vendee. Compare with a grant deed.
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blanket mortgage
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A single trust deed which describes more than one parcel of real estate as security for the referenced debt.
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conditional assignment of rents
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A trust deed provision which creates a lien on all rents in favor of the lender. The rents become additional security to the real estate which is also liened by the trust deed. Compare with absolute assignment of rents.
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constructive notice
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To be charged with the knowledge of conditions existing on the property by recorded documents or an occupancy of the property at the time of a transaction.
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dragnet clause
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A provision in a trust deed that purports to use the mortgaged real estate as security for all debts between the parties to the security agreement.
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future advances clause
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A trust deed provision authorizing a mortgage holder to advance funds for payment of conditions impairing the mortgage holder’s security interest in the mortgaged property, such as delinquent property taxes, assessments, improvement bonds, mortgage insurance premiums or elimination of waste.
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hypothecation
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The pledging of something as security without the necessity of giving up possession to it.
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interlineation
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The process of modifying an instrument or document by inserting additional language between the lines to clarify a particular provision, usually adding something that was omitted.
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litigation guarantee
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A title insurance policy which lists all parties with a recorded interest in a property and their addresses of record, ensuring that all persons with a recorded interest in a property are named and served in litigation.
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mixed collateral transaction
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A transaction which is evidenced by one note and secured by both real estate (using a trust deed) and personal property (using a UCC-1 Form).
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perfecting the lien
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The preparation and filing of a UCC-1 Financing Statement (UCC-1) to put the public on notice of the lien created by a security agreement.
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privity of estate
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A mutual or successive relationship to the same rights in property; a connection between persons to the same estate in property.
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property profile
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A report from a title company providing information about a property’s ownership, encumbrances, use restrictions and comparable sales data.
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real estate fixture
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Personal property attached to the real estate as an improvement, which becomes part of the conveyable real estate.
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security agreement
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An agreement entered into between a mortgage holder and buyer to grant the mortgage holder additional security in the form of a lien on personal property described in the agreement.
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security interest
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A generic term designating the interest held in real estate or personal property by a lender, carryback seller or judgment creditor which is evidenced by either a trust deed, UCC-1 financing statement or abstract of judgment.
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title insurance
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A form of indemnity insurance by which a title insurance company holds harmless a person who acquires an interest in real estate against a monetary loss caused by an encumbrance on title that is not listed in the policy and the insured was unaware of when the policy was issued.
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trade fixture
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A fixture used to render services or make products for the trade or business of a tenant.
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trustee (on a mortgage)
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A party to a mortgage who, as a legal fiction, holds title to property as security for the performance of an obligation with the authority to sell the property or reconvey the trust deed on instructions from the mortgage holder.
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III. Lender & Government Regulation (Compliance)
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Term
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Definition
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Source(s)
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average prime offer rate
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An annual percentage mortgage interest rate derived from average interest rates, points and other pricing terms offered by lenders on consumer mortgages which have low-risk pricing characteristics and are used to fund a higher-priced mortgage loan. These rates are published weekly by the Consumer Financial Protection Bureau (CFPB).
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Closing Disclosure
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A disclosure of the buyer’s final settlement charges and mortgage terms handed to the buyer on a standard form within three business days before mortgage closing.
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consumer mortgage
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A debt incurred primarily for personal, family, or household purposes and secured by a parcel of real estate containing one-to-four residential units.
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Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)
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A federal consumer protection law which created minimum standards and oversight for consumer mortgage origination.
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Federal Home Loan Bank Board (FHLBB)
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The Depression-era regulatory body established to fund savings and loan associations (S&Ls) and provide mortgage market liquidity. The FHLBB became the Office of Thrift Supervision in 1989, and then dissolved in 2011 shifting its duties to the Consumer Financial Protection Bureau (CFPB) and other federal agencies.
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federally related mortgage
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A consumer mortgage made, insured, guaranteed, assisted or otherwise connected to the federal government, controlled by the Real Estate Settlement Procedures Act (RESPA).
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Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)
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Federal legislation enacted in 1989 in the wake of the savings and loan (S&L) crisis to strengthen regulations on lenders and appraisers and improve the availability of mortgage funds.
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general ability-to-repay (ATR) rules
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A consumer mortgage conforming to the federal ability-to-repay (ATR) rules, without a qualified mortgage (QM) safe harbor or rebuttable presumption status.
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general qualified mortgage
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A type of qualified mortgage (QM) which meets the definition of a qualified mortgage under Regulation Z (Reg Z) and has a debt-to-income ratio (DTI) of 43% or less, other than a balloon-payment QM, small lender QM and temporary QM.
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high-cost consumer mortgage (Section 32 mortgage)
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A class of Regulation Z (Reg Z) consumer mortgage characterized by an annual percentage rate (APR) charge which exceeds the average prime offer rate for a comparable mortgage by various percentage spreads set by the mortgage’s priority on title and principal balance, and subject to consumer protection rules.
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Loan Estimate
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An estimate of a buyer’s settlement charges and mortgage terms handed to the buyer on a standard form within three business days following the lender’s receipt of the mortgage application.
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mortgage loan originator (MLO)
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An individual who receives fees to arrange a consumer mortgage.
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mortgage steering
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A mortgage loan originator (MLO) practice of directing a homebuyer to a consumer mortgage with less favorable terms in order to obtain greater compensation.
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qualified mortgage (QM)
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A consumer mortgage granted safe harbor status under Regulation Z (Reg Z) ability-to-repay (ATR) rules under one of four definitions.
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Real Estate Settlement Procedures Act (RESPA)
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A federal law governing the behavior of service providers on a federally related mortgage which prohibits them from giving or receiving unlawful kickbacks.
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residential mortgage
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A consumer mortgage other than a carryback mortgage requiring the licensee arranging the mortgage to be mortgage loan origination (MLO)-endorsed by the California Department of Real Estate (DRE).
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Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)
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A federal consumer protection law which created a uniform national licensing and registration scheme for mortgage loan originators (MLOs).
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service provider
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An individual or company which offers services connected with a prospective or actual consumer mortgage origination.
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small lender qualified mortgage
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A type of qualified mortgage (QM) under Regulation Z (Reg Z) which allows small community mortgage lenders to include features otherwise prohibited in consumer mortgages.
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temporary qualified mortgage
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A transitional qualified mortgage (QM) under Regulation Z (Reg Z) for lenders originating mortgages insured or guaranteed by the federal government or sold to Fannie Mae or Freddie Mac.
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Truth in Lending Act (TILA)
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A federal law created to promote the informed use of consumer credit by requiring accurate disclosure of loan and cost terms.
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Uniform Residential Loan Application (URLA)
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A standardized mortgage application prepared by the buyer with the assistance of the transaction agent (TA) and the lender’s representative.
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upcharging
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The practice of marking up the price of a third-party service and keeping the difference.
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usury
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A limit on the lender’s interest rate yield on non-exempt real estate mortgages.
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IV. Mortgage Types & Products (Conventional, FHA, ARM)
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Term
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Definition
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Source(s)
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balloon-payment qualified mortgage
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A type of qualified mortgage which allows small lenders to include a balloon feature.
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conforming loan
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A conventional mortgage with terms, conditions and a maximum principal amount set by Fannie Mae and Freddie Mac.
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conventional mortgage
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A mortgage that is not made, insured or guaranteed by the federal government.
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Energy Efficient Mortgage (EEM)
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A Federal Housing Administration (FHA) mortgage which finances energy-efficient improvements.
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Federal Housing Administration (FHA)-insured mortgage
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A mortgage originated by a lender and insured by the FHA, characterized by a small down payment requirement, high loan-to-value (LTV) ratio and high mortgage insurance premiums (MIPs), typically made to first-time homebuyers.
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fixed payment ratio
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A debt-to-income ratio (DTI) used to determine eligibility for an FHA-insured mortgage limiting the buyer’s total fixed payment on all debts to 43% of the buyer’s gross income, also called the DTI back-end ratio.
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government-related mortgage
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A mortgage that is made, insured or guaranteed by the federal government.
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jumbo mortgage
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A conventional mortgage with a principal amount exceeding the conforming or super-conforming loan limits set by Fannie Mae and Freddie Mac.
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loan-to-value ratio (LTV)
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A ratio stating the outstanding mortgage balance as a percentage of the mortgaged property’s fair market value (FMV).
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mortgage payment ratio
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A debt-to-income ratio (DTI) used to determine eligibility for an FHA-insured mortgage limiting the buyer’s mortgage payment to 31% of the buyer’s gross effective income.
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private mortgage insurance (PMI)
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Default mortgage insurance coverage provided to a mortgage holder by private insurers on conventional mortgages with loan-to-value (LTV) ratios higher than 80%.
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super-conforming loan
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A conforming loan with a maximum principal amount adjusted for a high-cost area.
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V. Carryback Financing & Seller Credit
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Term
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Definition
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Source(s)
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all-inclusive trust deed (AITD)
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A note entered into by a buyer in favor of the seller to evidence the amount remaining due on the purchase price after deducting the down payment, an amount inclusive of any specified mortgage debts remaining of record with the seller retaining responsibility for their payment. Also referred to as a wraparound mortgage or overriding mortgage.
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Applicable Federal Rate (AFR)
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Rates set by the Internal Revenue Service for carryback sellers to impute and report income at the minimum interest when the note rate on the carryback debt is a lesser rate.
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carryback financing
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A note and trust deed executed by a buyer of real estate in favor of the seller for the unpaid portion of the sales price on closing.
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impound account
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A money reserve funded monthly by the property owner and maintained by the mortgage holder to pay annual recurring ownership obligations.
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impairment
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The act of injuring or diminishing the value of an interest held by another in real estate.
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installment sale
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Financing provided by a seller who extends credit to the buyer for future periodic payments of a portion of the price paid for real estate, also known as carryback financing.
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land sales contract
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A contract used in a sale of real estate when the seller retains title to the property until all or a prescribed part of the purchase price has been paid.
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masked security device
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Alternative documentation for a carryback sale, substituted for a note and trust deed in a deceptive attempt to avoid due-on enforcement, Regulation Z (Reg Z), reassessment for property taxes, profit reporting and the buyer’s right of reinstatement or redemption on default.
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pass-through provisions
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An all-inclusive trust deed (AITD) provision used by a carryback seller which provides for the payment of any demands made by the underlying mortgage holder, other than regular principal and interest payments, to be passed through to the buyer when triggered by the buyer’s conduct.
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unsecured note
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A document evidencing a debt owed by one person to another where the debt is not secured by collateral, also called an unsecured promissory note.
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VI. Loan Origination & Institution (Business Terms)
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Term
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Definition
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Source(s)
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business mortgage
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A debt incurred for other than personal, family or household (consumer) purposes and secured by any type of real estate.
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buyer mortgage capacity
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A buyer’s ability to make mortgage payments based on their debt-to-income ratios (DTI).
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creditworthiness
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An individual’s ability to borrow money, determined by their present income and previous debt payment history.
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debt-to-income ratio (DTI)
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The percentage of monthly gross income that goes towards paying debt.
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exempt debts
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Private party transactions exempt from usury laws involving the origination of a loan secured by real estate and made or arranged by a real estate broker.
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forebearance
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An agreement entered into by a mortgage holder and owner to delay enforcement of the mortgage terms.
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institutional lender
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A lender which pools deposits and invests them by making mortgages, e.g. a bank, credit union or insurance company.
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lender overlay
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Lender-imposed standards on consumer mortgages to be met by applicants in addition to standards set by mortgage insurers and investors.
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mortgage commitment
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A lender’s commitment to make a mortgage, enforceable only when written, unconditional and signed by the lender for consideration.
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mortgage shopping worksheet
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A worksheet designed for use by buyers when submitting applications for a consumer mortgage to compare mortgages offered by different lenders based on a list of all the variables commonly occurring as costs at the time of origination and over the life of the mortgage.
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non-exempt lender
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A lender subject to usury limitations when making a loan.
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portfolio lender
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A lender who both funds and holds a mortgage to collect the interest income.
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prime offer rate
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A base rate used by banks to price short-term business loans and home equity lines of credit, set 3% above the federal funds rate.
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rate lock
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A lender’s conditional, unsigned commitment to fund a mortgage at a quoted interest rate, origination fee and points, regardless of whether interest rates rise or fall prior to funding.
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warehouse lender
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A lender who funds a mortgage under an agreement to immediately resell the mortgage in the secondary mortgage market.
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VII. Debt Status & Transfer (Recourse, Due-on, Assumption)
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Term
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Definition
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Source(s)
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acceleration
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A demand for immediate payment of all amounts remaining unpaid on a mortgage or extension of credit by a lender or carryback seller.
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alienation clause
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A trust deed clause limiting the rights of the owner of the mortgaged property to freely transfer their interest in the property by sale, lease or further encumbrance.
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anti-deficiency
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A limitation placed on a mortgage lender’s ability to recover losses on default when the secured property’s value is insufficient to satisfy the mortgage debt.
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assignment
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The transfer of an interest in a property or document from one person to another, such as the transfer of a note and trust deed from a seller to a trust deed investor.
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assumption agreement
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A promise given by a buyer to the seller or an existing mortgage holder to perform all the terms of the mortgage taken over by the buyer on the sale.
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buyer-seller assumption agreement
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A promise given by the buyer to the seller to perform all the terms of a mortgage taken over by the buyer on the property purchased.
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call
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A mortgage holder’s demand for the balance of the loan to be immediately paid in full.
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cross-collateralization
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The use of one trust deed to describe multiple parcels of real estate or a UCC-1 financing statement encumbering personal property together with a trust deed as additional security for payment of a debt.
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due-on clause
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A trust deed provision authorizing the mortgage holder to accelerate the maturity date of the mortgage if the property is transferred or further encumbered.
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entitled person
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The original borrower on a note and trust deed, their successor-in-interest or an authorized agent of either who may request, in writing, a beneficiary statement or payoff demand statement.
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exculpatory clause
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A provision in a note which converts a recourse debt into nonrecourse debt by barring the mortgage holder from obtaining a money judgment against the borrower in the event of a deficiency.
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formal assumption
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A buyer’s promise to perform all the terms of the mortgage, given to the mortgage holder on the buyer’s takeover of an existing mortgage, typically involving a modification of the interest rate and payments and an assessment of points and fees. Compare with a subject-to transaction.
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further encumbrance
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A claim or lien on a parcel of real estate, such as junior trust deeds, CC&Rs, easements, taxes or assessments.
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inter vivos trust
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A title holding arrangement used as a vesting by a property owner for probate avoidance on death. Also known as a living trust.
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novation
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A three-party agreement reached between the seller, buyer and mortgage holder to release the seller from liability on the mortgage and substitute the buyer’s liability.
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nonrecourse debt
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A debt recoverable on default solely through the value of the security interest in the secured property.
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recast
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A mortgage holder’s demand to modify the note terms and receive payment of additional fees in exchange for waiving the due-on clause in their mortgage.
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recourse debt
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A debt for which a debtor may be personally liable if a sale of the secured property does not fully satisfy the debt on a default.
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restraint on alienation
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A limit placed on a property owner’s ability to sell, lease for a period exceeding three years or further encumber a property, as permitted by federal mortgage policy.
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retroactive interest differential (RID)
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The mortgage holder’s losses, calculated based on the interest differential between the note rate and the market rate on the date of a third party’s unlawful interference with the mortgage holder’s right to call a mortgage.
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subject-to transaction
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A sale of mortgaged property calling for the buyer to take title subject to the mortgage, the principal balance being credited toward the purchase price paid. Compare with formal assumption.
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waiver agreement
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An agreement in which a mortgage holder consents to the owner’s present or future transfer of an interest in the mortgaged property as a waiver of the mortgage holder’s due-on rights. Also known as an assumption agreement.
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VIII. Default & Foreclosure (Remedies and Protection)
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Term
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Definition
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Source(s)
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bona fide purchaser (BFP)
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A buyer other than the mortgage holder who purchases a property for value at a trustee’s sale without notice of title or trustee’s sale defects.
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cramdown
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The reduction of the principal balance of a mortgage debt to the value of the mortgaged real estate.
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deed-in-lieu of foreclosure
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A transaction in which the owner of the secured property conveys the property to the mortgage holder to satisfy the mortgage debt and avoid foreclosure.
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deficiency
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The unpaid amount of a mortgage remaining after the foreclosing mortgage holder applies the net sale proceeds of the secured property.
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deficiency judgment
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A money award obtained by a mortgage holder to recover money losses experienced when the value of the mortgaged property is less than the remaining mortgage debt at the time of the judicial foreclosure sale.
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fair value hearing
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The court proceeding at which a money judgment is awarded for any deficiency in the secured property’s fair market value (FMV) at the time of the judicial foreclosure sale to fully satisfy all debt obligations owed the mortgage holder.
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full credit bid
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The maximum amount the foreclosing mortgage holder may bid at a trustee’s sale without adding cash, equal to the debt secured by the property being sold, plus trustee’s fees and foreclosure expenses.
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guarantee agreement
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A written agreement in which a guarantor promises to pay the mortgage holder the amount of the debt if the property owner defaults.
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guarantor
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A person who is not the payor under the note, but who is obligated under a separate agreement to buy the note if the borrower defaults.
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judicial foreclosure
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The court-ordered sale by public auction of the secured property. Also known as a sheriff’s sale.
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letter of credit
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An agreement issued by a bank or other institution to a mortgage holder authorizing the mortgage holder to draw a stipulated amount of funds from the institution on default of the property owner.
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money judgment (on foreclosure)
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An award for any unpaid balance remaining after a judicial foreclosure sale due to the secured property’s insufficient fair market value (FMV) on the date of the sale to satisfy the debt owed, also called a deficiency.
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nonjudicial foreclosure
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The sale of property by a trustee under the power-of-sale provision in a trust deed, without the court action required for a judicial foreclosure.
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payoff demand
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A written demand, prepared by a mortgage holder, for the total dollar amount required on the date of preparation to pay off the mortgage as a requisite for recording a reconveyance of their trust deed lien on a property.
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pledge
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To offer an asset (such as an existing carryback note) as collateral or security for another, unrelated debt. Also known as hypothecation.
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power-of-sale provision
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A trust deed provision authorizing the trustee to initiate a non-judicial foreclosure sale of the described property on instructions from the beneficiary.
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put option
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A contract provision authorizing the mortgage holder, on the occurrence of a default or other specified event, to demand the owner sell the property to the mortgage holder for the amount of the remaining debt.
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reconveyance
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A document executed by a trustee named in a trust deed to release the trust deed lien from title to real estate, used when the secured debt is fully paid.
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redeem
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To acquire the title to real estate under foreclosure by payment of the debt to the mortgage holder.
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reinstatement
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The revival of a mortgage which has been accelerated, by payment of the delinquent amounts due plus the expenses of enforcement incurred to that date.
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self-help
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One of several enforcement steps taken by a lender when an owner defaults on a post-1996 trust deed, in which the lender takes possession of the property and collects rents nonjudicially.
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subordination
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The rearrangement of mortgage lien priorities on title in which a mortgage lien takes a lesser or junior position to another mortgage lien on a property.
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subordination agreement
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An agreement entered into by a mortgage holder to permit their security interest in title to the mortgaged property to take an inferior position to another encumbrance.
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surplus funds
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Funds remaining when the price paid for property by the successful bidder at a trustee’s sale exceeds the amount of debt and costs due the foreclosing mortgage holder.
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treble damages
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A usury penalty computed at three times the total interest paid by the borrower during the one year period immediately preceding their filing of an action on a nonexempt private lender mortgage.
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trustee’s sale guarantee
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A policy issued by a title insurance company to a trustee before or at the time the notice of default (NOD) is recorded providing coverage for the trustee should they fail to serve notices on any party of record due to an omission in the guarantee.
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waste
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The intentional destruction or neglect of property which diminishes its value.
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IX. Taxation & Accounting
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Term
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Definition
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Source(s)
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balance sheet
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An itemized, dollar-value presentation for setting an individual’s net worth by subtracting debt obligations (liabilities) from asset values.
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cost basis
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The cost incurred to acquire and improve an asset subject to adjustments for destruction and depreciation, used primarily for tax reporting.
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dealer property
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Real estate held for sale to customers in the ordinary course of an owner’s trade or business, where the earnings on the sales of the properties are taxed as business inventory at ordinary income rates.
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discharge-of-indebtedness income
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Reportable income resulting from a mortgage holder’s discount on a payoff of a mortgage debt. Called a short pay.
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fair market value (FMV)
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The price a reasonable, unpressured buyer would pay for property on the open market.
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home equity mortgage
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A junior mortgage encumbering the value in a home remaining after deducting the principal on the senior mortgage from the market value of the home.
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imputed interest rate
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The applicable federal rate (AFR) set by the Internal Revenue Service (IRS) for carryback sellers to impute and report as minimum interest income a portion of principal when the note rate on a carryback debt is a lesser rate.
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itemized deductions
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Deductions taken by a taxpayer for allowable personal expenditures which, to the extent allowed, are subtracted from adjusted gross income (AGI) to set the taxable income for determining the income tax due, called Schedule A.
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passive category income
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Profits and losses from rental real estate, operations and sales, and from non-owner-operated businesses.
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personal use loan
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A mortgage origination which funds a personal use, such as a loan that funds the purchase or improvement of an owner’s principal residence or second home.
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portfolio category income
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Unearned income from interest on investments in bonds, savings, income property, stocks and trust deed notes.
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qualified interest
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Interest on a mortgage which has accrued and been paid and is an allowable interest deduction for ownership of a first and second home.
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stepped-up basis
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The readjustment of an appreciated asset’s cost basis to fair market value for future tax purposes when transferred by inheritance.
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X. General Transaction Terms
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Term
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Definition
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Source(s)
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affirmative duty
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An agent’s obligation to voluntarily undertake an advisory activity when in a fiduciary relationship.
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beneficiary statement
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A written disclosure made by a mortgage holder regarding the condition of a debt owed to them, usually evidenced by a trust deed note.
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cash collateral
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In Chapter 11 Bankruptcy, cash or cash equivalents from the sale of property in which the lender has an interest.
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computation period
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For impound account analysis, the 12-month period beginning on the date of the initial impound deposit during which monthly deposits, disbursements and any applicable interest occur.
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equity purchase investor
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A person who acquires title to a seller-occupied, one-to-four unit residential property in foreclosure for dealer, investment or security purposes.
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equity purchase transaction
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A sales transaction in which a one-to-four unit residential property in foreclosure, occupied by the owner as their principal residence, is acquired for dealer, investment or security purposes by an investor.
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further-approval contingency
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A provision in an agreement calling for the further approval of an event or activity as a condition precedent to the further performance or cancellation of the transaction by the persons benefiting from the provision.
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grace period
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The time period for the mortgage holder’s receipt of a payment following its due date after which the missed payment is delinquent and subject to a late charge.
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holdover tenant
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A tenant who retains possession of the rented premises after their right of possession has been terminated, called a tenant-at-sufferance.
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implicit rent
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The value of the use of a property by the owner.
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kickback
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A fee improperly paid to a transaction agent (TA) who renders no service beyond the act of referring when the TA is already providing another service in the transaction for a fee.
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mortgage-backed bond (MBB)
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An asset-backed security representing a claim on the cash flows from payments received on a mortgage.
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pyramiding
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The practice of assessing a late charge for the delinquent payment of a previously assessed late charge.
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sale-leaseback and purchase option arrangement
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A disguised mortgage arrangement created when a seller conveys title to an investor/lender and retains possession under a lease agreement with the right to repurchase title and redeem the property for a fixed dollar sum.
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secondary mortgage market
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A market where mortgages are sold by originators to bundlers who aggregate them into pools which become collateral for bonds sold to investors, called mortgage backed securities (MBS).
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secular stagnation
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An abnormally lengthy period of sluggish economic growth.
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secured loan transaction
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A mortgage transaction which places a lien on the owner’s interest in a property for the amount of the debt owed the mortgage holder, including financial transactions documented by sellers as sale-leaseback and purchase lease-option arrangements.
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transaction agent (TA)
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The term lenders use to identify the buyer’s agent in a sales transaction.
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unconscionable advantage
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When an equity purchase investor or a mortgage holder exploits an element of oppression, helplessness or surprise to exact unreasonably favorable terms from a property owner or tenant.
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