A

 

Absolute Auction: An auction with no minimum bid amount. The highest bidder gets the property no matter how low the bid.

 

Abstract of Title: A summary of the conveyances and other facts relied on as evidence of title.

 

Accrued Interest: Interest accumulated on the mortgage since the last payment.

 

Action: The notice of is the published legal beginning of the demand for payment in a foreclosure proceeding.

 

Adjustable Rate Mortgage (ARM):  A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index.  The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps.

 

Amenity: A feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, woods, water) or man-made (like a swimming pool or garden).

 

Amortization: Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

 

Annual Percentage Rate (APR): Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

 

Application: The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

 

Appraisal: A document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

 

Appraiser: A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

 

ARM: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

 

Assessed Value: Value placed on property by the County for the purpose of computing real property taxes. For example, in Florida the assessed value is usually 15-20% below market value but will vary by area.

 

Assessor: A government official who is responsible for determining the value of a property for the purpose of taxation.

 

Assumable Mortgage: A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.

 

B

 

Balloon Mortgage: A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.

 

Bankruptcy: A federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay. The most common Bankruptcy types are Bankruptcy Chapter 7, Bankruptcy Chapter 11 and  Bankruptcy Chapter 13.

 

Bankruptcy Chapter 7: Bankruptcy Chapter 7 of the Title 11 of the United States Code (Bankruptcy Code) governs the process of liquidation under the bankruptcy laws of the United States. (In contrast, Chapters 11 and 13 govern the process of reorganization of a debtor in bankruptcy). Chapter 7 is the most common form of bankruptcy in the United States.

 

Bankruptcy Chapter 11: Bankruptcy Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. In contrast, Chapter 7 governs the process of a liquidation bankruptcy, while Chapter 13 provides a reorganization process for the majority of private individuals.

 

Bankruptcy Chapter 13: This type of bankruptcy (Chapter 13) is often referred to as "reorganization", and it involves a repayment plan that sets forth with specificity the manner in which debtors will settle their debts over three to five years. The minimum amount of payment required depends on the debtor's income, balance, and the amount that unsecured lenders would have been paid if the former had filed for Chapter 7 bankruptcy.

 

Borrower: A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

 

BPO: Broker's Price Opinion also called a Comparative Market Analysis. A Comparative Market Analysis is often referred to as a CMA. A method of appraisal in which selling prices of similar properties are used as the basis for arriving at the value estimate. Institutional sellers usually rely on a BPO prepared by a real estate agent and a professional appraisal to determine a listing price.

 

Building Code: Based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

 

Budget: A detailed record of all income earned and spent during a specific period of time.

 

C

 

Cap: A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.

 

Cash Reserves: A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

 

Certificate of Sale: A certificate issued to a buyer at a judicial sale (e.g. foreclosure). A certificate of sale is transferred to the buyer at different times depending upon different state laws. For example, a certificate of sale is usually transferred 10 days to the lender in a foreclosure in the state of Florida.  

 

Certificate of Title: A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

 

Certified Funds: Same as cash. Buyer’s monies must be brought to the closing in this form.

 

Chinese Drywall: Drywall is a common building material typically made of a layer of gypsum-based plaster pressed between two thick sheets of paper, then dried in a kiln. Foreign drywall was imported by the United States during the construction boom between 2004 and 2007. Importation was further spurred by a shortage of American-made drywall due to the rebuilding demand of nine hurricanes that hit Florida from 2004 to 2005, and widespread damage caused along the Gulf Coast by Hurricane Katrina in 2005. An analysis covering drywall imports since January 2006 showed that more than 550 million pounds of Chinese drywall was brought into the United States since then, enough to build 60,000 average-sized homes.

 

Closing: Also known as settlement. A closing is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.

 

Closing Costs: Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.

 

Comparative Market Analysis (CMA): An estimate of the value of real property using only a few indicators taken from sales of comparable properties, such as price per square foot. Such value estimates are not Appraisals and do not meet the professional standards of appraisal practice.

 

Commission: An amount, usually a percentage of the property sales price that is collected by a real estate professional as a fee for negotiating the transaction.

 

Condominium: A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.

 

Contingent: Dependent upon conditions or events. There are conditions the institutional seller will consider in an offer to purchase such as the ability of the buyer to obtain a mortgage or perform inspections. The sale of another property to raise sufficient funds is an example of a contingent usually not considered.

 

Contract: A promise. Only when an offer to purchase has been fully executed (signed and initialed) by buyer and seller does it become a contract.

 

Conventional loan: A private sector loan, one that is not guaranteed or insured by the U.S. government.

Cooperative (Co-op): Residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

 

Credit History: History of an individual’s debt payment; lenders use this information to gauge a potential borrower’s ability to repay a loan.

 

Credit Repair: Borrowers undertake this process by 1) ensuring that information in their credit reports is accurate, 2) disputing erroneous items with the credit reporting agencies, and 3) developing a spending plan to lower their debt and raise their credit score (i.e. maintaining current balances below 40% of their credit limit).

 

Credit Rating: Also known as a credit score, this number ranging from 300 to 800 is assigned by credit bureaus on the basis of a consumer's creditworthiness- calculated by examining the latter's payment history, present financial condition, and risk profile (i.e. bankruptcy, foreclosure).

 

Credit Report: A record of a borrower's credit history (i.e. late payments, prior debts, balances) and public records that is issued by credit reporting bureaus Experian, Equifax, and Trans Union and that assesses creditworthiness. Credit Reports include Bankruptcy Chapter 7, Chapter 13, Foreclosure, Deed In Lieu, Credit Counseling, Debt Collection, Bank Loans, Credit Card Balances, Credit Card Debt, Personal History, Employment, Job History, Home address, Home Loans, Mortgages, Student Loans, Lawsuits, Liens, Tax Liens, Repossessions and Judgments.

 

Credit Bureau Score: A number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

 

D

 

Debt-to-Income Ratio: A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

 

Debt Arbitration: Debt arbitrators are third-party institutions that work on behalf of their clients to negotiate out-of-court settlements for credit card debt, tax liens, repossessions, old bills, invoices, lawsuits, liens, medical bills, utility bills, judgments, and other types of significant debt. Typically, debt arbitrators are in lieu of credit counseling as a way to avoid bankruptcy.

 

Deed: The document that transfers ownership of a property.

 

Deed-in-Lieu: To avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

 

Default: The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.

 

Default Judgment: Against someone because they failed to show up in court.

 

Deficiency Balance: Amount left over when the money realized from the sale of a foreclosed property is insufficient to pay off the full loan amount. This is one of the reasons banks usually insist on the borrower's personal guaranty so that they can go after his or her home or other property to make up the shortfall.

 

Deficiency Judgment: Decision requiring a borrower to pay the lender the difference between the mortgage balance and the amount realized at the foreclosure sale.

 

Delinquency: Failure of a borrower to make timely mortgage payments under a loan agreement.

 

Discount point: Normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.

 

Down payment: The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.

 

E

 

Earnest Money: Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

 

EEM: Energy Efficient Mortgage; an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase.

 

Equity: An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s) from the fair market value of the property.

 

Escrow Account: A separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

 

F

 

Fair Credit Reporting Act (FRCA): This federal law aims at ensuring that the data contained in consumer reports is complete and accurate, and that it is kept confidential. Borrowers are entitled to review their credit report and to have erroneous statements corrected.  

 

Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act. Its purposes are to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. The Act creates guidelines under which debt collectors may conduct business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes used in conjunction with the Fair Credit Reporting Act.

 

Fair Housing Act: A law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

 

Fair market value: The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

 

Federal Tax Lien: An obligation to the federal government as a result of non-payment of taxes.

 

Fee Simple: Complete legal ownership of a property.

 

FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

 

FNMA or F.N.M.A.: Abbreviation for the Federal National Mortgage Association affectionately known as "Fannie Mae", an agency which buys blocks of loans from banks. Due to its size, Fannie Mae Foreclosures make up a significant percentage of our Florida inventory.

 

FHLMC or F.H.L.M.C.: Abbreviation for the Federal Home Loan Mortgage Corporation affectionately known as "Freddie Mac", an agency performing a similar function to Fannie Mae and now much larger. Special financing is offered on Freddie Mac Foreclosures.

 

Fixed-Rate Mortgage: A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.

 

Flood Insurance: Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain; the lender will require flood insurance before approving a loan.

 

Foreclosure: A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

 

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.

 

G

 

Ginnie Mae: Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.

 

Good Faith Estimate: An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

 

Government Sponsored Enterprises: A group of financial servicer’s corporations’ created the United States Congress. Their purpose is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient.

 

Grantor: The seller.

 

H

 

Hard Expenses: Monthly expenses that is definite and documented. Examples include installment debts such as mortgage payments, car loans and personal loans.

 

HELP: Homebuyer Education Learning Program; an educational program from the FHA that counsels people about the home buying process; HELP covers topics like budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price.

 

Home Affordable Refinance: Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today's lower mortgage rates, perhaps due to a decrease in the value of their home. The Home Affordable Refinance will help borrowers whose loans are held by Fannie Mae refinance into a more affordable mortgage.

 

Home Affordable Modification: Many homeowners are struggling to make their monthly mortgage payments either because their interest rate has increased or they have less income. The Home Affordable Modification will provide them with mortgage payments they can afford.

 

Home Inspection: An examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.

 

Home Warranty: Offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance coverage extends over a specific time period and does not cover the home's structure.

 

Homeowner's Insurance: An insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence or inappropriate action that results in someone's injury or property damage.

 

HOPE for Homeowners: A program authorized by the Economic and Housing Recovery Act of 2008 to help distressed homeowners refinance their loans. The program was launched for 3 years starting October 1, 2008 and is administered by the Department of Housing and Urban Development.

 

HOPE NOW: An alliance of counselors, mortgage servicers, investors, and other mortgage market participants that works to help homeowners avoid foreclosures.

 

Housing Counseling Agency: Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

 

HUD: The U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

 

HUD1 Statement: Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing.

 

HVAC: Heating, Ventilation and Air Conditioning; a home's heating and cooling system.

 

I

 

Index: A measurement used by lenders to determine changes to the Interest rate charged on an adjustable rate mortgage.

 

Inflation: The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.

 

Interest: A fee charged for the use of money.

 

Interest Only: A feature of some MLCC loan programs that allow the borrower to pay only interest on the loan, without paying down any principal with each monthly payment.

 

Interest Rate: The amount of interest charged on a monthly loan payment; usually expressed as a percentage.

 

Institutional Lender: Financial institutions whose loans are regulated by law such as banks, credit unions and commercial loan agencies.

 

Insurance: Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.

 

Involuntary Lien: A lien imposed against property without the owner's consent such as taxes, special assessments, federal income taxes, etc.

 

J

 

Junior Lien: A lien that does not have first priority making the property security for payment of a debt.

 

Judgment: A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

L

 

Lease Purchase: Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

 

Lender: Someone who gives or lends money on the condition that it is returned and that the interest is paid for its temporary use.

 

Lien: A legal claim against property that must be satisfied when the property is sold

 

Lis Pendens: Lawsuit pending. A Lis Pendens usually recorded in states gives constructive notice of pending litigation. In most states like Florida, a Lis Pendens is filed with the foreclosure suit.

 

Loan: Money borrowed that is usually repaid with interest.

 

Loan Arbitration or Loan Modification: Is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e mortgagor and mortgagee).

 

Loan Fraud: Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

 

Loan to Facilitate: Some institutional sellers offer financing to make their properties more attractive in the market.

 

Loan-to-Value (LTV) Ratio: A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

 

Lock-In: Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

 

Loss Mitigation: A process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.

 

M

 

Margin: An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.

 

Market Value: The price a property will bring in the open market under normal conditions.

 

Mechanic's Lien: A lien placed on property by laborers or material suppliers who have contributed to an improvement.

 

MLS: Multiple Listing Service. Multiple Listing Services are usually run by local Realtor associations.

 

Mortgage: A lien on the property that secures the Promise to repay a loan.

 

Mortgagor: The borrower.

 

Mortgage Banker: A company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.

 

Mortgage Broker: A firm that originates and processes loans for a number of lenders.

 

Mortgage Insurance: A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.

 

Mortgage Insurance Premium (MIP): A monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.

 

Mortgage Modification: A loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

 

N

Non-performing asset: Is a loan that a borrower is no longer able to make payments on. It is considered non-performing for it is not making the bank any money.

Notice of Default: A notice filed to show that the borrower under a mortgage is in default (behind on the payments).

 

O

 

Offer: Indication by a potential buyer of willingness to purchase a home at a specific price; generally put forth in writing.

 

Option: The right to buy or lease with specified terms for a specified period of time.

 

OREO: Other Real Estate Owned by institutions. Sometimes used to refer to foreclosure properties but can refer to branch offices, etc. owned by the bank

 

Origination: The process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

 

Origination Fee: The charge for originating a loan; is usually calculated in the form of points and paid at closing.

 

P

 

Partial Claim: A loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

 

Performing Asset: Is a loan a borrower is able to make payments on and is not behind on the payment schedule. It is considered a performing asset for it is making the bank money.

 

PITI: Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

 

PMI: Private Mortgage Insurance. Private Mortgage Insurance companies are privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

 

Points: A charge made by the lender for loaning money. One point equals one percent of the loan.

 

Portfolio Loan: Loan originated and held 'in house' as part of a lender's investments.

 

Pre-Approval: People interested in buying a house can often approach a lender, who will check their credit and verify their income, and then can provide assurances they would be able to get a loan up to a certain amount. Buyers can then get a letter of pre approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are more likely to be able to buy the house. Note that a pre-approval letter from a lender is not a guarantee from the lender that a loan will be provided.

Pre-Approve: Lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

 

Pre-foreclosure: Period between when a borrower becomes delinquent and the property is foreclosed upon. A Pre-foreclosure can also be described as a property for sale that is usually sold via a short sale process.

 

Pre-foreclosure Sale: Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure. It also can be described as a property that was sold via short sale.

 

Pre-qualify: A lender informally determines the maximum amount an individual is eligible to borrow.

 

Premium: An amount paid on a regular schedule by a policyholder that maintains insurance coverage.

 

Prepayment: Payment of the mortgage loan before the scheduled due date; may be Subject to a prepayment penalty.

 

Principal: The amount borrowed from a lender; doesn't include interest or additional fees.

 

Principal Balance Reduction: When a bank forgives a portion of your balance as part of a loan modification. The mortgage payment due for this note is based off the new loan amount.

 

Q

 

Qualifying: Process of demonstrating a person is credit worthy and has enough money to buy a property. Institutional sellers may require "proof" in the form of a letter from a lender or some verification of the source of funds if the sale is cash.

 

Quick Sale Value: Price estimated to sell in less than normal market time and therefore below market value.

 

Quiet Title: Legal process to eliminate title problems.

 

Quitclaim: A form of deed in which the grantor is giving the grantee rights to a property but makes no warranties about rights others may have.

 

R

 

Radon: A radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.

 

Real Estate Agent: An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

 

Real Estate Broker: A party who acts as an intermediary between sellers and buyers of real estate (or real property as it is known elsewhere) and attempts to find sellers who wish to sell and buyers who wish to buy. In the United States, the relationship was originally established by reference to the English common law of agency with the broker having a fiduciary relationship with his clients.

REALTOR: A real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and or its local and state associations.

 

Rehabilitation Mortgage: A mortgage that covers the costs of rehabilitating (repairing or Improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.

 

REO or R.E.O.: An abbreviation for Real Estate Owned most commonly used to describe properties acquired in foreclosure and owned by institutions.

 

Repayment plan: adding a portion of the delinquent balance on top of the normal monthly payment.

 

RESPA: Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

 

Right of Redemption: Right to buy a property back for a limited period of time (usually 10 days) after a foreclosure sale but is different in every state.

 

S

 

Secondary Mortgage Market: Fannie Mae, Freddie Mac, Ginnie Mae were originally chartered by the federal government to stimulate the economy by either buying or recycling packages of loans from financial institutions.

 

Settlement: Another name for closing.

 

Sheriff's Deed: Deed given by court order to satisfy a judgment.

 

Short Sale: The sale of a home which falls short of what the owner owes on the mortgage. Some lenders will agree to allow a short sale and forgive the rest of what is owed if the owner is unable to make the mortgage payments. This is one way to avoid foreclosure.

 

Soft Expenses: Monthly expenses that fluctuate and are difficult to document such as, food, gas, incidentals, entertainment, and are not reported on one’s credit report.

 

Special Asset: Term also used to describe properties acquired in foreclosure and owned by an institution.

 

Special Forbearance: A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

 

Subordinate: To place in a rank of lesser importance or to make one claim secondary to another.

 

Survey: A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.

 

Sweat Equity: Using labor to build or improve a property as part of the down payment.

 

T

Tax Credit: A tax credit is generally much more valuable than a deduction. The tax credit reduces the actual amount of tax that must be paid. A deduction, on the other hand, only reduces the taxable income. Therefore, the tax deduction is subject to the variation in the progressive tax rate. A tax credit does not depend on the tax rate and so it is of equal value to a taxpayer regardless of his income level.

 

Teaser Rate: A very low but very temporary introductory rate on an adjustable rate mortgage or credit card.

This content can be found on the following page: http://www.investorwords.com/4924/teaser_rate.html

TILA or T.I.L.A.: Truth In Lending Act. The Truth in Lending Act is a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.

 

Title: Evidence that an owner is in lawful possession; instrument evidencing ownership.

 

Title 1: an FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien.

 

Title Insurance: Insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.

 

Title Search: A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

 

Treasury Department: (the federal department that collects revenue and administers federal finances; the Treasury Department was created in 1789)

 

U

 

Underwriting: The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

 

V

 

VA: Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

 

W

 

Warranty Deed: Assures the title conveyed is good and possession will be undisturbed.

 

Workout: A special process in which some lenders and property owners may seek a solution to impending foreclosure by a payment plan or refinance.