Deed-in-lieu

A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."

Deed of Trust

Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.

Default

Failure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.

Deficiency Judgment

A court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan. Deficiency judgments are not allowed in all states.

Delinquency 

A loan in which a payment is overdue but not yet in default.

Deposit

A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.

Depreciation

A decline in the value of property; the opposite of "appreciation."

Discount Points

See Points.

Documentary Stamps

A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.

Dower  

The rights of a widow in the property of her husband at his death.

Down Payment

The part of the purchase price, which the buyer pays in cash and does not finance with a mortgage

Due-on-sale provision

A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

Due-on-transfer provision

This terminology is usually used for second mortgages.

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Earnest Money

The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Easement Rights

A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.

Effective age

An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age. Effective gross income

Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Eminent domain

The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

Employer-assisted housing

A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.

Encroachment

An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance

A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

Endorser

A person who signs ownership interest over to another party. Contrast with co-maker.

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity

The difference between the market value of a property and the homeowner's outstanding mortgage balance.

Equity Loan

A loan based on the borrower's equity in his or her home. Prior to closing; also, an account held by the lender into which a homeowner pays money for taxes and insurance.

Escrow account

The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.Escrow analysis. The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow collections

Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance. Escrow disbursements. The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow payment

The portion of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Estate. The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Eviction

The lawful expulsion of an occupant from real property.

Examination of title

The report on the title of a property from the public records or an abstract of the title.

Exclusive listing

A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property alone without the payment of a commission. 

Executor

A person named in a will to administer an estate

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Fair Credit Reporting Act

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair-market-value                                                                                                           

The highest price that a buyer, willing but not compelled to buy would pay, and the lowest a seller, willing but not compelled to sell, would accept.

FDIC

(Federal Deposit Insurance Corporation). Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).

Fee simple

The greatest possible interest a person can have in real estate.

Fee simple estate

An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA

(Federal Housing Administration). A division of the Department of Housing and Urban Development. The FHA's main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA neither lends money, nor plans, nor constructs housing.

FHA Loan

Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

FHFB

(Federal Housing Finance Board). It oversees the credit functions of the twelve regional Federal Home Loan Banks.

FHLBB

(Federal Home Loan Bank Board). A regulatory and supervisory agency for federally charted savings institutions, which oversees the operations of the FSLIC and FHLMC. This agency was abolished by the Financial Institutions Reform, Recovery and Enforcement Act of 1989. (See FIRREA.)

FHLMC

(Federal Home Loan Mortgage Corporation, Freddie Mac). A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.

Finance Charge                         

The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.

Finder's fee

A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

FIRE

(Financial Institutions Reform, Recovery and Enforcement Act of 1989). An act signed into law in August 1989, by President Bush that restructured the thrift regulatory an insurance system.

Firm commitment

A lender’s agreement to make a loan to a specific borrower on a specific property. 

First Mortgage

The mortgage that has first claim in the event of default.

Fixed installment

The monthly payment due on a mortgage loan.

Fixed-Rate Mortgage

(FRM) A mortgage in which the interest rate does not change during the entire term of the loan.

FNMA

(Federal National Mortgage Association, Fannie Mae). A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.

Fixture

Personal property that becomes real property when attached in a permanent manner to real estate.

Flood insurance

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Forfeiture                 

The loss of money, property, rights, or privileges due to a breach of legal obligation.

Foreclosure

The process by which a mortgage property may be sold when a mortgage is in default.

Fully amortized ARM

An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

Full Recasting

Setting the P&I payments to the level that will fully amortize the loan's outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.

Fully Indexed Accrual Rate

The interest (accrual) rate resulting from the index at closing (or at another point in the loan) plus the lender's full spread, rounded as prescribed in the loan documents (often to the nearest 1/8th of 1%).

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General Warranty Deed

A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Good Faith Estimate

An estimate of charges, which a borrower is likely to incur in connection with a loan closing.

Graduated Payment Mortgage

(GPM) A mortgage where the payments are scheduled to increase, usually annually, for a set number of years, and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30-year term.

Grantee

That party in the deed who is the buyer or recipient.

Grantor                                                                               

That party in the deed who is the seller or giver.

Gross Monthly Income

The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.

Growing Equity Mortgage

(GEM) A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.

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Income property

Real estate developed or improved to produce income.

Index

(Also called "Rate Index"). A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates.

Initial Borrower Interest Rate

The rate on which the borrower's first payment is calculated.

Initial Borrower Payment Rate

The annual interest rate used to calculate the borrower's initial cash payment.

Inflation

An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Initial interest rate

The original interest rate of the mortgage at the time of closing.

Installment

The regular periodic payment that a borrower agrees to make to a lender.

Installment loan

Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.

Insurable title

A property title that a title insurance company agrees to insure against defects and disputes.

Insurance

A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance binder

A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured mortgage

A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount

Interest

The fee charged for borrowing money.

Interest accrual rate

The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.

Interest Rate

The percentage of an amount of money, which is paid for its use for a specified time.

Interest Rate Cap

A provision of an ARM limiting how much interest rates may increase per adjustment period.

Interest rate ceiling

For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest rate floor

For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Investment property

A property that is not occupied by the owner.

IRA (Individual Retirement Account)

A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.

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Joint tenancy

A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.

Judgment

A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.

Judgment lien

A lien on the property of a debtor resulting from the decree of a court.

Judicial foreclosure

A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.

Jumbo Loans

Jumbo, or non-conforming, is a term used to describe a loan that does not conform to Fannie Mae or Freddie Mac guidelines. The typical Jumbo loan exceeds the maximum loan amounts described above.

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Late charge

The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

Lease

A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Leasehold estate

A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Legal description

A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.

Lender

An institution that makes loans to borrowers on real estate.

Liabilities

A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability insurance

Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.

Lien

A legal claim against a property that must be paid when the property is sold.

Lifetime Cap

A provision of an ARM that limits the total increase in interest rates over the life of the loan.

Lifetime payment cap

For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Line of credit

An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid asset

A cash asset or an asset that is easily converted into cash.

Loan

A sum of borrowed money (principal) that is generally repaid with interest.

Loan Commitment

Formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.

Loan origination

The process by which a mortgage lender brings into existence a mortgage secured by real property.

Loan Servicing

The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Loan -To-Value

(LTV). The loan-to-value ratio (LTV) is the original loan amount divided by the lower of the sales price or the appraised value.

Lock

The period, expressed in days, during which a lender will guarantee a rate.

Lock-in period

The time period during which the lender has guaranteed an interest rate to a borrower.

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