A title that
is unqualified; the best title one can obtain; conveys the highest
bundle of rights.
abstract
A condensed
history of the title to a property, consisting of a summary of the
original grant and all subsequent conveyances and encumbrances relating
to the particular parcel of real estate.
acceleration
The clause
in a mortgage or trust deed that stipulates the entire debt is due
immediately, if the mortgagor defaults under the terms of the contract.
acknowledgment
A notarization
on a legal document attesting to the validity of the signatures
affixed hereto.
acquisition
cost
Under FHA,
the purchase price or appraised value plus the estimated closing
costs.
actual notice
In a real estate
transaction, the verbal or written communication of facts pertinent
to the transaction, i.e., the physical condition of the property.
add-on rate
Method of computing
interest whereby interest is charged on the entire principal amount
for the specified term, regardless of any periodic repayments of
principal that are made.
adjustable-rate
mortgage (ARM)
A variable-interest-rate
loan.
adjusted
book basis
Purchase price
of a property plus any capital improvements minus accrued depreciation,
if any, to the date of the sale.
administered
price system FNMA
securities
purchasing procedure where required yields are adjusted daily to
reflect financial market factors.
all-inclusive
encumbrance
See wraparound
encumbrance.
allodial
system
Land ownership
free and clear of any rent or service due the government.
ALTA policy
American Land
Title Association title insurance policy; the most comprehensive
form.
amortization
The systematic
repayment of a loan through periodic installments of principal and
interest over the entire term of the loan agreement.
annual percentage
rate (APR)
The effective
interest rate.
annuity
A series of
income payments or receipts over a period of years.
appraisal
An estimate
of the value of a property based upon comparison of real estate
prices and the market for real estate.
assessed
value
A property's
adjusted actual market value to establish property taxes.
assets
All things
of value, encumbered or not, owned by a person, corporation or other
entity.
assignment
The transfer
of an interest in a bond, mortgage, lease or other instrument, in
writing, by the assignor to the assignee.
assumed
Buying a property
and taking over or assuming the responsibility for the existing
mortgage.
auction
Selling property
to the highest bidder.
avulsion
A sudden separation
of land caused by flooding, earthquake or other physical disruption;
affects the fixity of real estate.
Name given
babies born after World War II, now a significant bubble in our
population.
balanced
trust
See combination
trust.
balloon
payment
The final payment
of a partially amortized loan that is considerably larger than the
required periodic payments.
banker's
rule
Using a 360-day
year for prorating. bankrupt No longer able to pay debts.
basis points
There are 100
basis points in one percent; thus, 50 basis points equal one-half
percent.
beneficiary
The lender
in a trust deed financing arrangement.
BIF
Bank Insurance
Fund.
bill of
sale
The document
by which personal property ownership is transferred.
biweekly
loan
A loan designed
to be repaid twice monthly to match many borrowers payroll schedules.
blanket
mortgage
A mortgage
secured by the pledging of more than one property a ' s collateral.
blended
rate
Adjusted rate
of interest on loan assumption.
blue-sky
provision
Requiring full
disclosure of all risks in a limited partnership solicitation under
the Uniform Partnership Act.
bonds
Securities
issued to raise funds by a corporation or a governing body, backed
by a promise to pay a certain sum of money on a specific date,plus
interest
book value
Acquisition
costs less any accrued depreciation.
boot
In an exchange,
something of value given in addition to like-kind property, e.g.,
"this acre and cash to boot"
break even
point
That point
at which gross income equals fixed costs plus variable costs.
bridge loan
An equity loan
made for a short time to raise money for a special purpose.
budget loan
Loan payments
include a portion for taxes and insurance,as well as principal and
interest.
building
and loan associations
Obsolete term
for savings and loan associations. built-up rate See weighted rate.
bullet loan
See rollover
loan and term loan.
bundle of
rights
All of the
ownership rights in real estate.
buy downs
Allows loans
to be made at less-than-market interest rates by paying front-end
discounts.
A special program
for eligible California veterans to help them finance the purchase
of farms and ranches within the state.
capital
gains
Income earned
from the sale of investments, where the net sales price exceeds
the adjusted book basis.
capital
losses
Losses derived
from the sale of investments, where the net sales price is less
than the adjusted book basis..
capitalization
Method of estimating
a property's value by considering net annual income as a percentage
of a reasonable rate of return on an investment. (Income - Rate
= Value.).
caps
Yearly and/or
life-of-loan limitations on amounts of variations allowed when adjusting
interest on variable-rate loans.
carry back
Seller agrees
to finance buyer in order to complete a property sale.
cash flow
Regular income
from property rentals.
certificate
of eligibility
A veteran's
evidence of entitlement for a V.A. guaranteed loan.
certificate
of reasonable value (CRV)
The appraised
value of a property being pledged as collateral for a D.A. guaranteed
loan.
certificate
of savings
A long-term
savings plan. chattel Personal property.
CLIC
Commercial
Leasehold Insurance Co oration- owned
closing
statements
Final arrangements
to transfer title of property,as well as allocate charges and credits.
cloud
An outstanding
encumbrance that, if valid, would affect or impair the owner's property
title.
co-insurance
A FHA program
that allows loan originators to directly underwrite housing project
loans, shortening processing time considerably.
co-insured
All parties
with an interest in properties named as insured, e.g., the owner
and the lender.
collateral
Property, real
or personal, pledged as security to back up a promise.
combination
trust
A trust that
participates in real estate investments as both financier and investor.
commercial
banks
Established
primarily to serve the community's business needs. Do not invest
heavily in real estate loans.
commercial
leasehold insurance
See CLIC.
commercial,
paper
Loans issued
by banks and savings institutions for business enterprises.
commitment
A promise by
a lender to make a loan at a future date on specified terms and
conditions. A promise by an investor to purchase a specified amount
of mortgages from the loan originator.
commitment
fee
Charge imposed
for granting an agreement either to lend or to purchase at a future
date.
common law
marriage
Recognized
in California as eligible for community property.
community
property
All property
acquired by either spouse during marriage and owned equally, except
that received by gift, devise or descent.
Community
Re-investment Act (CRA)
Provides that
financial institutions meet the credit needs of all citizens of
a community.
comp
Also known
as a comparable, property similar to subject property used as a
basis of comparison in market data appraising method.
completion
bond
A third-party
guarantee that the builder will complete construction.
compound
interest
Interest paid
on the original principal and also on the accrued interest.
concurrent
ownership
Real estate
ownership by more than one party,such as partnerships, tenants in
common, community property and joint tenancy.
condemnation
See eminent
domain.
condominium
Fee simple
ownership of an apartment or a unit, generally in a
constant
payment mortgage
Fixed payments
of principal and interest over the life of a loan.
construction
loan
Open-end mortgage
loan, usually for a short term, to finance the actual construction
of buildings on a property.
constructive
notice
In a real estate
transaction, the express revelation of a fact, e.g., matters of
public record.
contingent
liability
Responsibility
that exists beyond the primary boundaries of a transaction.
contract
rate
See nominal
rate.
conventional
loan
Mortgage loan
made without any additional guarantees for repayment, such as FHA
insurance, D.A. guarantees, or private insurance; usually given
at an 80 percent loan-to-value (IN) ratio.
conversion
'A change from
a rental format to one of individual ownership.
convertible
loan
Borrower can
change to a fixed rate any time during the life of an adjustable-rate
loan.
cooperative
A residential
multi-family building with the title in a trust or corporation that
is owned and operated for the benefit of the persons living therein,
who are beneficial owners of the trust or stockholders in the corporation,
each possessing a proprietary lease. All owners have joint liability
for the mortgage on the property.
corporation
An entity created
to act as an individual when engaging in business and finance, but
limiting the personal liability of its stockholders.
correspondent
A mortgage
banker.
cosigners
Additional
signers to a financial agreement adding their guarantees to that
of the borrowers.
cost approach
Process of
appraising the value of a property by adding the estimated value
of the land to the appraiser's calculations of the replacement cost
of the building, less depreciation.
cost recovery
Now used to
describe depreciation.
coupon bonds
Bonds with
interest coupons attached that are removed as they become due and
cashed by their bearer. Also known as bearer bonds.
covenant
of seisin
Clause in a
mortgage that warrants that the mortgagor has title to the property
and the authority to pledge it as collateral.
covenants
that run with the land
Conditions
that are recorded against property that remain in effect through
changes in ownership.
credit loan
Mortgage issued
strictly upon the financial strength of a borrower, without at re
for collateral.
credit report
Document indicating
credit circumstances of a borrower of a real estate loan.
credit union
Organization
formed by a homogeneous group for banking purposes, e.g., a government
employees credit union.
cross-defaulting
clause
Usually included
in a junior loan instrument; stipulates that a default in the senior
encumbrance also triggers a default in the junior loan.
crunch down
Recasting an
existing loan to a lower level to avoid a foreclosure.
cycle
A period of
time within which the economic ups and downs of business or real
estate takes place.
A bond issued
without any specific collateral pledge, but secured by the general
assets of the issuer.
debt ratio
The relationship
between a borrower's long-term debt payments and monthly income.
deed
A document
used to transfer ownership of real property.
deed in
lieu of foreclosure
Voluntarily
signing over to the creditor the property pledged as collateral
on a defaulted loan.
deed of
trust
A financing
instrument in which the borrower/trustor conveys title of the collateral
to a trustee to be held in trust for the beneficiary/lender. When
the loan is repaid, title is reconveyed to the trustor. If a default
occurs, the trustee exercises the power of sale on behalf of the
beneficiary.
default
Nonperformance
of a duty; failure to meet an obligation when due.
defeasance
clause
Clause included
in a loan instrument that provides for the cancellation of the mortgagee's
interest when the debt has been paid in full.
deficiency
judgment
A personal
judgments levied against the mortgagor under the terms of the note,
when a mortgage foreclosure sale does not produce sufficient funds
to repay the mortgagee the outstanding loan balance, interest and
costs.
de la Cuesta
Precedent-setting case
(Fidelity Federal
Savings v. de la Cuesta) in which the United States Supreme Court
ruled on June 28, 1982, that the due-on-sale clause was legally
enforceable.
delinquency
Late payments
or nonpayment of principal, interest, taxes, or insurance.
Depository
Institutions Deregulation and Monetary Control Act of 1980.
Authorized
deregulation of banks and savings institutions.
depreciation
Loss of value
due to all causes, but usually considered to include physical deterioration,
functional obsolescence and economic obsolescence.
deregulation
See Depository
Institutions Deregulation and Monetary Control Act of 1980.
direct endorsement
program
An FHA special
program allowing eligible lenders the right to underwrite the loans
that they create.
direct sales
comparison approach
See market-data
approach.
disclosures
Information
pertinent to a property's value required to be imparted to buyers
and borrowers in California.
discount
Difference
between the face amount of a note or mortgage and the price at which
the instrument is sold in the secondary market.
discount
rate
The rate that
the Fed charges its members for funds borrowed on collateralized
loans.
discounted
cash flow
Present value
of income stream.
discretionary
income
Earned funds
left over for investment after allocations for necessities and reserves.
disintermediation
Rapid withdrawal
of money from savings accounts.
disposable
personal income
'Personal income
less allocations for necessities; available for personal consumption.
draws
A system of
payments to a contractor under a construction loan.
due-on-sale
clause
A clause that
stipulates that a borrower cannot sell or transfer the property
without prior written consent of the lender.
V.A.
Department
of Veterans Affairs; since 1944, the D.A. has guaranteed the top
portion of an eligible veteran's loan.
Actual interest
rate paid on a loan, regardless of the rate stipulated in the contract.
eminent
domain
The government's
sovereign power of condemnation over private property for the benefit
of the community; an example of police power.
encroachment
Improvements
overlapping adjoining property.
encumbrance
Any lien against
a property or any restriction in its use, such as an easement; a
right or interest in a property held by one who is the legal owner.
endowment
A permanent
source of income.
English
Common Law
Established
allodial system of real property ownership.
entitlement
The amount
of guarantee a veteran is eligible to secure on a D.A. loan.
Equal Credit
Opportunity Act (ECO)
Provides for
the elimination of discrimination for age, sex and race in finance.
equitable ownership Less than a fee simple estate, as that which
a vendee owns under a land contract.
equitable
redemption period
A period of
time established by custom, usually six months, that allows a defaulting
borrower to redeem property by bringing all payments current before
foreclosure. equitable rights The rights of a less-than-fee-simple
owner to occupy, lease or sell the subject property.
equitable
title
See equitable
ownership.
equity
The interest
or value a property owner has in the property over and above any
liens against it.
equity loans
Monies loaned
to borrowers based on a percentage of the equity held in the collateral
property.
equity trust
An investment
trust dealing in ownerships rather than in financing.
escalator
clause
Clause in a
loan instrument providing for increases in payments or interest
based upon predetermined schedules or upon a specific economic index,
such as the consumer price index. See variable-rate mortgage.
escrow
A third-party
agent that receives, holds and/or disburses, certain funds or documents
upon the performance of certain conditions; the closing agent in
a real estate transaction.
estoppel
certificate
Legal form
that states the unpaid balance due on the loan as of a specified
date and prevents, or "stops," any purchaser of the loan from claiming
that the original borrower owes more than the stated amount.
estate tax
A tax imposed
by federal and state agencies on the net value of a deceased's estate
in excess of $600,000.
eviction
Legally dispossessing
occupants of real property for unlawful detainer.
exchange
A method for
postponing income taxes on capital gains by trading like-kind of
property. See Section 1031, Internal Revenue Code.
A complete
national banking system for financing the activities of farmers
and ranchers.
FDIC
Federal Deposit
Insurance Corporation; provides insurance of $100,000 per account
and supervises the operations of banks that qualify for membership
in the insurance program.
Fed
The United
States Federal Reserve System.
federal funds rate The rate the Fed charges its members on uncollateralized
loans.
Federal
Reserve System
The nation's
economic manager, the Fed regulates its member commercial banks.
fee appraiser
Also known
as a field appraiser One who is not an employee of a particular
fiduciary lender; an independent agent.
fee simple
absolute
See absolute
fee simple title (fee simple).
FHA
Federal Housing
Administration; insures loans made by approved lenders to qualified
borrowers in accordance with its regulations.
FHLB
Federal Home
Loan Bank System; serves and regulates the national savings and
loan associations, much like the Federal Reserve System does for
the commercial banking industry.
FHLMC
Federal Home
Loan Mortgage Corporation; provides a secondary market for mortgages.
fictitious
deeds of trust
Comprehensive
master deeds of trust established by lenders to cover all areas
of trust deed finance; referred to in shorter versions of trust
deeds.
fiduciary
A person in
a position of trust and confidence who represents another; known
as the agent.
financial
intermediary
Financial institution
that accepts deposits and makes loans.
financial
service center
A one-stop
money shop, like Sears, that provides insurance, real estate sales,
real estate loans and banking services in one location.
financial
statement
A compilation
of a borrower's assets, liabilities and earnings records.
fine-tune
A method by
which the Fed controls the nation's economy by controlling the amount
of money in circulation.
FIRREA
The Financial
Institutions Reform, Recovery and Enforcement Act of 1989.
first mortgage
A loan that
has priority as a lien over all other loans. See senior loan.
fixed costs
Regularly impacting
operating expenses such as taxes, insurance and maintenance.
fixed-rate
loan
The interest
rate remains constant over term of loan.
fixture
Article of
personal property attached permanently to a building or land so
that it becomes part of the real property.
FMHA
Farmers Home
Administration; lends funds to farmers unable to obtain financial
assistance from other sources.
FNMA
Federal National
Mortgage Association; provides secondary mortgage market. FOMC
Federal Open
Market Committee; directs and regulates the Federal Reserve System's
open-market operations.
forbearance
The postponement
for a limited time of a portion or all of the payments on a loan
in jeopardy of foreclosure. See moratorium.
foreclosure
Court action
initiated by a lender for the purpose of recovering the borrower's
real estate to pay the balance owed on a defaulted loan.
freehold
estate
See absolute
fee simple title (fee simple).
front-end
zero
Under a conventional
loan, a borrower may elect to finance all of the mortgage insurance
premium, thus incurring no cash obligation for this charge at closing.
front money
Money required
from a borrower as a down payment.
FSLIC
Federal Savings
and Loan Insurance Corporation; provides insurance of $100,000 per
account and supervises operations of its member savings and loan
associations. Now defunct.
funding
fee
A front-end
charge of one percent of the loan amount paid by the borrower when
securing a DVA guaranteed loan.
future worth
The compounding
increase in the value of money over time.
A short-term,
high-interest loan covering the possible gap in construction financing
if rent-up requirements are not met and the long-term lender does
not vest takeout mortgage in full and/or the construction mortgagee
holds back a portion of the interim financing.
Garn-St.
Germain Bill
See Depository
Institutions Deregulation and Monetary Control Act of 1980.
general
lien
A lien on all
property of a debtor, both real and personal.
general
obligation bonds
Public improvement
bonds to be paid from property taxes.
general
partner
In a limited
partnership, the individual or company acquiring, organizing and
managing the investment.
gift tax
A federal tax
on gifts in excess of $10,000 per donee per year.
GNMA
Government
National Mortgage Association; created in 1968 to take over special
assistance and liquidation functions of FNMA; participates in the
secondary market through its mortgage-backed securities pools.
grace period
A time allowed,
usually ten days, for making late payments without a penalty being
imposed.
graduated
payment mortgage (GPM)
Payments are
adjustable.
granting
clause
Words of conveyance
in a deed or mortgage.
gross income
'Obtained annual
income from a property before any expenses are deducted.
gross rent
multiplier (GRM)
Comparing imputed
market rents to estimate the value of residential real estate by
the income approach.
ground rents
Perpetual leases
given by landowners to tenants, used predominantly in Maryland and
Pennsylvania prior to 1885. The owner retained title and the lessee
received the right of possession and use.
growing
equity mortgage (GEM)
A loan allowing
a borrower to accelerate its satisfaction by making additional monthly
principal payments.
Fund set up
by a lender to collect and hold monthly payments from the borrower
for taxes and hazard insurance until they are due.
income approach
Estimating
the value of an income-producing property by capitalizing its net
annual income.
income ratio
The relationship
between a borrower's total income and the amount needed to make
one month's mortgage payment.
index
Utilized to
set interest rates, such as the six-month Treasury bill rate.
industrial
development bond
A bond that
allows private investors to finance apartment and commercial developments
by using tax-exempt, inexpensive funds. TRA '86 imposed severe restrictions
on this financing technique.
industrial
revenue bonds
Bonds issued
for developing an industrial park or for constructing a building
for lease to commercial tenants.
inheritability
The right to
leave an estate to a specific designee.
installment
sale
Paying for
property over time.
interest
Money paid
for the use of money.
interest
factor (IF)
From a table,
the numbers derived from formulas designed to indicate the present
or future worth of money.
interest
only
A term loan
arrangement calling for payments of interest only, not to include
any amount for principal.
interim
financing
See construction
loan.
intermediaries
Financial fiduciaries
including banks, savings institutions and life insurance companies.
investment
conduit
See REIT.
B>involuntary
lien
Lien imposed
upon a property by law, such as a lien for delinquent taxes, a mechanic's
lien or a judgment.
IRA
Individual
retirement account into which $2,000 can be deposited annually in
an approved tax deferment program.
TRA'86 created limitations on IRAs.
Type of equity
participation in which the lender puts up the funds, the developer
contributes special expertise and the two become partners in the
project.
judgment
decree
Specifies the
awards made by the court in a civil case.
judgment
lien
Charge upon
the property of a debtor resulting from a court decree, properly
entered, declaring that the owner is indebted and fixing the amount
of the indebtedness.
judicial
foreclosure
A court procedure
utilized by lenders to secure clear title to a property under a
defaulted real estate loan.
junior loan
A loan in subordinate
priority position to a senior loan.
junior mortgage
A second mortgage;
a lien that is subordinate to a first mortgage.
A retirement
plan for self-employed individuals who may deposit 25 percent of
earned income, up to $30,000 annually, into an approved tax deferment
program.
kicker
A bonus paid
to a lender as an enticement to make a below-marketinterest rate
loan.
Penalty imposed
for late payments. leaseback See sale-leaseback.
leasehold
estate
An estate for
a fixed length of time, established when a landlord gives up possession
of real estate to a tenant; the tenant has an equitable interest
in the property, defined by the terms of a lease.
leasehold
lending
Loans on leased
property, with satisfaction dates usually designed to impact 10
to 20 years prior to lease expiration.
leasehold
mortgage
Mortgage loan
secured by the tenant's leasehold interest in a property.
lease option
A rental agreement
including a tenant's option to purchase the property.
legal description
Official definition
of the boundaries of a parcel of real estate that is on file at
the county recorder's office.
legal title
See asolute
fee simple title (fee simple).
lessee
The tenant
in a leasehold estate.
lessor
The owner or
landlord in a leasehold estate.
leverage
Using someone
else's money for the purchase of property.
liabilities
Debts incurred.
lien
A legal claim
by one party against the property of another assecurity for a debt.
lien theory
Borrowers retain
legal rights in the property pledged to the lender who has an equitable
interest in the collateral.
lien waivers
Documents signed
by subcontractors and suppliers indicating they have received payments
in full.
life estate
Less than a
fee simple ownership created for the life of anyone except the grantor.
lifting
clause
Clause included
in a junior loan instrument that allows the underlying mortgage
to be replaced or refinanced as long as the amount of the new senior
mortgage does not exceed the amount of the first lien outstanding
at the time the junior loan was made.
like kind
In an exchange,
refers to real estate for real estate, e.g., a lot for an apartment
house. See Section 1031, Internal Revenue Code.
limited
partners
In a syndicate
or regular partnership, the owners other than the general partners.
Liability is limited to the amount of their investment.
line of
credit
An amount stipulated
by a commercial bank to an active customer on an annual basis. Must
be brought to zero on an agreed upon regular date.
liquidity
The cash position
of an individual, business or financial institution, measured by
cash on hand and securities that quickly convert into cash.
lis pendens
Indicates that
a law suit is in process.
loan constant
See mortgage
constant.
loan-to-value
(L/V) ratio
The relationship
between the amount of a mortgage loan and the value of the collateral
property; expressed as a percentage.
Process of
estimating a property's value through exam ination and comparison
of actual sales of comparable properties; also know as the direct
sales comparison approach.
market value
The highest
price for which a property would sell, assuming a reasonable time
for the sale and a knowledgeable buyer and seller acting without
duress
master trusts
See fictitious
deeds of trust.
maturity
Due date of
a loan.
mechanic's
lien
Imposed against
property for nonpayment of labor fees.
MGIC
Mortgage Guaranty
Insurance Corporation; provides insurance for the top five to 30
percent of mortgage loans made by approved lenders and qualified
borrowers.
mill
One-tenth (1/10)
of a cent (0.001); used in property tax assessments.
mobile-home
loan
Mortgage loan
on a large mobile home considered to be real property; usually drawn
for a shorter period than a conventional real estate mortgage.
money
A medium of
exchange; a storehouse of purchasing power, a standard value
money market
certificate
Special savings
plan offered by thrift institutions.
A technique
by which the Fed indicates its wishes to its membe banks, precluding
more drastic actions to achieve desired goals.
moratorium
A temporary
suspension of payments due under a financing agreement in order
to help a distressed borrower recover and avoid a default and foreclosure.
mortgage
A conditional
transfer or pledge of real property as security for the payment
of a debt; the document used to create a mortgage lien.
mortgage-backed
securities
Mortgage pools
established by GNMA that act as collateral for the sale of pass-through
securities.
mortgage
banker
Semifiduciary
financial intermediary who originates new mortgage loans, collects
payments, inspects the collateral and forecloses, if necessary.
mortgagebroker
Semifiduciary
who joins borrower and lender for a real estate loan, thereby earning
a placement fee.
mortgage
companies
Businesses
designed to lend money on real or personal property, e.g., Household
Finance Company.
mortgage
constant
Factor or multiplier
used for rapid computation of the annual payment needed to amortize
a loan.
mortgage
insurance premium
Payment for
an FHA or private mortgage insurance policy; can be paid in cash
at closing or included in monthly payments.
B>mortgage
pool
See mortgage-backed
securities.
mortgage
release document
Filed when
loan is satisfied.
mortgage
revenue bond
A type of industrial
development bond that is offered by state and local governments
through their housing financing agencies and is tax-exempt.
mortgagee
The lender
in a mortgage loan transaction.
mortgagee's
title insurance
An insurance
policy protecting the lender for the amount-of the loan in the event
of a future title dispute.
mortgagor
The borrower
in a mortgage loan transaction; owner of collateral pledged as security
for the mortgage.
multiclass
mortgage securities
Short-term
or long-term mortgage securities, with or without pass-through privileges.
B>municipal
bonds
Bonds issued
for purposes of financing public improvements, such as schools,
parks and renewal projects.
municipal
mortgage enhancement
An FNMA program
in which AAA-rated Fannie Mae mortgage-backed securities are exchanged
for the underlying mortgage on a tax-exempt multifamily project,
enabling the developer to secure money at the lowest rate; familiarly
called "Munie Mae."
Loan balance
increases as a result of less-than-interestonly payments.
net income
Gross income
less operating costs.
net worth
Assets less
liabilities.
nominal
rate
The interest
rate stipulated in a contract.
nonbank
A consumer
bank that accepts demand deposits or makes commercial loans, but
not both.
nonfiduciary
A source of
funds for real estate finance that owes no duty to others and can
maintain complete discretion over its activities because it invests
its own funds. Examples include title insurance companies, private
loan companies and individuals.
nonjudicial
foreclosure
See strict
foreclosure.
note
A signed instrument
acknowledging a debt and promising repayment.
notice of
delinquency In junior finance,
Where the borrower
gives the senior lender permission to notify the junior lender in
the event of a default.
novation
Full substitution
of the original borrower by a new, qualified borrower; releases
the original maker of the loan from all liability.
A loan that
includes certain equipment and appliances located or installed on
the premises in addition to the real property itself.
par
The face value
of a bond or security.
partial
release
Removal of
a specific portion of the collateral from the lien of a mortgage.
partially
amortized
Loan repayment
schedule that provides for equal payments of principal and interest
up to a certain stop date, at which time the balance of the principal
is due in full. See balloon payment.
participation
financing
Where a lender
also becomes a partner in development.
participation
loan
A loan in which
more than one lender or more than one borrower has an interest;
a loan in which the lender receives partial ownership in the enterprise
that is being financed.
pass-throughs
Payments on
securities sold in the secondary market that are sent directly to
the investors.
pension
plans
Public and
private retirement programs wherein donations are made during the
working years to develop a pool of funds to be paid to those who
reach retirement a .
personal
income
A persoiys
gross income from all sources.
personal
property
Movable property
that does not fit the definition of realty. PHA Public Housing Authority,
now under the aegis of HUD.
placement
fee
Charge levied
by a mortgage broker for joining a borrower and a lender who subsequently
negotiate a loan agreement.
pledged
account mortgage (PAM)
Combines a
GPM with a subsidizing savings account to provide the borrower with
a low payment plan, the lender with level amortizing payments and
the seller with cash.
points
Amount of discount
on a mortgage loan stated as a percentage; one point equals one
percent of the face amount of the loan; a discount of one point
raises the net yield on the loan by one-eighth of one percent.
police power
The government's
authority to regulate the use of real estate for the public welfare.
power-of-sale
clause
In a deed of
trust, it authorizes a lender's attorney to "confess a judgment
without process" to speed a foreclosure.
premium
A fee paid
for an insurance policy.
premium
(in excess of par)
A price paid
for a security in excess of its face value.
prepayment
clause
Clause that
provides for a penalty to be levied against a borrower who repays
a loan before the specified due date.
present
worth
The discounted
present-day value of money to be received in the future.
primary
interest rate
See prime rate.
primary
lenders
Originators
of real estate loans.
prime rate
Interest rate
charged by fiduciary institutions to their AAA-rate borrowers.
principal
Amount of a
debt; one of the parties in a financial transaction.
priority
lien position
Established
by recording loan documents-first in time, first in right.
private
mortgage insurance (PMI)
Mortgage insurance
issued by private companies.
property
Anything capable
of being owned.
Proposition
13
A California
referendum limiting the amount of annual property tax increases.
prorations
At a real estate
sale and/or loan closing, the allocation of charge and credits to
the appropriate parties.
purchase-money
loan
Loan given
by a borrower to the seller as part of the urchase price of the
property.
pyramiding
through refinancing
Method of acquiring
additional properties through refinancing existing mortgages.
Land grants
for grazing or farming issued by the king of Spain to political
or military agencies in California.
real estate
Also termed
realty and real property; a portion of the earth's surface extending
downward to the center of the earth and upward into space, including
all things permanently attached thereto by nature or man and all
legal rights therein.
real estate
investment trust
See REIT.
Real Estate
Mortgage Investment Conduit (REMIC)
Created by
TRA '86; allows companies to be formed for trading in mortgage pools
and escaping double tax imposed on corporations.
real estate
mortgage trust
A trust dealing
in financing investments rather than in owning them.
Real Estate
Settlement Procedures Act (RESPA)
An act calling
for the revelation of all costs in anticipation of closing a real
estate transaction.
real property
See real estate.
real property
sales contract
Also known
as a land contract; usually drawn between individuals. It is a contract
by which the purchase price is paid in installments over a period
of time during which the purchaser has possession of the property,
but the seller retains title until the contract terms are completed.
realized
capital gains
Investment
profits not subject to income tax,e.g., profits from refinancing,
exchanges and installment sales.
recast
A redesign
of an existing loan balance into a new loan for the same period
or longer to reduce payments and help a distressed borrower.
recognition
clause
Clause included
in a blanket loan contract used to purchase a tract of land for
subdivision and development; provides for the protection of the
rights of buyers of small parcels in case of default on the part
of the developer-promoter.
recognized
capital gain
Profits from
the sale of investments and subject to income tax; derived by subtracting
the adjusted book basis from the net proceeds of the sale.
reconciliation
In appraising,
estimating a single value from the different approaches; see weighted
average.
reconveys
In satisfying
a deed of trust, the trustee reconveys full title to the borr
recording
Formal filing
of documents affecting a property's title.
redemption
right
Time allotted
to the borrower to redeem collateral afte default by paying the
debt in full, interest accrued and all court costs.
redlining
The delineation
by a lending institution of those areas of a commu nity occupied
by less-than-desirable borrowers; not allowed under the Community
Reinvestment Act.
registered
bond
Issued to a
specific owner; it cannot be transferred without the owner's endorsement.
Regulation
Z
Truth-in-lending
provision that requires lenders to reveal the actual costs of borrowing.
reinstate
In delinquent
deeds of trust, the time prior to exercising the power sale in which
the errant borrower may bring the loan current.
