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Terms Flashcards

1
Q

ABANDONMENT

A

When a borrower abandons a property, he packs up his belongings,
leaves, and stops making payments. Unfortunately, he is still responsible for whatever
payments he is contractually obligated to. If a borrower is in financial distress, there is a
right way and a wrong way to give back the house and re-negotiate or default on the
transaction, but abandonment is almost always the wrong way. If the property has been
condemned or destroyed in a hurricane, well, that’s why there’s homeowners or hazard
insurance.

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2
Q

ABATEMENT

A

A reduction or decrease in amount of property taxes or mortgage payments
due.

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3
Q

ABSOLUTE TITLE

A

A title that has no liens, judgments, deficiencies or clouds on it. Sometimes
called CLEAR TITLE.

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4
Q

ABSTRACT (OF TITLE)

A

A report provided to the Settlement agent that shows the ownership
history of a particular property (called a CHAIN OF TITLE), as well as any other easements or
liens.

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5
Q

ABSTRACTOR

A

‘The guy’ who goes down to the county courthouse to research a property
by conducting a title search and who provides an abstract of that research (or an
updated abstract, if necessary) to the Settlement agent.

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6
Q

ABUSIVE ACT

A

Anything that we as mortgage professionals may do or say that ‘materially
interferes’ with a borrower’s ability to fully understand a product or service. A lie or even a
half-truth.

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7
Q

ACCELERATION CLAUSE

A

The right of the Lender to demand the immediate repayment of
the mortgage loan balance because the borrower defaults on his obligations under the
Note and/or mortgage. The Lender ‘accelerates’ the loan, calling all remaining amounts
due and payable immediately.

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8
Q

ACCRUED EXPENSES

A

money owed or a financial obligation incurred, but not yet paid,
examples of which might be periodic interest or lender fees. These expenses are found on
the Closing Disclosure and/or HUD-1, and are paid at settlement.

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9
Q

ACQUISITION COST

A

The total cost to purchase a home. It includes the total sales price
and whatever closing costs the borrower must pay. It has nothing to do with the amount or
terms of the loan itself. As an example, if I bought a house for $675,000 and had to pay
$25,000 in closing costs, my acquisition cost would be $700,000. Again, the terms of the
loan and the down payment are meaningless.

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10
Q

ACT OF GOD

A

A natural disaster that was unpreventable. And sometimes deserved.

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11
Q

ADDENDUM

A

An addition or amendment to a contract, usually a contract to purchase a
home, but can also be for a mortgage Note (as in Pre-Payment Penalty Addendum).

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12
Q

ADJUSTED (COST) BASIS

A

The cost of a property plus the cost of fixing it up, minus any
depreciation taken.

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13
Q

ADJUSTMENT DATE

A

The date that the interest rate changes or adjusts on an ARM.

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14
Q

ADJUSTMENT INTERVAL

A

On an ARM, the time between changes in the interest rate, usually
every 12 months or 1-year. On a 5/1 ARM, it is annually after the Initial Adjustment Period.

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15
Q

ADJUSTMENT PERIOD (INITIAL)

A

The period elapsing between the start rate and the first
adjustment. On a 5/1 ARM, it is five years.

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16
Q

ADVANCE

A

A partial disbursement of funds under a note. The term is typically used when
describing receiving funds from a Warehouse Line of Credit, a HELOC, as a draw on a
construction loan or receiving cash from utilizing a reverse mortgage.

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17
Q

AFFORDABILITY ANALYSIS

A

A pre-qualification of the borrower’s ability to finance a
property that is not a formal underwriting of the loan, which analyses income, assets
liabilities, and loan transaction particulars.

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18
Q

AGENCY

A

A legal and contractual relationship between a principal and his agent
whereby the agent agrees to act on the behalf of the principal. If I am buying a home, I
will enlist the services of a Buyer’s agent, whose legal responsibility is to act in my best
interests during the transaction, just as I would myself.

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19
Q

ALTA

A

The American Land Title Association, which is the Title Company/Settlement
Agency’s national trade association and creators of standardized settlement forms and
documents. Not to be confused with ULTA, which is a beauty store where chicks go to buy
war paint and haircare products.

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20
Q

ALT-A

A

Alt-A has nothing to do with ALTA or ULTA, but with loan quality. Alt-A (Alternative-
A) loans are those that fall just ever so slightly outside prime lending guidelines – kind of like
‘sub-prime lite’.

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21
Q

DUE ON SALE CLAUSE

A

used when the property is sold

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22
Q

ACCELERATION CLAUSE

A

used for when the borrower goes into default

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23
Q

ALIENATION CLAUSE

A

used when borrower transfers title/ownership. It does not
mean that the property has been sold, just that ownership has changed

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24
Q

APPRAISAL MANAGEMENT COMPANY – AMC

A

a company that acts as a ‘middleman’
between brokers and appraisers in part to ensure that brokers cannot choose their own
appraisers. God forbid that a broker or lender actually has a business relationship with the
appraiser… The AMC is paid by the broker or borrower directly to provide (usually
independent) appraisers on a rotational basis, and they in turn pay the appraisers a
portion of the fee they received.

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25
Q

APPRECIATION

A

increase in value

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26
Q

ARM’S LENGTH TRANSACTION

A

A transaction among non-related parties, each acting in
their own best interest. If I sell my house to you, that’s an arm-s length transaction.

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27
Q

NON-ARM’S LENGTH TRANSACTION

A

If I sell my
house to my sister, it’s a NON-ARM’S LENGTH TRANSACTION and may require further
underwriting scrutiny.

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28
Q

ASSESSMENT

A

A local tax that is usually temporary or a one-time assessment, levied
against a property for a specific municipal need or purpose, such as putting in sidewalks or
a sewer system.

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29
Q

ASSIGNMENT

A

The transfer of the ownership of a mortgage loan from one person or
company to another. The Assignor transfers or assigns his ownership rights to the mortgage
to the Assignee.

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30
Q

Creditor

A

gives out the loan - e.g. Mortgage Bank

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31
Q

Debtor

A

owes money on the loan - e.g. Borrower

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32
Q

Mortgagor

A

Borrower is the Mortgagor, giving Mortgage to collateralize the loan

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33
Q

Mortgagee

A

Bank is the mortgagee, who received the mortgage as collateral from the borrower

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34
Q

ASSUMABILITY

A

With an assumable mortgage, a purchaser can take over the remaining mortgage obligation (and payments) from the home seller. This does require underwriting
and qualification, and generally speaking, only VA and FHA loans are assumable. If a mortgage contains a due-on sale clause, it is not an assumable loan.
It only makes sense for a buyer to assume a loan if it can save him money because of a
shorter remaining term and/or if it contains a lower than current market interest rate.

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35
Q

ASSUMPTION FEE

A

The fee paid to a lender when an assumption takes place, which I assume you probably figured out.

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36
Q

ATTACHMENT

A

A lien on property to force payment of a debt when the property is sold or otherwise refinanced.

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37
Q

ATTEST

A

To witness by observation and signature

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38
Q

ATTORNEY’S OPINION OF TITLE

A

A written statement by an attorney after examination of
public records and or abstracts of title that in his or her judgement the title to a particular
property is free and clear of liens and encumbrances.

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39
Q

BAD TITLE

A

A condition where title to a property is impaired by unsettled claims and liens.
Also called CLOUD ON TITLE.

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40
Q

BANKRUPTCY

A

The legal discharge (Chapter 7 Bankruptcy) or reorganization of a debtor’s
debts (Chapter 13 Bankruptcy) via the court system. Not to be confused with insolvency,
which is the financial inability to pay one’s debts when due, and when his liabilities exceed
his assets.

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41
Q

BLANKET MORTGAGE

A

mortgage covering two or more properties as security for the
same loan, usually used for builders and developers who are working with several projects
simultaneously. When a particular property is sold, a PARTIAL RELEASE OF LIEN is issued by
the developer’s lender.

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42
Q

BLENDED RATE

A

In a refinance with both first and second mortgages, it is the mathematical
average of both mortgage interest rates calculated according to the percentage of each
loan in relation to the total amount borrowed.

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43
Q

BLOCKBUSTING

A

The practice of illegally frightening homeowners by telling them that
people who are members of a particular race, religion, or national origin are moving into
their neighborhood and those homeowners should expect a decline in the value of their
property. The purpose of this scheme is to get the homeowners to sell out at a deflated
price, so that the properties can be purchased on the cheap and sold at a high profit.

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44
Q

BONA FIDE

A

is Latin for ‘In good faith’.

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45
Q

BORROWER CREDIT

A

Credits (money) given to the borrower at closing that are subtracted
from the final closing costs, including seller paid closing costs or a portion of the yield
spread premium received by the broker.

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46
Q

BRIDGE LOAN

A

A second mortgage on the borrower’s present home, used for purchasing a
new house before the present home is sold. Also called a “swing loan.”

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47
Q

CASH FLOW

A

The amount of cash generated over a specific period of time from an
income-producing property. There is positive cash flow when the amount of rent exceeds
the expenses of property, including PITI, maintenance, utilities, etc.

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48
Q

CERTIFICATE OF ELIGIBILITY (COE)

A

The document given to qualified veterans which entitles
them to VA guaranteed loans.

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49
Q

CERTIFICATE OF REASONABLE VALUE (CRV)

A

An appraisal for a VA loan.

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50
Q

CERTIFICATE OF TITLE

A

A statement provided by Settlement agent attesting that the title to
a property is legally held by the current owner.

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51
Q

CERTIFICATE OF VETERAN STATUS

A

The document given to veterans or reservists who have
served 90 days of continuous active duty (including training time) which enables them to
obtain lower down payments on certain FHA insured loans (NOT VA loans!).

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52
Q

CHATTEL

A

Personal property that is not real estate.

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53
Q

CLEAR TITLE

A

A title free of clouds, liens or encumbrances.

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54
Q

CLOSING

A

The act of transferring ownership of property; when the buyer and seller
become contractually obligated to each other. Not to be confused with
CONSUMMATION, which occurs when the borrower becomes contractually obligated to
the lender.

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55
Q

CLOSING DISCLOSURE

A

The Settlement Statement. The new document that replaced the
Final TIL and HUD-1.

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56
Q

CLOUD ON TITLE

A

Exists when there is an outstanding claim or encumbrance on the title.

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57
Q

COFI

A

The 11th Federal Reserve District Cost of Funds Index. One type of index used to
determine interest rates for adjustable rate mortgages.

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58
Q

COSI

A

The 11th Federal Reserve District Cost of Savings Index. Another type of index used
to determine interest rates for adjustable rate mortgages.

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59
Q

COLLATERAL

A

Property pledged as security for a debt.

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60
Q

COMMITMENT

A

A binding agreement issued by a Lender to a borrower to lend money
under specific terms. The Commitment to Lend must be good for a minimum of 10 days
once it is issued (same 10-days also applies for the Loan Estimate).

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61
Q

CONDEMNATION

A

A determination that a property is unfit to occupy.

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62
Q

CONSIDERATION

A

payment

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63
Q

CONTROLLED BUSINESS ARRANGEMENTS (CBA)

A

A CBA exists when real estate, mortgage
and title companies provide related services to each other through subsidiary companies
they each own. It is similar to a multi-entity AfBA.

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64
Q

CONTROLLED SUBSTANCES

A

drugs

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65
Q

CONVERSION OPTION

A

A provision in an ARM allowing the loan to be converted to a fixedrate
usually at the end of the first adjustment period.

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66
Q

CONVEYANCE

A

The transfer of the Title from one entity to another.

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67
Q

CORRESPONDENT LENDER

A

Mortgage Banker utilizing a warehouse line of credit to fund loans.

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68
Q

COVENANT

A

Promise written into Deeds and other instruments agreeing to performance or
non-performance of certain acts or preventing certain uses of the property.

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69
Q

CREDIT LIFE (OR ACCIDENT OR HEALTH) INSURANCE

A

An OPTIONAL declining term life
insurance policy used to insure repayment of a loan should the borrower die (or whatever).

70
Q

DEED

A

A written instrument signed by the Grantor only and delivered to the Grantee that
conveys Title to real property.

71
Q

DEED OF TRUST

A

In Title Theory states, this document is used instead of a mortgage to
secure the payment of a note.

72
Q

DEFEASENCE CLAUSE

A

States that when the Note has been satisfied, the Lender will release
the lien on the property.

73
Q

DEFERRED INTEREST

A

A fancy way of saying negative amortization. Or what someone
expresses when they’re just not into you until you start makin’ dat’ mad mortgage money

74
Q

DEFICIENCY JUDGEMENT

A

When a borrower’s home is sold at a foreclosure auction and
the proceeds of the sale aren’t enough to cover what the lender is owed, the lender can
place a judgement for that remaining amount owed against the borrower.

75
Q

DEMAND CLAUSE

A

Allows a lender to call a Note due before maturity.

76
Q

DEPRECIATION

A

A decrease in the value of a property over time.

77
Q

DISPARATE IMPACT

A

A law that does not appear to be intentionally discriminatory, but in
practice actually is, having a ‘disproportionate adverse effect on members of a protected
class’. An example might be zoning laws or other housing restrictions that exclude
minorities from certain neighborhoods. Re-read the RESPA section.

78
Q

DOWER or CURTESY RIGHTS

A

Provides for ownership of the real property of a deceased
spouse to the surviving spouse.

79
Q

DOWERY

A

What your future father-in-law promises you if you take his youngest daughter off
his hands.

80
Q

DUAL TRACKING

A

The illegal practice of a servicer pursuing loss mitigation options for a
borrower while simultaneously proceeding with foreclosure processing.

81
Q

DUE DILIGENCE

A

Making a reasonable effort to perform a task or provide accurate and
complete information.

82
Q

DUE ON DEMAND CLAUSE

A

A provision of a mortgage allowing a lender to demand
immediate payment of the loan fraud and misrepresentation in the loan application are
discovered.

83
Q

DUE ON SALE CLAUSE

A

Allows the lender to demand immediate payment of the balance
of the mortgage if the mortgage holder sells the home.

84
Q

EASEMENT

A

The right granted in a Deed to use part of another person’s property. An
example of one type of easement is the granting of a RIGHT OF WAY. One type of right of
way may be a driveway that goes through a neighbor’s adjacent property in order to get
access to a borrower’s property.

85
Q

EMINENT DOMAIN

A

When a government (Federal, State or Local) forcibly takes ownership
of a private property for the greater public good and use. The property owner must be
compensated ‘fair market value’ for the property that was taken.

86
Q

ENCUMBRANCE

A

A lien, judgment, easement, security interest, unpaid tax claim or any
other cloud on title which may affect the ability to transfer ownership of the property.

87
Q

EARNEST MONEY DEPOSIT

A

Money given by a buyer to a seller as part of the purchase price
to bind the sales contract.

88
Q

ESCALATION CLAUSE

A

A clause in the loan terms that allows the lender to increase the
interest rate, usually in response to loan non-performance or default.

89
Q

EQUITY EXCHANGE – Also known as a 1031 EXCHANGE

A

Allows a real estate investor to sell
an investment property that has increased in value and purchase a new investment
property, while deferring capital gains taxes on the appreciated amount until a later time.

90
Q

ESTOPPEL LETTER

A

Is the payoff letter from the lender that specifies exactly how much is due
to pay off the mortgage.

91
Q

EXCULPATORY CLAUSE

A

prevents lender from seeking DEFICIENCY JUDGEMENT form a borrower after the borrower’s home is sold at a foreclosure sale and the proceeds are not enough to satisfy the amount due to the lender.
It may also allow the borrower to surrender the property without personal liability for the loan balance if the lender accepts a DEED IN LIEU OF FORECLOSURE.

92
Q

FARMERS HOME ADMINISTRATION (FmHA)

A

Provides financing to farmers.

93
Q

FFIEC – Federal Financial Institutions Examination Council

A

This is who lenders send their
annual HMDA data to.

94
Q

FIRM COMMITMENT

A

A promise from a lender to make a mortgage loan to a borrower
under specific terms and conditions.

95
Q

FORBEARANCE

A

When a lender delays foreclosure action in order to allow a borrower to
catch up on overdue mortgage payments.

96
Q

FORCE PLACED INSURANCE

A

If a borrower allows his homeowners/hazard insurance to
lapse or if it cancelled and not replaced with a new policy, the lender can put into place
Forced Place Insurance that protects the lender’s financial interest should the house burn
to a crisp or otherwise be damaged. It does not cover the borrower’s financial interest in
the property – only the lender’s. This insurance is very expensive, and it is ultimately the
responsibility of the borrower to pay.

97
Q

FRAUD

A

An intentional misrepresentation or concealment of a fact that deceives another,
causing him/her to act upon the false representation or concealment to his/her detriment.

98
Q

GEM

A

Growing Equity Mortgage – an FHA specialty loan.

99
Q

GIFT DEED

A

A Deed for which consideration is ‘love and affection and no financial
consideration’.

100
Q

GRACE PERIOD

A

The 10-15-day period after the 1st of the month during which a borrower
can make his mortgage payment late and not incur a late payment charge. The late
payment fee is 5% of the payment amount for Conforming loans, and 4% of the payment
amount for Government loans.

101
Q

GRADUATED PAYMENT MORTGAGE (GPM)

A

An FHA mortgage where the payments
increase for a specified period of time and then level off.

102
Q

HUD-1 SETTLEMENT STATEMENT

A

A recently retired document that provides an itemized
listing of the closing costs. Info now covered by the CD.

103
Q

HVCC

A

Home Valuation Code of Conduct. It was the original appraiser independence
rule that was retired by Dodd-Frank in 2010.

104
Q

HYPOTHECATE/HYPOTHICATION

A

pledging collateral for a loan.

105
Q

IMPOUNDS

A

Escrow account

106
Q

INDEX

A

A published interest rate lenders use to adjust the interest rate on an adjustable
mortgage.

107
Q

INSURED CLOSING PROTECTION LETTER

A

A legal document provided to a lender by a title
insurance company, promising to abide by closing instructions, and which protects the
lender (and borrower) from misuse of funds by the title company. Recall the story about my
friends Tom and Lisa and the ICPL.

108
Q

INTEREST RATE FLOOR

A

The minimum interest rate allowable on an ARM.

109
Q

INTERIM FINANCING

A

A construction loan that is replaced by permanent financing.

110
Q

JUDICIAL FORECLOSURE

A

A foreclosure process that necessitates the lender files a lawsuit in
a court of law. Used in Lien Theory states. Remember Judge Judy?

111
Q

LAND INSTALLMENT CONTRACT

A

also known as a CONTRACT FOR DEED – A form of seller
financing, whereby the seller of a property retains Title of the property until the buyer/borrower is able to pay off the loan. The buyer takes occupancy and for all intents and purposes can do whatever they want with the property as if he owned it, but actual ownership does not transfer to him until he pays off the seller and the Deed transfers.
The land installment contract may be recorded or un-recorded. If recorded, when the buyer finds more ‘traditional’ financing to pay off the seller, that transaction is usually treated as a refinance. If un-recorded, the ‘take-out’ financing is usually treated as a
purchase.

112
Q

LEASE/OPTION

A

A financing arrangement between a landlord and his tenant whereby a portion of the monthly rent goes towards the purchase price of the house the tenant is
living in.

113
Q

LIS PENDENS

A

litigation pending – a notice sent out by a lender to warn a borrower that
foreclosure proceeding are eminent.

114
Q

LOAN WORKOUT

A

When a lender or servicer pursues alternatives to foreclosure.

115
Q

LOSS MITIGATION

A

Specific alternatives to foreclosure, including short sales, loan modifications, deed-in-lieu, etc.

116
Q

MANDATORY ARBITRATION AGREEMENT

A

A provision in a contract that requires all parties to
submit to arbitration to resolve disputes instead of seeking action in the courts. Arbitration is
both less formal than a court proceeding and far less expensive for both parties. Decisions
rendered by arbitrators (instead of Judges and Juries) are just as legally binding.
Mandatory arbitration agreements are prohibited by the LO Comp rule in Dodd Frank.

117
Q

MATURITY

A

The date on which the principal balance of a loan becomes due and
payable.

118
Q

MDIA

A

The Mortgage Disclosure Improvement Act. The rules in this Act have been subsequently made part of TILA via Dodd-Frank. MDIA gave us
- the 3-7-3 rule (see TRID),
- it tells consumers that just because they signed reams of paperwork doesn’t mean that they are obligated to go through with the transaction, and lastly,
- that the creditor can only collect the credit report fee before the LE is provided

119
Q

MERGED CREDIT REPORT

A

A consumer credit report which contains information from two or
more of the three credit repositories. A tri-merge report contains all three.

120
Q

MSA - Metropolitan Statistical Area

A

A geographic area with a population base of
50,000 or more people, used as a basis for annual HMDA reporting to the FFIEC.

121
Q

MSA - Marketing Service Agreement

A

With an MSA, there is a contract between
two or more parties (lender, real estate broker, Title Company) to pay advertising
fees to promote each other’s services. They are structured to walk a razor’s edge in
order to skirt Section 8 of RESPA. And sometimes they do. And sometimes they’re just
a ‘front’ for paying for referrals. But with all the enhanced scrutiny by regulators
these days, many are dissolving their MSAs because they don’t want even a hint of
impropriety being inferred by an audit or investigation. It’s bad for business, and the
fines are severe, not to mention the legal expense of defending one’s position even
when no guilt has been determined.

122
Q

NOD – NOTICE OF DEFAULT

A

the document sent to a borrower when the mortgage
delinquency reaches 120 days. After the NOD the lender can file the Lis Pendens, and then
the foreclosure can proceed.

123
Q

NON-ASSUMPTION CLAUSE

A

A clause in a mortgage contract forbidding the assumption of
the mortgage without the prior approval of the lender.

124
Q

OFFICE OF THE COMPTROLLER OF THE CURRENCY – OCC

A

federal regulator that supervises
depository institutions.

125
Q

OFFICE OF THRIFT SUPERVISION (OTS)

A

The regulator for federally chartered savings
institutions. Formally known as Federal Home Loan Bank Board

126
Q

PERMANENT LOAN

A

A long term mortgage, used to take-out or replace a short-term construction loan.

127
Q

PLEDGED ASSET MORTGAGE

A

A mortgage that is secured by a securities (stocks, bonds, mutual funds) account.

128
Q

POWER OF ATTORNEY – POA

A

legal document authorizing one person to act on behalf of another for purposes of banking and contracting. A real estate and mortgage transaction
generally require a Limited or Specific Power Of Attorney, as opposed to a General POA.

129
Q

PRE-APPROVAL

A

Lender’s credit underwriting approval to make a loan, subject to property
underwriting. It does not include a commitment by the lender to a particular interest rate
or lending terms, nor a specific property. It is used as an aid to help the buyer shop for a
home knowing that he can finance ‘up to’ a certain loan amount, as long as the appraisal
comes in at or above the sales price.

130
Q

PRE-QUALIFICATION

A

Examination of information that a loan applicant has provided about
his/her income and financial obligations to estimate how much money the loan applicant
might be eligible to borrow. MUCH weaker than a pre-approval, and non-binding upon
the lender.

131
Q

QUITCLAIM DEED

A

A deed that transfers ownership without any guarantees or warranties,
and can be used to remove any clouds on a title. Quitclaims are also commonly used in
divorce cases after a refinance has taken one spouse off the Note, then that spouse would
give up any claim of ownership to the property via a quit claim.

132
Q

REALTOR®

A

A licensed real estate agent holding active membership in a local real estate
board affiliated with the National Association of Realtors.

133
Q

REAL ESTATE AGENT

A

A person licensed to negotiate and transact the purchase and sale of
real estate on behalf of a buyer or seller.

134
Q

RECASTING

A

The term used by lenders to adjust mortgage payments when:
* the interest-only period is finished on an I/O loan and it becomes fully amortizing, or
* when an adjustable rate mortgage makes its initial rate adjustment, or
* when the negative amortization provision of an Option Arm has reached its limit and
the loan must begin to be paid as a fully amortizing loan

135
Q

RECONVEYANCE

A

A clause in a Deed of Trust that conveys title back to the borrower once
the loan is paid in full.

136
Q

RECORDATION FEES

A

When a borrower goes to Settlement and a new mortgage is taken
out, the County in which the property is located charges fees to record the mortgage
(and the Deed, if it is a purchase transaction) in the permanent record books. Recordation
Fees are different from Transfer Taxes, which are a State sales tax on the sale of a property,
or the transfer of ownership from one owner to another.

137
Q

RELEASE (of lien)

A

A document sent by the lender to the county courthouse that affirms
that there is no longer a lien (mortgage) in effect on a property because the loan has
been satisfied. Also known as a Notice of Satisfaction.

138
Q

REPOSITORY

A

An organization that gathers, records, updates, and stores financial, legal
and public records of individuals who are being considered for credit.

139
Q

RESIDUAL INCOME

A

for VA loans, the amount of income left over after all monthly
obligations have been paid. It is based on family size and location.

140
Q

REVERSE ANNUITY MORTGAGE (RAM)

A

A reverse mortgage – an FHA HECM – where the
lender makes periodic payments to the borrower using the borrower’s equity in the home
as collateral.

141
Q

RULE OF 78

A

A method of determining an interest rate refund in the event a borrower pays
off a fixed rate loan prior to its maturity.

142
Q

SECURED LOAN

A

A loan that is secured by collateral such as property. The loan agreement
contains a provision stating the lender has a claim against the property if the debt is not
paid according to the terms of the agreement.

143
Q

SECURITY

A

The property that will be pledged as collateral for a loan.

144
Q

SHARED APPRECIATION MORTGAGE (SAM)

A

A mortgage in which a borrower receives a
below market interest rate in return for which the lender receives a portion of the future
appreciation in the value of the property.

145
Q

SIMPLE INTEREST

A

Interest which is computed only on the principle balance.

146
Q

STATUTE

A

A law enacted by a legislative body. May include a law established by an Act or
the rules or regulations which are used to promulgate the law.

147
Q

STEP-RATE MORTGAGE

A

A type of ARM whereby the interest rate increases according to a
specified schedule of time, say five years, at the end of that period, the rate and
payments will remain constant for the remainder of the loan.

148
Q

SUBPRIME LOAN

A

Loans for borrowers who have either poor credit, an unstable income
history, or high debt ratios, and who cannot meet Prime loan underwriting guidelines.

149
Q

SWEAT EQUITY

A

Equity created by a purchaser performing work on a property being
purchased.

150
Q

TEMPORARY BUY-DOWN

A

A financing tool used to temporarily reduce the interest rate and
monthly payments on a mortgage.

151
Q

TENANCY

A

Tenancy describes the type of ownership to a property is held by its owners. Are
the owners married or unmarried, and what happens to the ownership of the property
when the owner dies – does his ownership interest go to the other owner(s), or to his heirs?

152
Q

TIME-PRICE DIFFERENTIAL

A

An alternative way of expressing the finance charge. Basically,
you subtract the loan amount from the total of the payments made over time.

153
Q

TITLE BINDER

A

A temporary title insurance policy given to a lender while waiting for the
permanent policy documents to be prepared and delivered.

154
Q

TIME VALUE OF MONEY

A

A concept that a sum of money available today is more valuable
than that same sum of money in the future, because 1) today’s money can be invested to
earn money – to make itself grow, and 2) tomorrow’s money is also worth less because of
the effects of inflation.

155
Q

TORNADO FOOD

A

Mobile home parks.

156
Q

TRANSFER TAXES

A

State sales tax on the sale of a property, or the transfer of ownership from
one owner to another. It is paid in addition to Recordation Fees, above.

157
Q

TREASURY RATE (T-RATE)

A

The current interest rate the U.S. Treasury is paying on bonds it
issues. Generally, shorter term bonds pay less than long term bonds for reasons that you
won’t have to worry about for the exam. As of the time of this writing, the 10-year bond
yields (pays as interest) 2.07% annually, and the 30-year bond 3.98%.

158
Q

TRUST

A

An arrangement whereby property is transferred to a trusted third party (Trustee) by
a Grantor. The Trustee holds the property for the benefit of another party called the
Beneficiary. In a Title Theory State, the Title to a property is conveyed by the Grantor into
the Trust administered by the Trustee. If we pay off the loan obligation as agreed, the Title
re-conveys back to the Grantor. If the Grantor defaults on the loan, the Title conveys to
the Beneficiary, who in our world is the Lender.

159
Q

UDAP

A

Unfair and Deceptive Acts and Practices.

160
Q

UNENCUMBERED PROPERTY

A

Real Estate without any liens, clouds
or encumbrances on title.

161
Q

UNRECORDED DEED

A

An instrument that transfers Title from one party to another that hasn’t
been recorded at the county courthouse.

162
Q

UNSECURED LOAN

A

A loan that is not collateralized

163
Q

USURY

A

Interest charged in excess of the legal limits established by each State.

164
Q

VARIABLE RATE MORTGAGE (VRM)

A

An adjustable rate mortgage. Same thing, different
name.

165
Q

VICARIOUS LIABILITY

A

The responsibility of one person for the acts of another, usually
referenced when discussing that employers in our world are responsible for anything their
employees do that can harm a consumer.

166
Q

VOID

A

Having no legal force or effect, or being unenforceable.

167
Q

WAIVER

A

The voluntary abandonment or surrender of some legal claim, right or
privilege

168
Q

WAREHOUSE FEE

A

time a mortgage banker uses a warehouse line of credit to close loans, those warehouse
lenders charge a fee for privilege.

169
Q

WARRANTY DEED

A

A Deed that contains language that the grantor will protect the grantee
against any and all claims relating to clear title.

170
Q

WDO – Wood Destroying Organism Report

A

This is your Termite Inspection. Termites and
anything else that eats wood, except for tornados.

171
Q

WET SETTLEMENT

A

A loan settlement where the funds for the loan are disbursed the same
time as settlement occurs, or if applicable, when the rescission period is over. In a DRY
SETTLEMENT state, the funds are only available after the mortgage or deed of trust has
been recorded at the county courthouse.

172
Q

ZONING

A

A legal mechanism for local governments to regulate the use of privately-owned
real property to prevent conflicting land use and promote orderly development.

MLO (1 decks)

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