Vocabulary II

Question 1

default

Answer 1

Failure to make the mortgage payment within a specified period of time. For first
mortgages or first trust deeds, if a payment has still not been made within 30
days of the due date, the loan is considered to be in default.

Question 2

delinquency

Answer 2

Failure to make mortgage payments when mortgage payments are due. For most
mortgages, payments are due on the first day of the month. Even though they
may not charge a “late fee” for a number of days, the payment is still considered
to be late and the loan delinquent. When a loan payment is more than 30 days
late, most lenders report the late payment to one or more credit bureaus.

Question 3

depreciation

Answer 3

A decline in the value of property; the opposite of appreciation. Depreciation is
also an accounting term which shows the declining monetary value of an asset
and is used as an expense to reduce taxable income. Since this is not a true
expense where money is actually paid, lenders will add back depreciation
expense for self-employed borrowers and count it as income.

Question 4

discount points

Answer 4

In the mortgage industry, this term is usually used in only in reference to
government loans, meaning FHA and VA loans. Discount points refer to any
“points” paid in addition to the one percent loan origination fee. A “point” is one
percent of the loan amount.

Question 5

due-on-sale provision

Answer 5

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.

Question 6

easement

Answer 6

A right of way giving persons other than the owner access to or over a property.

Question 7

effective age

Answer 7

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.

Question 8

eminent domain

Answer 8

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.

Question 9

encroachment

Answer 9

An improvement that intrudes illegally on another’s property.

Question 10

encumbrance

Answer 10

Anything that affects or limits the fee simple title to a property, such as
mortgages, leases, easements, or restrictions.

Question 11

Equal Credit Opportunity Act (ECOA)

Answer 11

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.

Question 12

estate

Answer 12

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.

Question 13

eviction

Answer 13

The lawful expulsion of an occupant from real property.

Question 14

examination of title

Answer 14

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

Question 15

exclusive listing

Answer 15

A written contract that gives a licensed real estate agent the exclusive right to sell
a property for a specified time.

Question 16

executor

Answer 16

A person named in a will to administer an estate. The court will appoint an
administrator if no executor is named. “Executrix” is the feminine form.

Question 17

fair market value

Answer 17

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.

Question 18

Federal Housing Administration (FHA)

Answer 18

An agency of the U.S. Department of Housing and Urban Development (HUD).
Its main activity is the insuring of residential mortgage loans made by private
lenders. The FHA sets standards for construction and underwriting but does not
lend money or plan or construct housing.

Question 19

fee simple

Answer 19

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

Question 20

fee simple estate

Answer 20

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.

Question 21

firm commitment

Answer 21

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

Question 22

first mortgage

Answer 22

The mortgage that is in first place among any loans recorded against a property.
Usually refers to the date in which loans are recorded, but there are exceptions.

Question 23

fixed-rate mortgage

Answer 23

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

Question 24

fixture

Answer 24

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

Question 25

Government National Mortgage Association (Ginnie Mae)

Answer 25

A government-owned corporation within the U.S. Department of Housing and
Urban Development (HUD). Created by Congress on September 1, 1968, GNMA
performs the same role as Fannie Mae and Freddie Mac in providing funds to
lenders for making home loans. The difference is that Ginnie Mae provides funds
for government loans (FHA and VA)

Question 26

grantee

Answer 26

The person to whom an interest in real property is conveyed.

Question 27

grantor

Answer 27

The person conveying an interest in real property.

Question 28

Home Equity Conversion Mortgage (HECM)

Answer 28

Usually referred to as a reverse annuity mortgage, what makes this type of
mortgage unique is that instead of making payments to a lender, the lender
makes payments to you. It enables older home owners to convert the equity they
have in their homes into cash, usually in the form of monthly payments. Unlike
traditional home equity loans, a borrower does not qualify on the basis of income
but on the value of his or her home. In addition, the loan does not have to be
repaid until the borrower no longer occupies the property.

Question 29

HUD median income

Answer 29

Median family income for a particular county or metropolitan statistical area
(MSA), as estimated by the Department of Housing and Urban Development
(HUD).

Question 30

HUD-1 settlement statement

Answer 30

A document that provides an itemized listing of the funds that were paid at
closing. Items that appear on the statement include real estate commissions,
loan fees, points, and initial escrow (impound) amounts. Each type of expense
goes on a specific numbered line on the sheet. The totals at the bottom of the
HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at
closing. It is called a HUD1 because the form is printed by the Department of
Housing and Urban Development (HUD). The HUD1 statement is also known as
the “closing statement” or “settlement sheet.”

Question 31

joint tenancy

Answer 31

A form of ownership or taking title to property which means each party owns the
whole property and that ownership is not separate. In the event of the death of
one party, the survivor owns the property in its entirety.

Question 32

judicial foreclosure

Answer 32

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. Other states use
non-judicial foreclosure.

Question 33

jumbo loan

Answer 33

A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at
$227,150. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans
are referred to as conforming loans.