Glossary of Terms
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A
A process in bankruptcy wherein the court releases a property from its control when it is deemed to have no value to the estate. When the court abandoned its interest in the property, the automatic stay is lifted, and the lender(s) can resume foreclosure proceedings. The borrower, although still in bankruptcy, is then free to reaffirm the mortgage debt, list and sell, or refinance the home in an effort to save it, or sell it before it is lost to foreclosure.
The essentials of a money judgment obtained via an adjudicated lawsuit. When an abstract is recorded in the recorder's office, the judgment becomes a general lien on all the debtor's property located in that particular county.
Clause in a deed of trust or mortgage that accelerates the time when the indebtedness becomes due. For example, some mortgages or deeds of trust contain a provision that the note balance shall become due immediately on the resale of the land or on the default in the payment of principal and interest.
A formal declaration before a duly authorized officer (such as a notary public) by a person who has executed an instrument that such execution is his or her own.
An act or process, such as foreclosure, by which one procures ownership of property.
An addition or change to a contract.
Putting off or postponing business or a session until another time. For example, a Sheriff’s Sale may be adjourned to another date if the homeowner is close to securing a refinance, a workout, or completing a sale.
A judicial determination.
A loan with an interest rate that fluctuates based on a specified financial index.
If a person dies without a will (Intestate) the court will appoint a person or administrator to handle the estate whose functions are similar to those of an executor.
Money paid, on behalf of an owner, by a junior interest holder. Done to temporarily cure a delinquency on a senior encumbrance that threatens to extinguish the junior’s position. Thereafter, the junior lien holder can start his own foreclosures if he is not immediately reimbursed for the advances paid out. For example, a junior or second mortgage lender may advance money to bring a senior mortgage lien current or pay property taxes to avoid a tax sale.
A sworn, notarized statement that’s signed by the affiant before witness. At a real estate closing, the seller is asked to provide an affidavit of title.
The relationship of trust that exists between sellers and buyers and their agents. The agency is formed through a written contract like a listing agreement.
A person who is authorized by another to represent him or her (real estate agent). A person licensed by the state to conduct real estate transactions.
A signed written contract entered into between the seller and buyer for sale of real property under certain specific terms and conditions.
The transfer of an interest in or title to property to another.
The gradual repayment of a debt in a series of equal periodic amounts until the total debt, including interest, is paid in full. Senior loans are typically amortized over 30 years, whereas junior loans are generally amortized over a much shorter time period.
The cost of the loan expressed as a yearly rate on the balance of the loan. When examining a loan for truth-in-lending violations, start with the APR.
In a lawsuit, this is a legal document that the defendant must file in response to the claims alleged in the complaint.
A communication that informs a party that the obligations of the original contract will not be fulfilled.
A statement of value or estimation of the value of a property as of a certain date conducted by a disinterested person with suitable qualifications. Generally, value for single-family properties is based on a review of recent market activity using sales of comparable properties as a basis and then making value adjustments based on the comparison of comparable property to the subject property.
Increase in value or worth. The difference between the increased value of property and the original sales price.
A right, privilege, or improvement belonging to, or passing with, the land (an in ground swimming pool, for example).
A transaction between relative strangers, each trying to do the best for himself. Many short sale approvals require the transaction to be at arm’s length, meaning you can’t easily sell the home at a discount to a relative that would indirectly benefit the seller.
The purchase or sale of a property in its existing condition.
Applies in ad valorem taxation and refers to the value of a property according to tax roles. May not conform to market value, but it is actually calculated to a market value base. A tax assessor’s determination of the value of a home in order to calculate a tax base. May or may not be the same as appraised value. Lenders rely on the appraised value.
One to whom a transfer of an interest is made (i.e., assignee of a deed of trust).
Written document by which property, other than real property, is transferred from one person (assignor) to another (assignee). Assignments of mortgage, assignments of deed of trust, assignments of lease, assignments of rentals, and so on are common assignments.
One who transfers property by assignment.
When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Can help you attract buyers if you sell your home.
A provision that allows a buyer to take responsibility for the mortgage from a seller.
A formal agreement with a lender in which a new property owner agrees to be personally liable for the repayment of a preexisting lien. Generally entails paying the lender an assumption fee and sometimes a higher interest rate. Doesn’t release the original borrower from further liability unless the agreement specifically provides for it.
An agent authorized to act for another. Commonly evidenced by a recorded Power of Attorney. Holder of the power can exercise it only as long as it has not been revoked and the grantor remains alive and competent enough to act on their own behalf if needed.
A bankruptcy case automatically prevents continuation of creditor collection activity. Filing bankruptcy is the only way to get this protection (mortgages may petition the court to “lift” the stay and grant permission to resume collection activity, usually foreclosure).
B
A secondary bid for a property that the seller will accept if the first offer fails.
A lump-sum final installment payment of a promissory note that is much larger than the regular installment payments.
A person who is insolvent; one whose total property is legally declared insufficient to pay his or her debts.
A proceeding in U.S. District Court wherein debtors who cannot meet the claims of their creditors may be adjudged bankrupt by the court. There are three different types (and many chapters) of bankruptcy proceedings (see Cramdown).
Initial, tentative filing of a bankruptcy petition that qualifies the petitioner to the benefits of the automatic stay pending the filing of the full petition within the following 15 days. Failure to complete the filing of the full petition will result in the dismissal of the “face sheet filing” and a bar to any subsequent refiling for the next 180 days.
A deed that carries with it no warrants against liens or other encumbrances but that does imply that the grantor has the right to convey title.
A deed in which the grantor warrants or guarantees the title against defects arising during the period of his or her ownership of the property, but not against defects existing before that time.
The sale of property for less than market value.
The cost of an asset increased by the cost of allowable improvements and reduced by depreciation and amortization deductions to calculate gain or loss on sale.
Building, expanding, or modifying a structure without benefit of a required permit.
The failure to perform provisions of a contract without a legal excuse. For example, if you agree to sell your property but after several weeks the buyer changes his mind and decides not to perform as agreed in the contract, the buyer is said to have breached the contract.
A person licensed by the state to work in a specific field including real estate, mortgage loans, insurance, securities, and so on.
A written estimate of the most probable sales price of a property provided by a licensed real estate broker with experience in the specific locality of the subject property. Value of the subject property is estimated by comparing like properties that recently sold and adjusting for differences. Often provided as a means to establish a listing price for a property. A mortgage lender considering an application for pre-foreclosure shot sale will almost always have a local broker confirm the property’s as-is value. Less formal than a certified appraisal, and also less costly to the lender.
A mortgage that requires monthly payments of interest only until the final mortgage payment when full payment of principal is due.
A written document used to describe your business, summarizing an organized sequence of predetermined actions to complete future objectives.
An upfront payment to a lender to reduce a loan’s interest rate, either temporarily (the first year or two) or permanently.
A real estate broker who exclusively represents the buyer’s interests in a transaction and whose commission is paid by the buyer rather than the seller.
A market with a lot fewer buyers than there are sellers. Indicated by a prolonged marketing time of more than 90 days and generally high mortgage interest rates of more than 12 percent.
C
A clause that details the conditions under which each party may terminate the agreement.
A negotiated upper limit the interest rate on a variable rate mortgage can rise, both annually and over the life of the mortgage.
Profits an investor makes from the sale of real estate or investments.
A tax placed on the profits from the sale of real estate or investments.
Occurs when items owed on a loan are treated as part of a new, principal balance. When arrears are capitalized, the amount of the arrears is included in th principal before the interest is applied. Also a mathematical process for estimating the value of a property using a proper rate of return on the investment and annual net income expected to be produced by the property. (Income + Rate = Value)
The surplus left over out of the rents after paying out all operating expenses and mortgage payments.
Document issued by a local governmental agency that states a property meets the local building standards for occupancy. Many sales transactions cannot be completed unless or until a CO is issued to the purchaser.
An appraisal issued by the VA-approved appraiser that establishes the property’s current market value used by a borrower when seeking a VA-insured loan.
A chronological list of documents that comprises the title record history to a specific parcel of real property. A list of the real estate’s previous owners.
The court oversees the liquidation of the debtors’ nonexempt assets, distributing the cash proceeds proportionally among their creditors. Most of the time this is not the bankruptcy proceeding mortgagors/trustors will choose since their real objective is to stall off the trustee’s sale as long as they can, rather than liquidate everything.
This is a business reorganization proceeding.
This is the almost automatic choice of most mortgagors/trustors seeking to use a bankruptcy filing to delay the inevitable Sheriff’s Sale or trustee’s sale as long as they can. It’s hypothetically possible to drag out a Chapter 13 proceeding for several years. The purpose of this proceeding is to give a wage earner time for rehabilitation – a temporary respite free from the collection efforts of creditors. But a sharp mortgagee’s and/or beneficiary’s attorney can usually cut the delay down to about 90 days by persuading the court to grant relief from the automatic stay when the debtors are unable to keep current with their post-petition payments on their property.
The process of writing sums that have been deemed uncollectible, including credit card debt and other unsecured loans.
A payment pattern wherein the borrower habitually violates the terms of the note by paying late. For example, making a payment every month, but paying June’s payment in July, July’s payment in August, August’s payment in September, and so forth.
Title that is not encumbered or burdened with defects, including judgments.
The final procedure in which documents are signed and recorded, and the property is transferred.
Closing Costs The miscellaneous costs that the buyer and seller incur to complete or close a real estate transaction. These costs are in addition to the price of the property. Expenses incidental to the sale of real estate, including loan, title, and appraisal fees. The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of these costs. Buyer's expenses include
documentary stamps,escrow fees,attorney's fees,title insurance,appraisal and inspection,and survey charges. Seller's expenses include the cost of abstrast,documentary stamps on deed,real estate commission, recording mortgage,survey charge,escrow fees,and attorney's fees.
A document that details the final financial settlement between a buyer and a seller and the costs paid by each party, commonly called a HUD-1 Settlement Statement.
Any claim, encumbrance, or defect that contradicts the title record as understood by the property owner. Intractable pursuits are resolved judicially (quiet title action). For example, an unauthorized mortgage or a mortgage loan that was paid, but never formally recorded as satisfied.
A collection of laws relating to a certain topic, such as real property, patents, and so on.
Anything of value, like real property, pledged as security for a debt.
Hundreds or thousands of individual home mortgages grouped together, creating an investment opportunity called a Collateralized Mortgage Backed Security (CMBS), and then traded on Wall Street and other financial markets.
A fee paid to a real estate agent/broker by a principal as compensation for finding a buyer or seller and completing the sale. Usually a percentage of the sale price amounting to 6 to 7 percent on houses and 10 percent on unimproved land.
A promise or firm agreement; a lender’s contractual obligation to make a loan to a qualified borrower.
Some state’s laws provide that where a couple acquires any asset during marriage, the husband and wife will be considered to have one half interest in the property.
A study, intended to assist an owner in establishing a listing price, of recent, comparable sales; properties that failed to sell; and property presently on the market. A real estate broker will usually provide a complimentary CMA to a potential client as part of a listing appointment.
Similar properties (situated near the property you’re interested in) that are currently listed for sale or have recently sold.
A document commencing a lawsuit. In judicial foreclosure states, a summons and complaint served on the homeowner signify the formal beginning of foreclosure.
A Veterans Administration approved short sale.
A promise by a lender to make a loan if the borrower meets certain conditions.
The financial intermediary that sponsors the conduit between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases loans from third-party correspondents under standardized terms, underwriting, and documents, and then, when sufficient volume has been obtained, pools the loans for sale to investors in the CMBS market.
A hearing where the debtor’s proposed Chapter 13 plan is reviewed and either approved or denied by the bankruptcy judge.
A hearing held subsequent to the Sheriff’s Sale to confirm the sale and transfer title to the successful bidder.
Notice imparted by the public records (e.g., the county recorder’s records). The law presumes that one has knowledge of instruments that are properly recorded. Foreclosure proceedings may be public knowledge. The recording of a lis pendens announced to the world a lawsuit, usually a lawsuit in foreclosure, is pending.
A condition specified in a purchase contract, such as the prospective buyer making an offer contingent on his or her sale of a present home, or such as a satisfactory home inspection, or mortgagee short sale approval.
An agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertakes to do or refrain from doing some legal act or acts. Essential elements of a valid contract are parties competent to contract, a proper subject matter, consideration, mutuality of agreement, and mutuality of obligation.
A contract for the sale of real estate wherein the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until final payment. Also called an installment contract or a land contract.
A contract the buyer initiates that details the purchase price and conditions of the transaction and is accepted by the seller. Also known as an agreement of sale.
A party designated in a CMBS that has the right to approve and direct certain actions of the Special Servicer with respect to specially serviced loans. The controlling party would be able to approve the modification of a loan or loans in a CMBS.
A mortgage loan not insured by HUD or guaranteed by the Veterans’ Administration. It is subject to conditions established by the lending institution and state statutes.
The change to a case under a chapter different than the one originally filed under. The court may convert a case on the request of the debtor or the request of a party in interest. For instance, a Chapter 7 may be converted to a Chapter 13, or vice versa.
A mortgage loan that had previously incurred a default or related event, had been transferred to the Special Servicer for handling and becomes a Specially Serviced Mortgage Loan, had cured the default by any of a number of avenues available to the Special Servicer and thus became a Corrected Mortgage Loan returned to the Master Servicer for administration. A loan that has been modified to avoid foreclosure could be one.
Agreeing to be responsible for someone else’s debt. For example, a father might cosign a car loan for a son or daughter.
The process of estimating the value of property by adding to the estimated land value the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation.
A controversial procedure in bankruptcy wherein the court reduces a secured debt (i.e., trust deed or mortgage) to the current value of the property. The court actually splits the mortgage debt into two parts. The amount equal to the current value of the home is treated as a secured claim that the debtor must continue to pay. The portion of debt in excess of the property’s current value becomes an unsecured claim that’s usually not repaid in full. As of 12/06/07, the U.S. Senate Judiciary Committee is considering cramdown as a viable tool for bankruptcy judges to help bankrupt borrowers manage their debt and keep their homes.
The money a lender extends to a buyer for a commitment to repay the loan within a certain time frame.
A company that receives information about a consumer’s credit history and keeps records that are available to others seeking information on that consumer. It’s a good idea to periodically check your credit report for factual errors. TransUnion, Equifax, and Experian (formerly TRW) will provide a free credit report to homeowners once each year for the asking.
A record of an individual’s current and past debt payments as reported by creditors.
The degree of credit worthiness assigned to a person based on credit history and financial status.
A credit bureau report that shows a loan applicant’s history of payments made on previous debts. Several companies issue credit reports, but the three largest are TransUnion, Equifax, and Experian (formerly TRW).
With respect to delinquent mortgage loans, all missed payments have been made and loan payments are current.
D
The period of time a property is listed for sale until it is sold or taken off the market.
A repeat buyer whose intent is to resell quickly rather than hold for investment. There are no tax breaks for those who make money with quick turnover properties. The income or gain is taxed as ordinary income.
Applies to collection agencies and lawyers that are collecting debt for others.
This is normally a court-ordered proceeding in which a debtor must answer questions about current income and assets from which a judgment may be collected.
A judgment by court (a divorce decree).
A written document that transfers ownership of land from one party to another. The seller is called the grantor, and the buyer is called the grantee. Deeds may be of many kinds. For example, there are grant deeds, quitclaim deeds, gift deeds, guardians’ deeds, administrators’ deeds, warranty deeds, and so on depending on the language of the deed, the legal capacity of the grantor, and other circumstances.
Used owners to voluntarily convey the title of their property to the mortgage/beneficiary (lender) to avoid the negative credit consequences of a foreclosure. Lenders are generally reluctant to accept a DIL unless the title is free and clear of any other encumbrances junior to theirs.
A three-party security instrument conveying the legal title to real property as security for the repayment of a loan. The owner is called the trustor. The neutral third party to whom the bare legal title is conveyed (and who is called on to liquidate the property if need be) is the trustee. The lender is the beneficiary. When the loan is paid off, the trustee is directed by the beneficiary to issue a deed of reconveyance to the trustor, which extinguishes the trust deed lien.
Failure to make the loan payments as agreed in the promissory note.
A judgment in a lawsuit against a defendant who did not meet the legal requirements in connection with the case (failure to appear, failure to file an answer, missing deadlines, etc.).
In a lawsuit, the person(s) or business(s) being sued.
When the amount of interest a borrower is required to pay on a mortgage loan is less than the amount of interest accrued on the outstanding principal balance. This amount is usually added to the outstanding principal balance of the mortgage loan that is, in effect, a negative amortization loan (balance increases instead of decreasing as payments are made).
Any repair or maintenance of a piece of property that has been postponed, resulting in a decline in property value. Peeling paint or a worn roof indicates deferred maintenance.
The amount a debtor owes a creditor on a debt after the creditor seizes and sells the collateral. A deficiency arises when the collateral is sold for less than the amount of the debt. If your home is sold at a Sheriff’s Sale for an amount less than was owed to the lender, the laws in your state may permit the lender to sue you for the difference between what was owed and what was paid.
A personal judgment against a debtor for the amount remaining due after a judicial foreclosure of a mortgage or a trust deed.
A loan payment that is at least 30 days past due. Usually after 90 days delinquency, the lender has the right to initiate foreclosure proceedings against the loan that is in default. Technically, the lender can foreclose if a payment is one day late, but usually allows a grace period. Note: There may be no grace period allowed if you are participating in a loss mitigation repayment plan. If payment is not received on the day it is due, you may face inescapable foreclosure.
A mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings.
The payoff amount necessary to retire a secured debt. The amount may be the contractual amount due, or a lesser amount due to a negotiated short sale.
A decline in the value of property. Usually due to the obsolescence or wear and tear of the improvements on the land or adverse changes in the neighborhood.
A document that ends a debtor’s legally enforceable obligation to pay a debt. For example, a paid-off mortgage is discharged. A borrower’s debts may be discharged in bankruptcy.
Regarding real estate, it is revealing all known facts concerning the property being transferred, such as the presence of high levels of radon gas, asbestos, an underground oil tank, or lead paint.
Workout fees paid to a special servicer for making a loan current or liquidating a problem loan or foreclosed property. Can also include late fees, modification fees, and lan administration charges. These fees are negotiated with each CMBS.
Property that is in poor physical or financial condition. Homes in foreclosure are said to be distressed.
A state tax, in the form 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.
The upfront cash commitment paid by the buyer. It makes up the difference between the sales price of a property and the loan amount obtainable.
A measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances; not measured by any absolute standard but depends on the relative facts of the special case.
Provision in a mortgage or deed of trust calling for the total payoff of the loan balance in the event of a sale or transfer of title to the secured real property. A contract provision that authorizes the lender, at its option, to declare immediately due and payable sums secured by the lender’s security instrument on a sale of transfer o all or any part of the real property securing the loan without the lender’s prior written consent. For purposes of this definition, a sale or transfer means the conveyance of real property of any right, title, or interest therein, whether legal or equitable, whether voluntary or involuntary, by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three years, lease-option contract, or any other method of conveyance of real property interests. Standard language that states that the loan must be paid when a house is sold.
Unlawful constraint or action exercised on a person who is forced to perform an act against his or her will.
E
An advance payment toward the purchase price of property that binds the parties to a purchase contract for property. It is usually not refundable if the purchase doesn’t go through as a fault of the buyer, unless specified otherwise. Also known as Good Faith Deposit.
See External Obsolescence
See Bare Bones Petition
A legal right, claim, or lien on real property that diminishes the owner’s equity or the land’s value. Typical encumbrances are mortgages, trust deeds, judgments, assessments, mechanic’s liens, easements, and so on.
Prohibits discrimination in any aspect of a credit transaction on the basis of race, religion, age, color, national origin, receipt of public assistance funds, sex, or marital status.
The property’s current value minus the sum of all liens against it.
A mortgage loan that works much like a charge card, wherein a homeowner borrows money as needed, up to a prenegotiated limit. Interest is paid only on the amount of the loan used, and the borrower can pay off the balance as quickly or as slowly as they like.
A right of the owner to reclaim property before it is sold through foreclosure by the payment of the debt, interest, and costs.
Amounts set aside for a particular purpose. For example, one type of escrow would be money paid to your mortgage company for payment of property taxes and insurance.
A lender’s periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower’s monthly mortgage payment to pay for expenses such as property taxes and insurance.
A document in which a borrower certifies the amount he or she owes on a mortgage loan and rate of interest.
A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property, on the owner’s stated terms, for a commission. The owner reserves the right to sell without paying anyone a commission.
A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner’s stated terms, and agrees to pay the broker a commission when the property is sold whether by the broker, the owner, or another broker.
A contract under which something remains to be done by one or more of the parties. For example, a contingency must be met, such as the seller securing mortgagee short sale approval.
Property that the law allows you to keep when you are faced with collection of an unsecured debt.
The way in which an investor closes out a specific investment, usually for cash.
Reduction in a property’s value caused by factors outside the subject property, such as social or environmental forces or objectionable neighboring property. Also called locational obsolescence or economic obsolescence. A proposed highway nearby could be a form of external obsolescence.
A legal procedure to remove a tenant (including former owner) for reasons including failure to pay rent.
F
A federal law passed in 1977 that outlaws debtor harassment and other types of collection practices. The act regulates collection agencies, original creditors who set up a separate office to collect debts, and lawyers hired by the creditor to help collect overdue bills. An original creditor – the company or individual that originally granted the credit – is not covered by the act, but may be covered by similar measures approved by state governments.
The highest price a property in its as-is, where-is, with all faults condition will bring on the open market, given an informed and freely willing buyer and seller.
A stockholder-owned corporation chartered by Congress to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages from lenders and packages them into securities that are sold to investors.
Formed in 1934, it’s now a branch of HUD. Its basic function is to spur housing in the directions that Congress mandates by issuing mortgage insurance to institutional lenders on the loans they make under the 47 different loan programs that FHA now sponsors. With such loan insurance, lenders are willing to lend with smaller down payments and at lower rates of interest. A loan insured by the FHA is open to all qualified home purchasers. Interest rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans. FHA loans cannot exceed the statutory limit.
The largest secondary-market investor in residential mortgages in the Unites States. Provides a constant and orderly market for banks to go to when they need to sell mortgages in order to keep their loan portfolios in balance with government-mandated liquidity ratios.
A new loan program available for certain, qualified non-FHA borrowers whose adjustable rate mortgages are unaffordable.
A person serving in a position of trust.
The relationship of trust that buyers and sellers expect from a real estate agent. The term also applies to legal and business relationships.
Buying and then reselling property for a profit within a very short holding period.
Occurs when a contract to purchase a property is assigned to another person or entity before the first contract is closed.
A course of action a lender may pursue to delay foreclosure or legal action against a delinquent borrower. A borrower would ask for its lender’s forbearance as a temporary remedy to avoid foreclosure.
A formal agreement between a borrower and a lender to temporarily postpone an ongoing foreclosure.
When one sells or loses his property without actually wanting to dispose of it.
The process by which a lender takes back a property on which the mortgagor has defaulted. A property usually goes into the process of foreclosure if payments are more than 90 days past due.
The owner markets and sells the home without using a licensed real estate broker to avoid paying a sales commission.
Deception that causes a person to give up property, or a lawful right.
Giving away property to keep it from creditors.
Ownership of property free of all indebtedness. When an owner’s equity is equal to the fair market value of her property.
Instigated by the mortgagor/trustor for some ulterior reason – generally to clear up clouded title and so on.
A loss of value to an improvement to real estate due to functional problems often caused by age or poor design. A nine-bedroom home with only one bathroom is an example of functional obsolescence.
Money that someone loans, invests in, or gives you because they believe in the plan you’ve submitted.
G
A creditor’s seizure, to satisfy a debt, of property belonging to the debtor that is in possession of a third party. An example would be the seizure of money from your bank account, or your wages (wage garnishment).
Preemption of due-on-sale prohibitions. Exempt from DOS includes a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
An estimate from an institutional lender that shows the costs a borrower will incur, including loan-processing charges and inspection fees.
A period of days in which a debtor may cure a delinquency without penalty (before triggering a late charge, a foreclosure, or an acceleration of the balance due).
The person acquiring title to real property by a deed.
The person transferring title to real property by a deed.
Where a broker was aware of his or her salesperson’s wrongdoing, but did not report the activity to the applicable authority.
H
A loan made based primarily on the collateral’s equity, rather than the credit worthiness of the borrower.
That possible use of land that would produce the greatest net income and thereby develop the highest land value. An empty lot on a busy highway where multistory commercial buildings are commonplace would not be the property’s highest and best use.
Loan made to provide homeowners with access to excess built-up equity in their residences. Typically, secured by a junior lien mortgage where a superior lien mortgage exists.
A document that by law protects some of a home’s equity from lawsuits.
A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.
I
An investment not readily convertible to cash.
A published measure of economic conditions usually relative to other financial instruments such as Treasury notes or Treasury bills. The lender uses a particular index to calculate the interest rate on an adjustable rate mortgage (ARM) by adding a fixed margin to the index. The most common indexes are: Constant Maturity Treasury (CMT), Treasury Bill (T-Bill), 12-Month Treasury Average (MTA), 11th District Cost of Funds Index (COFI), London Inter Bank Offering Rates (LIBOR), Certificate of Deposit (CD) Indexes,and Prime Rate.
A person or business that does not have sufficient assets to pay its debts. A borrower’s proof of insolvency can render phantom income that arises from forgiven debt exempt from tax.
An interest in property substantial enough to cause the owner of it an actual loss if it were damaged or destroyed. The beneficiary of any insurance policy, even a title insurance policy, must show an insurable interest in order to be covered for it.
The cost of using borrowed money. It’s quoted as an annual percentage of the loan amount. The rate can either be fixed or fluctuate (adjusted) over the life of the loan.
Limits the interest rate or the interest rate adjustment to a specified maximum. This protects the borrower from increasing interest rates.
Imposed on property by the operation of law rather than at the will of the owner. Property taxes, federal income taxes, bonded assessments, and abstracts of judgment are examples.
J
An estate owned by two or more parties in equal shares that is created by a single transfer document. On the death of a joint tenant the surviving joint tenants take the entire decedents share of the property, so nothing passes to the heirs of the deceased.
The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person’s property.
A general lien (good for 10 years) created by a court ordering a debtor to pay a certain amount of money to the judgment creditor. The lien will bind to the debtor’s real property once an abstract of the judgment is recorded. Thereafter the debtor won’t be able to resell, refinance, or buy any other property in the county without paying off the lien.
People or businesses with property of minimal value, which can be entirely protected by exemptions, making it difficult or impossible for any creditor to force you to pay a debt.
A foreclosure that’s processed via a court action. Usually limited to a collection action on an involuntary judgment lien that automatically attached against a debtor’s real property by operation of law (such as a recorded abstract of judgment).
A lien that does not have first claim on the property it is secured by because it was recorded later than a competing lien secured by the same property.
A mortgage loan that is subordinate to the primary or senior loan(s).
K
L
A fee imposed on the borrower when the borrower does not make a payment on time. The permitted amount of a single late fee is usually stated by a percentage of the loan payment.
A payment a lender receives after the due date has passed.
A lease that contains the right to purchase the property for a specific price within a certain time frame.
A claim against real property. Also called a Security Interest or an attachment.
A recorded notice of pending litigation, the outcome of which could affect the title to a particular piece of property.
A limited-time agreement with a licensed real estate broker that authorizes the broker to represent the seller in the sale of their property.
The relationship between the dollar amount of the loan and the value of the property. For instance, a loan with a $70,000 loan balance on a property with a $100,000 value would result in an LTV of 70 percent. Lenders require a protective equity cushion between their loan positions and the fair market value of a secured property. Nonguaranteed lenders generally require that their loans amount to no more than 75 percent to 85 percent of their appraiser’s estimate of the market value of the encumbered property.
A lender’s promise to hold a certain interest rate and points for you, for a given number of days, while your loan application is processed.
Rate of loss on a liquidated mortgage; defined as the ratio of (1) the outstanding principal on the mortgage loan(s) minus the realized loss over (2) the outstanding principal on the mortgage loan(s). When determining to accept or reject a workout option, the lender evaluates loss severity.
An offer mad to a seller that is substantially below their asking price, and/or market value. Most foreclosed homeowners who are trying to sell their home to avoid foreclosure get several lowball offers from buyers who will try to exploit the seller’s fear of foreclosure. That’s why it is important for the homeowner to know what the home is worth and understand the foreclosure time clock when considering a lowball offer.
Tax credit given to owners for the construction or rehabilitation of low-income housing.
M
A title that is free and clear of objectionable liens, clouds, or other title defects. A title that enables an owner to sell his property freely to others and that others will accept without objection.
Factors affecting the sale and purchase of homes at a particular point in time. High interest rates, high unemployment, and a high inventory of unsold homes are adverse market conditions.
The highest price that a buyer, willing, but not compelled, would pay, and the lowest price a seller, willing but not compelled to sell, would accept. The current value of property as determined by exposure to offers from willing buyers in the open market.
Required to service mortgage loans collateralizing a CMBS on behalf of, and for the benefit of, certificate holders. Responsibilities vary according to the servicing agreement. Common responsibilities include (1) collection of mortgage payments and delivery of the funds to the trustee, (2) advancement of any late payments to the trustee, (3) provision of mortgage performance reports to bond holders, and (4) transfer of all loans that become nonperforming to the special servicer.
An involuntary, statutory lien recorded against a specific property in favor of contractors or suppliers of materials for unpaid improvements made to the property. For example, a roofing contractor may place a mechanic’s lien against your home for the value of a roofing job he begins. The lien is removed once the job is complete and he is paid for his work.
A writing meant to memorialize the essentials of a transaction or act as an actual contract.
A change in any of the terms of the loan agreement.
A written pledge of property that is put up as security for the repayment of a loan. The lender is the mortgagee and the property owner is the mortgagor.
See Short Sale
A loan originator that uses its own funds to make real estate loans which it then resells to long-term mortgage investors.
An agent that matches borrowers with lenders in exchange for a referral fee that amounts to part or all of the “loan points” being charged the borrower.
Amends the internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence.
The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA-insured mortgages, this represents an annual rate of on-half of one percent paid by the mortgagor on a monthly basis.
A bank, mortgage company, or similar business that communicates with property owners concerning their mortgage loans. The servicer usually works for another company that owns the mortgage. A mortgage servicer may accept and record payments, negotiate workouts, and supervise the foreclosure process in the event of a default.
Any seller with a strong incentive to make a deal. A homeowner facing foreclosure or a job relocation may be a motivated seller.
The combined property listings of local real estate brokers, members that are pooled together in an MLS book and computer network for the widest marketing exposure to their membership at large. Before most mortgage lenders approve short sales, the subject property must be listed on MLS to assure the property had been adequately exposed to the market and commands the highest sale price possible.
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Occurs when interest accrued during a payment period is greater than the scheduled payment and the excess amount is added to the outstanding loan balance. For example, if the interest rate on an ARM exceeds the interest rate cap, then the borrower’s payment will not be sufficient to cover the interest accrued during the billing period. The unpaid interest is added to the outstanding loan balance.
Total income less operating expenses, adjustments, and so on, but before mortgage payments, tenant improvements and leasing commissions.
A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval. Most mortgage loans today are non-assumable loans.
Loans that do not comply with Fannie Mae or Freddie Mac guidelines. These guidelines establish the maximum loan amount, down payment, borrower credit and income requirements, and suitable properties. Loans that do conform to these guidelines may be sold to Fannie Mae or Freddy Mac, including most subprime mortgage loans.
A bonded officer licensed by the state to acknowledge and attest to the validity of signatures of others. Notarized signatures are required of the general public for any documents that individuals record in order to prevent the perpetration of fraud by forgery.
To initiate a non-judicial foreclosure proceeding involving a public sale of the real property securing the deed of trust, the trustee under the deed of trust records a Notice of Default and Election to Sell the real property collateral in the public records.
O
Two essential components of a valid contract; a meeting of the minds, when all parties agree to the exact terms.
A legal right to purchase property at some future date for a specified price and terms. The right is forfeited if not exercised in time.
By mouth; not written; verbal; spoken. When describing verbal agreements in real estate or financial matters, my contract law professor said; “Whatever isn’t written is rotten!”
A term used to identify real estate on the books that was taken back through foreclosure of a mortgage loan. The term “Other” REO is used by banks to distinguish foreclosure real estate from bank real estate owned (REO), which are corporate real estate assets. Typically, the real estate industry uses the term REO for seized real estate.
Also called surplus. That amount of money bid in excess of the trustee’s or sheriff’s minimum bid. It is distributed to the succeeding lien holders. In some states, the former homeowner may petition for the return of overbid after all lien holders have been satisfied. If you had equity in your home which was sold at a forced public foreclosure sale, check with the foreclosure authority to learn the requirements, if any, for recovering the overbid, or surplus.
P
A loss mitigation technique used with certain HUD-insured loans wherein HUD pays a claim to the loan servicer that brings the account current. The amount is then added to the end of the loan term, or as a subordinate lien.
Interest charged or accrued daily. For example, if you were to sell your home on a Monday and knew exactly how much you owed your lender, but didn’t close until Friday, your creditors would charge a per diem rate for additional interest for Tuesday, Wednesday, Thursday, and Friday.
Property that is movable or harvestable, that is securities, furniture, cars, promissory notes, clothing, intangibles, and so on.
Loss of value due to wear and tear or action of the elements.
Refers to the monthly housing expenses of; Principal, Interest, Taxes, and Insurance. If you have a P&I loan, you are responsible for property taxes and insurance payments in addition to your monthly mortgage loan payment. Make sure you don’t forget to pay your taxes or let your insurance coverage lapse.
The person or business that initiates a lawsuit. In foreclosure, the lender is the plaintiff, the borrower is the defendant.
A charge made by a lender that’s part of the borrower’s cost of obtaining a loan. Each point equals 1 percent of the loan amount. Points increase the effective yield on the loan above the nominal interest rate being charged.
A legal contract defining the responsibilities and the obligations for management of a CMBS, particularly for the Master Servicer and the Special Servicer. This primary document governs and controls much of the CMBS process. Also abbreviated as PSA, not to be confused with the Public Securities Association (also abbreviated as PSA).
A loan that a lender intends to hold in inventory rather than resell in the secondary market. Such a loan only has to satisfy the lender’s guidelines rather than the arbitrary rules of the secondary mortgage market.
Giving notice by physically attaching it to a prescribed bulletin board and/or attaching it to the affected property itself. In many jurisdictions, a property must be posted before it can be seized, for example, “THIS PROPERTY TO BE SOLD AT FORECLOSURE AUCTION at 2 p.m. on Thursday, February 28, 2008.”
An announcement made in lieu of a scheduled sheriff’s or trustee’s sale that reschedules the pending sale.
A document that authorizes an individual to act on behalf of someone else. Many real estate predators rely on a homeowner’s unwitting power of attorney to complete an ill-advised real estate or financial transaction.
A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.
A title company report showing the open title record of a property prior to the issuance of a title insurance policy.
A fee charged by a lender if a loan is paid off earlier than required.
A penalty paid by the borrower for any prepayments made on a mortgage loan if required under the loan documents. The premium is usually set at a fixed rate that, at times, decreases in steps as the loan matures. For example, a mortgage loan can have a premium of 5 percent for the first seven years, and during the next five years the premium decreases at a rate of 1 percent per year (4 percent in year 8, 3 percent in year 9); after year 12 there is no prepayment premium.
The risk that a borrower will repay the remaining principal or an amount other than the scheduled payment on a mortgage prior to maturity, thus shortening the life of the loan. In order to reduce prepayment risk, commercial mortgages commonly have lockout periods and/or prepayment premiums or yield maintenance.
Sale of property in anticipation of foreclosure or repossession, usually with the lender’s consent.
A credit/lien search for municipal liens, a search for civil judgments, bankruptcy, and other docketed matters resulting in a lien on real property.
The amount of money owed on a loan, excluding interest and other charges.
The superiority of an interest relative to other interests on the same property. Generally, the first to record is first in right.
A clause in a subordinate lien (such as a second trust deed) which states that it is subject to a prior lien.
Insurance against a loss by a lender, due to a default in payments from a borrower. Often required when a buyer is paying a small down payment (less than 20 percent of the appraised value of the secured property). Although the borrower pays for this insurance, only the lender will benefit from payment of a claim.
The process by which a court changes the title to a deceased person’s real property. The property is from a decedent to either; (1) his or her heirs (as determined under the laws of intestacy), called an “intestate estate”; or (2) pursuant to the terms of his or her will or trust, called a “testate estate.” All techniques that avoid probate involve changing title to the decedent’s real property without court involvement.
An unconditional instrument of indebtedness between borrower and lender (containing all of the terms of the loan) that is commonly secured by a mortgage (mortgage note) or deed of trust.
One who conceives, develops, and organizes a business or real estate project and is the motivating force that brings it to fruition.
A printed statement disclosing all material aspects of a real estate project.
Exaggerated or superlative comments or opinions not made as representations of fact and thus not grounds for misrepresentation.
A mortgage that a borrower gives in exchange for a loan to acquire a property.
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Used to define parameters within the Mortgage Forgiveness Debt Relief Act of 2007. Acquisition indebtedness for the taxpayer’s principal residence includes the debt incurred when buying the house, but does not include home equity indebtedness.
Lenders compute qualifying ratios to determine how much a potential buyer can borrow.
An action at law to remove an adverse claim or cloud from the title of property.
A form of deed containing no warranties as to the quality or validity of the title being transferred. It’s frequently used to remove a cloud, claim, or ambiguity in the title record.
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An increase in mortgage rates with respect to balloon mortgages, if the borrower fails to show progress toward refinancing such an appraisal, engineering report, or environmental study, or is unable to obtain a signed commitment or sales contract on the underlying property.
One who is prepared to buy property on the seller’s terms and is ready to take positive steps to consummate the transaction.
An agreement in the bankruptcy process to pay back a debt that would otherwise be discharged in bankruptcy.
Any person, partner, association or corporation who sells (or offers to sell), buys (or offers to buy), or negotiates the purchase, sale, or exchange of real estate, or who leases (or offers to lease) or rents (or offers to rent) any real estate or the improvement thereon for others and for a compensation or valuable consideration.
A business entity formed to invest in real estate, mortgages, and/or securities backed by real estate. REITs are required to pass through 95 percent of taxable income to their investors and are not taxed at the corporate level. The three major types of REITS are equity, mortgage, and hybrid, with equity being the dominant type.
A vehicle, created by the Tax Reform Act of 1986, which permits the sale of interests in mortgage loans in the secondary market. It is a pass-through entity that can hold loans secured by real property and issue multiple classes or investors without the regularity, accounting, and economic obstacles inherent with other forms of mortgage-backed securities.
The term used to describe real property collateral to which title has been taken back by the mortgagee trust by way of beneficial ownership) through foreclosure or deed in lieu of foreclosure.
A federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business.
The amount of principal, interest, and fees that is not realized (unrecovered) from the sale of a defaulted mortgage loan or sale of foreclosed REO property. It is equal to the amount of (1) the outstanding principal balance of the loan plus (2) all unpaid scheduled interest plus (3) all fees applied to the sale of the property minus (4) the amount received from liquidation.
A designation for a broker, or broker’s agent who is a member of the National Association of Realtors, a trade group. A real estate broker or broker’s agent may or may not choose to be a member of Realtor™.
Filing a document with the county recorder to have it entered into the public record, giving constructive notice to the public at large of its contents.
Recovering collateral from a creditor by paying the entire amount you owe. In bankruptcy, property can be redeemed in some situations by paying the collateral’s value even if that amount is less than the entire amount owed.
A period of time established by state law during which a property owner has the right to redeem his or her property from a forced, public foreclosure sale.
Generally refers to a debtor’s right to reacquire title to property lost via a judicial foreclosure (germane to mortgage states) within a year or so afterward. It also refers to the IRS’s right to redeem property that had secured a federal tax lien prior to a non-judicial foreclosure by a senior lien. The IRS’s right is limited to 120 days after the Sheriff’s Sale or trustee’s sale and requires reimbursement to the winning bidder of the trustee’s sale.
The process of paying back old debts by borrowing new money.
The federal code issued under the Truth-in-Lending Act that requires that a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.
The process of remedying a default so that the lender will treat you as if you had never fallen behind.
An order from the bankruptcy court allowing a lender to proceed with his default remedies (e.g. Sheriff’s Sale/trustee’s sale) against a debtor; exempt from the automatic, protective shield of the bankruptcy court.
When a borrower falls behind in mortgage payments, many lenders will negotiate a repayment plan rather than initiate foreclosure proceedings.
The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property, but serves the same purpose or function as the original.
When a house is repossessed, it is taken back by the lender holding the mortgage.
The construction cost at current prices of an exact duplicate of the subject property.
The cancellation of a contract. When you use your home as collateral for a loan, you generally have the right to cancel the credit transaction within three business days. This is called your right of rescission, and it is guaranteed by the Federal Truth in Lending Act.
An agreement by a property owner to give another person the right to buy or rent the property before it goes on the open market.
In certain states, the borrower under the deed of trust, or under the mortgage, and/or junior lienholders have the right to redeem the real property following foreclosure sale. The period of time during which the property may be redeemed, if right of redemption is permitted and whether it is applicable to non-judicial and/or judicial foreclosure, varies significantly by state and can be as little as three months or more than a year.
S
A transaction in which the buyer leases back the property to the seller for a specified period of time.
The tenant enjoys an exclusive option to purchase the property at a predetermined price within the term of the lease.
The process of estimating the value of a property by examining and comparing actual sales of comparable properties.
The length of time since origination of a mortgage loan. The longer a loan has been outstanding and performing to its terms, the better seasoned it is. A loan that has been outstanding for, say, three years, but shows a poor pay history, that is, several late pays, particularly beyond 30 days, is not considered seasoned because of its performance.
Most lenders sell the loans they originate to large-scale, national investors such as Fannie Mae and Freddie Mac. The reason they do this is to recycle their money to create more loans (in which they collect loan origination fees, points, etc.). In order to sell their loans, originating lenders have to adhere to Fannie Mae’s underwriting guidelines.
A mortgage in addition to the first mortgage. Home equity loans, credit lines, and home improvement loans are second mortgage loans. A second mortgage is subordinate to the first one. Second mortgage loans are nonconforming loans, so they usually carry a higher interest rate, and they often are for a shorter time.
A federal rental (and purchase) assistance program under HUD for very low-income families. The money is funneled to local housing authorities who pay (directly to landlords) the difference between market rent and what eligible families can afford to pay. The housing “voucher” program is a more flexible variant where the recipient families freely rent whatever they want for whatever rental amount they choose to pay.
Under section 1031 of the IRS, owners of real estate held for investment or for use in a trade or business can exchange their property tax-free for “like-kind” real estate.
Secures payments of an obligation, a mortgage or a lien.
Loans for which the full amount of the principal sum borrowed will be completely paid off at the loan’s termination pursuant to the loan’s payment schedule.
A seller’s broker represents the interest of the seller.
(Previously called Soldier’s and Sailor’s Relief Act) Protects certain military personnel from losing their homes to foreclosure while they’re on active duty.
Institution acting for the benefit of the certificate holders in the administration and servicing of mortgage loans in the CMBS. Functions include reporting to the trustee, collecting payments from borrowers, advancing funds for delinquent loans, negotiating workouts or restructures (as permitted by the PSA), taking defaulted loans through the foreclosure process, and liquidating defaulted loans and REO.
Generally defined as customary, reasonable, and necessary out-of-pocket costs and expenses incurred by the Master Servicer or Special Servicer n connection with the servicing of a mortgage loan after an event of default, delinquency, or other unanticipated event or in connection with the administration of an REO property. These advances are paid by the Master Servicer or sometimes the Special Servicer and are generally reimbursable from future payments and other collections. In all cases, the requirements to make servicing advances are detailed in the Pooling and Servicing Agreement.
A loan tape, more commonly now a diskette, maintained by the loan servicer and containing the current and historical loan payment characteristics of a mortgage loan. The detail and calculation methods utilized to maintain this information have historically varied widely across servicers. One of CSSA’s primary objectives is to promote consolidated streamlined information criteria and definitions to be used by servicers in an effort to increase CMBS liquidity and market growth.
With respect to any mortgage loan, a servicing transfer event occurs when the borrower has defaulted or, in the reasonable judgment of the Master Servicer, certain circumstances have occurred that make it likely that the borrower will default and not be able to cure within a reasonable time. In the event, the Master Servicer can transfer the day-to-day handling of the accounts to the Special Servicer until such time as the Special Servicer determines the default has been cured and that the loan is now a Corrected Mortgage Loan.
A document that details who has paid what to whom.
The deed issued by a sheriff to the highest bidder at a Sheriff’s Sale.
The sale of property by the sheriff under authority or a court’s judgement and writ of execution in order to satisfy an unpaid judgment, mortgage, lien, or other debt of the owner.
A type of preforeclosure sale in which the mortgagee agrees to let you sell the property for less than the full amount due, and accept the proceeds as payment in full. The sale of property at a fair market price that’s lower than the loan balance(s).
A lien that binds a specified piece of property, unlike a general lien, which is levied against all one’s assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person’s behalf. In some localities it is called particular lien or specific lien.
Some transactions have a separate special servicer which assumes servicing responsibilities when a loan goes into default and conducts the “workout” or foreclosure process. There are various types of special servicers: (1) those retaining first-loss pieces, (2) those investing in B pieces in return for special services rights, and (3) those appointed solely because of their asset-management expertise.
That portion of Special Servicer’s compensation that accrues with respect to each Specially Serviced Mortgage Loan and each Mortgage Loan that has become REO, as per the applicable Pooling and Servicing Agreement. This fee is calculated on a loan-by-loan basis on the basis of the same principal amount and for the same period, respecting which any related interest payment due or deemed due computed and is payable from general collections on mortgage loans and REO held by the Master Servicer.
A legal action brought in a court of equity in special cases to compel a party to carry out the terms of a contract.
One who buys or inventories goods, currencies, and so on, or develops and packages real estate and so on with the intent to resell for a profit.
That portion of the Special Servicer’s compensation which accrues with respect to each mortgage loan, including Specially Serviced Mortgage Loans and Mortgage Loans which have been converted to REO, as applicable per the Pooling and Servicing Agreement. This fee accrues at the Standby Fee Rate, is calculated in the same manner as the Master Servicing Fee, and is payable by the Master Servicer from its Master Servicing Fee.
A person acting as a front or a dummy buyer for another.
A taking of property without sale.
The purchase of a property with an existing lien against the title without assuming any personal liability for its payment.
A loan that is making payments but not the full principal and interest payments that the mortgage note demands. Many investors also classify a loan as subperforming even if monthly payments are current but when the loan-to-value ratio or other primary value indicator is such that it is unlikely that the loan will be unable to pay off in full at maturity.
A servicer who contracts with Master and Special Servicers to perform some of the specific functions required under the servicing agreement. This may include real estate services such as property inspections, foreclosure services, or individual loan administration. The Master or Special Servicer is legally responsible for the activities of their subservicers.
A court action intended to establish or settle the title to a particular property, especially when there is a cloud on the title.
This is a document at the beginning of a lawsuit to tell the defendant what is being requested, and what must be done to respond to the complaint.
T
An instrument, similar to certificate of sale, given to a purchaser at a tax sale.
An encumbrance placed on a property as a claim for payment of a tax liability. A tax lien may be imposed for failure to pay city, county, estate, income, payroll, property, sales, or school taxes. Tax liens and assessments take priority over most, if not all other liens.
The public sale of a property by the government for non-payment of taxes. Some jurisdictions auction Tax Lien Certificates which, if not redeemed by the homeowner within a prescribed time, can result in strict foreclosure.
Protects investors from any losses on the mortgage loans and is a form of credit enhancement.
A phrase in a contract that requires the performance of a certain act within a stated period of time. If you face foreclosure, for example, and you have a contract to sell your home before it is lost to foreclosure, you should include TOE in the contract so your buyers will move quickly or suffer financial consequences.
Evidence that the owner of land is in lawful possession thereof, evidence of ownership.
Also known as a land trust. Devised by Chicago Title Insurance Co. in 1891 as a legal, time-tested, fictitious entity that’s primarily used to hold the title to real property to shield it from any clouds or liens that all individuals are susceptible to when they get sued, go through a divorce, die, and so on. It’s especially useful when several nonrelated individuals jointly buy investment property.
A contract of indemnity protecting the insured from loss due to unknown, hidden clouds, liens or defects affecting the title to the covered property. Since insurance benefits will be paid only to the “named insured” in the title policy, it’s important that an owner purchase an owner’s title policy (CLTA) that’s separate from the lender’s policy (ALTA).
A detailed check of the title records at the recorder’s office to make certain that the buyer is purchasing a property from the legal owner and that there are no maore liens against the property’s title than those already disclosed by the seller.
A tax collected from sellers on the transfer of their title to real property. See Closing Costs.
A legal arrangement where a person, called the grantor or testator, transfers assets to a person called a Trustee, who will manage those assets for the benefit of the beneficiary.
An instrument used to create a mortgage lien by which the mortgagor conveys his or her title to a trustee, who holds it as security for the benefit of the note holder (the lender), also called a deed of trust.
Trustee Holds the mortgage collateral documents and passes all funds collected by the Master Servicer to the certificate holders (not the same as a bankruptcy trustee).
The deed issued by a trustee to the highest bidder at a trustee’s sale. The deed discloses on its face what the opening or minimum bid was at the sale and what the final winning bid actually amounted to.
A nonjudicial auction sale of real property, conducted by a trustee in the exercise of the power of sale clause, pursuant to the terms of the defaulted deed of trust.
Under this act, a lender is required to provide you with a disclosure estimating the costs of the loan you have applied for, including your total finance charge and the Annual Percentage Rate (APR) within three business days of your application for a loan, and a final statement showing the exact cost of credit. Violations to TILA may result in the ability to cancel certain mortgage loans up to three years after the loan was made.
U
A legal doctrine that says you cannot win by claiming the other side is being unfair if you, yourself, were unfair to them.
An unrecorded deed transfers ownership from one party to another without being officially recorded.
A debt that is not secured by any pledge of property. Examples: utility bills, student loans, credit cards, medical, hospital or doctor’s bills, and so on. As a condition of a preforeclosure short sale, a lender may require the borrower to continue making payment on the loan after the home has been sold in the form of unsecured debt.
A rate of interest charged on a loan that is in excess of the statutory maximum. Usury is a Truth-in-Lending violation, and may be used as a defense to foreclosure.
V
A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.
A loan bearing an interest rate that fluctuates (versus a fixed rate) according to some specified financial index of the current cost of money – wherein both the interest rate and the monthly payments are subject to adjustment at some pre-established interval. ARMS.
Established under the Serviceman’s Readjustment Act of 1944. It provides two very helpful housing benefits to servicemen and veterans by guaranteeing a lender’s housing loan made to an eligible vet without any down payment requirement and by requiring that the subject property conform to VA’s housing standards as determined by an on-site appraisal conducted by an approved VA appraiser.
A contract that seems to be valid on the surface, but may be rejected or disaffirmed by one of the parties.
A contract that has no legal force or effect because it does not meet the essential elements of a contract. For example, a contract to perform an illegal at is void.
Any lien placed on property with the consent and cooperation of the owner (mortgage).
W
A deed containing express and implied covenants as to good title and right to possession.
A workout can be a variety of negotiated agreements you might arrange with creditors to address a debt that you are having trouble paying. Most commonly, a workout is devised between a borrower and lender to restructure or modify a loan to avoid foreclosure.
A loan arrangement whereby the existing loan is retained and a new loan is added to the property. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.
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