Glossary

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| N | O | P | Q | R | S | T | U | V | W | X | Y | Z |

ABA Number: Originated by the American Bankers Association, it is the number (usually found on the bottom of the check), which identifies the bank in which a customer has their account

Abstract of Title: A written history of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as to the condition of title. It covers the period from the original source of title to the present and summarizes all subsequent instruments of public record by setting forth their material parts.

Acknowledgement: A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his/her own choice.

Adjustable Rate Mortgage (ARM): A mortgage that permits the lender to adjust its interest rate periodically on the basis of the movement in a specified index.

Adverse Action: Notice to a potential customer, which denies credit based on the terms requested.

Age of Majority: Age variances within states for classification of minors and responsible parties.

ALTA (American Land Title Association): See American Land Title Association.

Amenities: Those settings or improvements to property, which increase the desirability or enjoyment rather than the necessities of the residents. For example, a pool, a view, etc.

American Land Title Association (ALTA): A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.

Amortization: Loan payment by equal periodic payments calculated to retire the principal at the end of a fixed period and to pay accrued interest on the outstanding balance.

Amortization Schedule: A schedule showing each payment of a loan to be amortized and breaking down the payment into the amount applied to principal and the amount applied to interest.

Annual Percentage Rate (APR): The yearly finance charge percentage of a loan, as expressed by the actual rate paid; A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan.

Appraisal: A written statement prepared independently and impartially by a qualified appraiser. This statement sets forth an opinion as to the market value of an adequately described property on a specific date, and supported by the presentation and analysis of relevant market information.

Appraised Value: An opinion of value reached by an appraiser based on knowledge, experience, and a study of pertinent data.

Appraiser: One who is trained and educated in the methods of determining the value of property through analysis of various factors, which determine said value.

Appreciation: An increased value of property due to either a positive improvement of the area or the elimination of negative factors.

APR (Annual Percentage Rate): See Annual Percentage Rate.

"As Is" Condition: Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.

Assessed Valuation: The value a taxing authority places on real or personal property for taxation purposes.

Assessment: The value placed on property for taxation purposes. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assets: Property owned that is useful and or has value and could be converted to cash.

Assignee: The person or corporation to whom an agreement or contract is assigned. One to whom real property, or an interest in real property, is transferred or set over.

Assignor: One who transfers, assigns, or sets over real property or an interest therein to another.

Assignment: A transfer to another of any property, real or personal, or of any rights or estates in said property. Common assignments are of leases, mortgages, deeds of trust, but the general term encompasses all transfers of title.

Assumption: A method of selling real estate wherein the property purchaser agrees to take over the primary liability for payment of an existing mortgage.

Attached Home: A single-family housing unit built adjacent to another single -family housing unit with one or more common walls separating the two units. Frequently found in townhouses, row houses, and zero lot line planned unit developments.

Attorney-in-Fact: One who holds a power of attorney from another to execute documents on behalf of the grantor of the power. It is terminated upon the death, relocation, or court-decided incompetence of the grantor.

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Bankrupt: A person, firm, or corporation who - through a court proceeding - is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee for the protection of creditors. Bankruptcy may be declared under one of several chapters of the Federal Bankruptcy Code: Chapter 7 Ð which covers liquidation of a debtor's assets; Chapter 11 - which covers reorganization of bankrupt businesses; or Chapter 13 - which covers workoutsof debts by individuals.

Basis Point: One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages. 1/100th of 1%. For example, 5 basis points equals .05%.

Beneficiary: One in whose favor a trust operates or on whose behalf the income from a trust estate or trust deed is drawn; the lender on the security of a note; one who receives funds from a life insurance policy.

Best's Key Rating Guide: A publication, issued by the A.M. Best Company, which establishes ratings for insurance carriers by evaluating their assets and liabilities.

Binder: A report issued by a title insurance company setting forth the condition of title to certain property as of a certain date. It also sets forth conditions, which, if satisfied, will cause a policy of title insurance to be issued. Also called a commitment.

Blanket Insurance Policy: A single policy that covers more than one piece of property, or more than one person, or more than one type of risk.

Borrower: An individual who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.

Bridge Loan: A loan based on the amount of equity in the customer's current home to be used for down payment or closings costs on a new primary residence; also called Swing or Interim Loan.

Buydown: A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first 1 to 5 years of the loan.

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Cap (Interest Rate): The maximum allowable interest rate increase for an adjustable rate mortgage.

Cash Flow: In investment property, the actual cash the investor will receive after deduction of operating expenses and debt service (Loan payment) from his/her gross income.

Cashier's Check: A check drawn by a bank on itself rather than on an account of a depositor. A cashier's check is generally acceptable to close a sale without waiting for the check to clear.

Cash Out: A refinance where the amount of money received from the new loan exceeds the total of the money needed to repay the old debt and closing costs.

Certificate of Completion: A document issued by the appraiser stating that a newly constructed residence is completed in accordance with the terms, conditions, approved plans, and according to specifications.

Certificate of Occupancy: A certificate issued by a local government agency to an owner, builder or renovator stating that the building is in proper condition to be occupied.

Certified Check: A personal check drawn by an individual, which is certified (guaranteed) to be good. The bank holds the funds to pay the certified check and will not pay any other checks drawn on the account if such payment would impede payment of the certified check. The bank also will not honor a stop payment of a certified check.

Certified Copy: A true copy, attested to be true by the officer holding the original.

Charge-Off: Any debt, which has an existing balance and is classified as "uncollectible" which has been charged against the business' profits.

Check Funding: A funding method by which the loan proceeds check is sent directly to the closing agent.

Clear Title: Title not encumbered or burdened with defects.

Closing: The final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.

Closing Costs: Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc.

Closing Date: The date the loan documents are executed.

Closing Statement: The statement, which lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

CLTV (Combined Loan-to-Value): See Combined Loan-to-Value.

Collateral: Property pledged as a security for a debt, such as the real estate as security for a mortgage.

Combined Loan-to-Value (CLTV): The relationship between the unpaid principal balances of all mortgages and the lesser of the property's appraised value or sales price.

Commitment: An agreement, often in writing, between a lender and a customer to loan money at a future date subject to compliance with stated conditions.

Common Area: Land or improvements on land designated for common use and enjoyed by all occupants, tenants, or owners.

Community Property: A form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

Community Reinvestment Act (CRA): An act of Congress, which requires financial institutions to reinvest by means of lending, in communities from which they accept deposits. In practice, this has resulted in the offering of loan programs with less stringent requirements than standard programs, for customers in certain income brackets and/or geographical areas.

Comparables: An abbreviation for comparable properties used in the appraisal process. Refers to facilities of reasonably the same size and location with similar amenities. Also, properties that have been recently sold and have characteristics similar to property under consideration, thereby indicating the approximate fair market value of the subject property.

Conditions and Restrictions: A common term used to designate restrictions on the use of land and providing penalties for failure to comply. Commonly used by land subdividers on newly plotted areas.

Condominium: A structure of two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors, and ceiling. The balance of the property is calledthe common area.

Condominium Declarations: The basic condominium document that must be registered by the originating property owner prior to the conveyance of the first unit sold. The declaration thoroughly describes the entire condominium entity, including each unit and all common areas, and specifies essential elements of ownership that permanently govern its operations. Also known as a Master Deed.

Construction Loan: A short-term interim loan for financing the construction costs. The lender advances funds to either the borrower or the builder at periodic intervals as the work progresses.

Contingency: The dependence upon a stated event, which must occur before a contract is binding. For example, the sale of a house, contingent upon the buyer obtaining financing.

Contract for Deed: Written agreement between buyer and seller where buyer receives possession of property, but not title to it.

Conventional Loan: A mortgage or deed of trust not obtained under a government insured program, such as FHA, or VA.

Co-op: A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property and grants the occupancy rights to particular apartments or units to shareholders by means of proprietary leases or similar arrangements.

Corporation: A state-chartered business that is owned by shareholders. These shareholders have invested money into the business and in return received shares of stock.

Cost Approach to Value: Valuation method in which the replacement value of improvements, depreciation, and the land value are computed to determine property value.

Credit Life Insurance: A type of insurance often bought by mortgagors as it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Credit Report: A report on the past ability of a loan applicant to pay installment payments.

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Debt: Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

Debt-to-Income Ratio: Monthly debt or payments divided by gross monthly income. Also known as obligation-to-income ratio.

Declaration of Restrictions: A set of restrictions filed by a subdivider to cover an entire tract or subdivision.

Deed of Trust: An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the customer (trustor) in favor of the lender (beneficiary), and reconveyed upon payment in full.

Deed in Lieu: A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.

Department of Housing and Urban Development (HUD): Established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency. It is responsible for the implementation and administration of government housing and urban development programs.

Depreciation: Decrease in value to real property improvements caused by deterioration or obsolescence.

Detached House: A freestanding, single-family dwelling.

Disbursements: Payments made during the course of an escrow or at closing.

Discount Point: Amount payable to the lending institution by the customer or seller to increase the lender's effective yield. One point is equal to one percent of the loan.

Document Tax Stamps: Stamps, similar to postage stamps, affixed to a Mortgage or Deed of Trust, showing the amount of transfer tax paid. Most states now "stamp" the document rather than actually affixing a stamp.

Dower: A common law interest of a wife in the property of her deceased husband. Being changed in many states by statute to give more equality between men and women in property rights.

Down Payment: The difference between the sales price of real estate and the loan amount.

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Earnest Money: A sum of money given to bind a sale of real estate or assure payment or an advance of funds in the processing of the loan; a deposit.

Easement: A right to the limited use or enjoyment of land held by another. An easement is an interest in land to enable sewer or other utility lines to be laid, or to allow for access to the property.

ECOA (Equal Credit Opportunity Act): See Equal Credit Opportunity Act.

Economic Life: The estimated period of time during which a property can be utilized profitably.

Effective Age: Age of a structure as estimated by its condition rather than actual age. Takes into account rehabilitation and maintenance.

Egress: To go out. It is used with the word ingress (to go in) to describe the right of access to land.

Encroachment: An improvement that illegally violates another's property.

Encumbrance: Anything that affects or limits the fee simple title to property, such as a mortgage, lease, easement or restriction.

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

Equity: The difference between the value of a mortgaged property and the total dollar amount of all mortgages and other liens against the mortgaged property.

Equity Source Account (ESA): Revolving line of credit secured by a second mortgage loan.

ESA (Equity Source Account): See Equity Source Account.

Escrow: A situation in which a third party - acting as the agent for the buyer and seller - carries out instructions of both and assumes the responsibilities of handling all the paperwork and disbursement of funds.

Escrow Account: The segregated trust account in which escrow funds are held. An account under the custody of a bank or other third party. Funds or other securities are placed in this account by one or both parties to a real estate transaction and used in accordance with a written contract.

Escrow Agent: The person or organization having a fiduciary responsibility to both the buyer and seller (or lender and customer) to see that the terms of the purchase/sale (or loan) are carried out.

Escrow Instructions: Instructions which are signed by both buyer and seller, and which enable an escrow agent to carry out the procedures necessary to transfer real property, a business, or other assignable interest.

Escrow Officer: An escrow agent. In some states, one who has - through experience and education - gained a certain degree of expertise in escrow matters.

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Fair Credit Reporting Act (FCRA): A federal law giving one the right to see his/her credit report so that errors may be corrected. A lender refusing credit based on a credit report must inform the buyer which company issued the report. The buyer may see the report without charge if refused credit, or for a charge if just curious.

Fair Housing Act: Prohibits discrimination by lenders with respect to the financing of a house based on race, color, religion, national origin, familial status, sex and handicap.

Fair Market Value: Price at which property is transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.

FCRA (Fair Credit Reporting Act): See Fair Credit Reporting Act.

FDIC (Federal Deposit Insurance Corporation): See Federal Deposit Insurance Corporation.

Federal Deposit Insurance Corporation (FDIC): The regulatory agency that directs compliance for state banking systems.

Federal Home Loan Mortgage Corporation (FHLMC): Also known as Freddie Mac. A semi governmental purchaser of mortgage loans in the secondary market.

Federal Housing Administration (FHA): A federal agency, which insures first mortgages, enabling lenders to loan a very high percentage of the sales price.

Federal National Mortgage Association (FNMA): Also know as Fannie Mae. A private corporation dealing in the purchase of first mortgages.

Federal Savings and Loan Insurance Corporation (FSLIC): A federal corporation insuring against loss by depositors in a savings and loan association, in much the same way the Federal Deposit Insurance Corporation insures against loss by depositors in banks.

Federal Tax Lien: A lien attached to property for nonpayment of a federal tax (estate, income, etc.). A federal tax lien differs from other liens in that it is not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien (except by judicial foreclosure).

Fee Simple: The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one's heirs.

Fee Simple Estate: The absolute ownership of land, which gives the owner all the rights and privileges; makes owner accountable for all responsibilities relative to the property.

FHA (Federal Housing Administration): See Federal Housing Administration.

FHLMC (Federal Home Loan Mortgage Corporation): See Federal Home Loan Mortgage Corporation.

Fidelity Insurance: A type of insurance that a condominium or Planned Unit Development owners' association or a co-op corporation obtains. The insurance protects against economic loss from dishonest acts of anyone who either handles (or is responsible for) funds that the association or corporation holds or administers, whether or not that individual receives compensation forservices.

First Mortgage: A mortgage that is the primary lien against a property.

Fixed Rate Mortgage: A mortgage on which the interest rate is set for the term of the loan.

Flood Insurance: Insurance indemnifying against loss by flood damage. Required by lenders in areas designated (federally) as potential flood areas. The insurance is private but federally subsidized.

Flood Insurance Protection Act: An act established in 1974 which requires lenders to disclose to customers whether their property is in a special flood hazard area and whether federally subsidized flood insurance or disaster relief is available.

Flood Plain: Those lands subject to flooding when a stream or river is at flood stage.

Floor Plan: Scale architectural drawing showing details of floor design and layout.

FNMA (Federal National Mortgage Association): See Federal National Mortgage Association.

Foreclosure: A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner of property in order to sell the property to satisfy a lien against it.

Free and Clear: Real property against which there are no liens, especially mortgages.

FSLIC (Federal Savings and Loan Insurance Corporation): See Federal Savings and Loan Insurance Corporation.

Fully Indexed Rate: The index at time of application or at time of closing, whichever is less, plus the margin on the Note, including any margin increments required by the nature of the loan.

Functional Obsolescence: The loss over time in the desirability, layout or function of an element of a property.

Funding Date: The date the loan proceeds are disbursed, as outlined on the HUD-1 Settlement Statement.

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Gap Amount: The minimum amount required by the customer to pledge in collateral so that the loan conforms to LTV guidelines. Specific to a dual collateral loan (i.e. Preserved Asset Mortgage).

General Partnership: Type of business whereby each partner is personally liable for the debts of the business as a whole. Personal liability exists even after the partnership itself has been dissolved (as long as business debts are outstanding).

Gift Letter: A letter from the donor (giver) stating that a gift of money has been made to the buyer in order to purchase specific property.

GNMA: See Government National Mortgage Association.

Government National Mortgage Association (GNMA): Also known as Ginnie Mae. A federal association working with FHA, which offers special assistance in obtaining a mortgage and purchases mortgages in a secondary capacity.

Grace Period: A period of time past the due date for a payment during which time a payment may be made and not considered delinquent.

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

Grantor: The person conveying an interest in real property.

Gross Income: Total income before any expenses are deducted.

Gross LTV: The loan amount divided by the lower of the appraised value or sales price with a maximum of 100%. Specific to a Dual Collateral loan.

Ground Rent: The amount of money that is paid for the use of land when title to a property is held as a leasehold estate, rather than as fee simple.

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Hazard Insurance: Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

HELOC (Home Equity Line of Credit): See Home Equity Line of Credit.

High-Rise: Building with four or more stories, usually served by an elevator.

Home Equity Line of Credit (HELOC): A mortgage loan, usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his/her own discretion up to an amount that represents a specified percentage of the borrower's equity in a property.

Home Mortgage Disclosure Act (HMDA): A federal regulation, which requires that certain customer characteristics be obtained and reported on all applications. This requirement will provide information to citizens and public officials so they can determine if institutions are fulfilling obligations to serve the housing needs of their communities and neighborhoods.

Homeowner's Association: An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.

HMDA (Home Mortgage Disclosure Act): See Home Mortgage Disclosure Act.

Housing Ratio: The proportion of house payment to total monthly income.

HUD: See Department of Housing and Urban Development.

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Impound: That portion of a mortgagor's monthly payment held by the lender or servicer to pay for taxes, hazard insurance, flood insurance and/or mortgage insurance as they become due. Also known as reserves.

Improvements: Those additions to raw land that normally increase the land's value, such as buildings, streets and sewers.

Income Approach to Value: A method of measuring the value of a property based on the market rent or income that the property can be expected to earn.

Index: The externally determined interest rate, which is used to determine the interest rate to be charged on an adjustable rate note. The index is usually the effective market interest rate on the U.S. Treasury obligation of equal maturity.

Individual Condominium Unit Appraisal Report: Used to appraise attached/detached single-family units in a condominium project.

Individual Co-op Unit Appraisal Report: Used to appraise single-family units in a co-op project.

In-file Credit Report: An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.

Ingress: To go in; to enter. Used with egress to describe the right of access to land.

Installment Debt: Borrowed money that is repaid in several successive payments, usually at regular intervals, for a specific amount and for a specified term.

Insured Closing Protection Letter: A document issued by a title insurance company in connection with a to-be-issued title insurance policy. It protects a mortgagee who is forwarding funds to a title insurance company's agent or approved attorney against an embezzlement of funds or a failure to follow specific closing instructions.

Inter Vivos Trust: A trust during the life of the settlor rather than upon death.

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Joint Tenancy: An undivided interest in property, taken by two or more joint tenants. The interest must be equal, occurring under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Joint Tenants: Those holding under joint tenancy.

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Late Charge: A penalty for failure to pay a loan payment on time.

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

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

Legal Description: A method of geographically identifying a parcel of land in a manner acceptable to a court of law.

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

Lien: A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt.

Life of Loan Cap: The maximum interest rate that can ever be charged on the loan. The life of loan cap must be adjusted for margin increments required by the loan parameters.

Limited Partnership: Type of business where the partners have "limited" decision-making ability and they are compensated by the fact that their liability is also "limited" to the amount of money they invested into the partnership.

Line of Credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specific customer.

Living Trust: A trust, which is in effect during the life of the settlor, rather than upon his/her death.

Loan-to-Value (LTV): Ratio of the amount of a mortgage loan to the property value, which is the lesser of the sales price, or appraised value of the property. Example: An $80,000.00 loan for a property with a value of $100,000.00 has a 80.00% LTV. This ratio is expressed to a potential customer of property in terms of the percentage a lending institution is willing to finance.

Loss Payable Clause: An insurance policy provision for payment of a claim to someone - other than the insured - who holds an insurable interest in the covered property.

LTV (Loan-to-Value): See Loan-to-Value.

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Manufactured Home: Factory-built or prefabricated housing, including mobile homes.

Margin: The amount to be added to the index to determine the interest rate to be charged in the future. The margin is set by Capital Markets and can be modified only under the conditions set by Capital Markets. The margin on the loan must include any margin increments required by the loan parameters.

Market Value: The highest price a willing buyer would pay and a willing seller accept, both being fully informed, and the property exposed for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time.

MECA (Modification, Extension & Consolidation Agreement): See Modification, Extension & Consolidation Agreement.

Mechanic's Lien: A charge or encumbrance in favor of contractor's trade's people and others who have performed work or furnished material in the construction of a building or other improvement. Also called a material man's lien, though in some states, a material man's lien applies to construction materials and the mechanic's lien applies to contractors and trades people.

Metes and Bounds: A description in a deed of the land location in which the boundaries are defined by directions and distances.

MI (Mortgage Insurance): See Mortgage Insurance.

Mobile Home: A manufactured home built on a chassis with wheels (which may or may not be removed later).

Modification, Extension & Consolidation Agreement (MECA): Type of loan in New York which allows a customer to refinance an existing loan(s) or sell their property and avoid paying the expensive mortgage tax on the full loan amount. The customer can refinance without receiving cash out and owe nothing in mortgage tax. If he/she refinances with cash out, mortgage tax is owed on the new money only. This type of financing can save the customer a significantamount of money.

Modular Home; A manufactured home never intended to be mobile. This type of manufactured home is built in sections at a factory and placed on a permanent foundation at the building site.

Mortgage Insurance (MI): Insurance coverage issued by an independent insurer on conventional loans to protect the mortgagee against losses incurred due to foreclosure on a property when the customer has failed to make his/her mortgage payments. Also known as Private Mortgage Insurance (PMI).

Mortgagee: The lender in a mortgage transaction.

Mortgagee Clause: A special clause that may be attached to an insurance policy stipulating that the lender receive the necessary portion of the insurance proceeds in the event of a loss to satisfy the unpaid amount of a loan.

Mortgagor: The customer or owner in a mortgage transaction who pledges property as security for a debt.

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N-1 Mortgage: A mortgage in which the interest rate is fixed for a period of years and then reverts to a one year adjustable rate mortgage.

Negative Amortization: A gradual increase in the mortgage debt that occurs when the monthly installment is not sufficient for full application to both principal and interest. This interest shortage is added to the unpaid principal balance to create "negative" amortization.

Negative Cash Flow: When the income from an investment property does not equal the usual expenses. The owner must come up with cash each month to meet these expenses.

Net Income: The difference between effective gross income and expenses, including taxes and insurance. The term is qualified as net income before depreciation and debt.

Net Operating Income: The income from investment property available to cover the principal, interest, taxes and insurance payments and provide a cash flow to the owner. It is calculated as the gross monthly income from the property less the applicable operating expenses - utilities, repairs, reserves for replacement, a vacancy factor, etc. The monthly payment is not considered as operating expense.

Net Worth: The value of all assets, including cash, less total liabilities. It is often used as an underwriting guideline to indicate credit worthiness and financial strength.

Non-Relocating Borrower: The wage-earning member of a household who is moving with a relocated borrower, but who is not subject to a corporate relocation.

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Obligation-to-Income Ratio: See Debt-to-Income Ratio.

Obsolescence: The loss of value caused by reduced usefulness from outmoded physical features, by diminished suitability, or economic influence.

Origination Fee: The fee, which covers the lender's administrative costs in processing the loan.

Owner Occupied: Property physically occupied by the owner.

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Partnership: Type of business whereby two or more persons act as co-owners of the business for the purpose of sharing not only the profits and losses of that business, but management responsibilities as well.

Party Wall: A wall built on a line between two adjoining properties and used by both owners.

Payment to Income Ratio: The ratio of the monthly housing payment to total gross monthly income.

Physical Depreciation: A loss in value that is caused by deterioration in the physical condition of a property's improvements.

PITI (Principal, Interest, Taxes and Insurance): See Principal, Interest, Taxes and Insurance.

Planned Unit Development (PUD): A comprehensive development plan for a large land area. It usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. A subdivision having areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.

Plans and Specifications: Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.

Plat: A map representing a piece of land subdivided into lots with streets, boundaries, easements, and dimensions shown thereon; A map showing how land is subdivided or planned for home building.

PMI (Private Mortgage Insurance): See Mortgage Insurance.

Point: An amount equal to 1% of the principal amount of the loan.

Power of Attorney: A legal document authorizing one person to act on behalf of another.

Prepayment Penalty: A penalty under a note, mortgage or deed of trust imposed when the loan is paid before it is due.

Principal, Interest, Taxes and Insurance (PITI): The total of the principal, interest, taxes and insurance on a loan.

Private Mortgage Insurance (PMI): See Mortgage Insurance.

Proprietary Lease: A lease that a co-op gives to a tenant-stockholder to cover the unit that he/she will occupy. It is proprietary because the tenant-stockholder is both a shareholder in the landlord's co-op corporation and a tenant under the lease.

PUD (Planned Unit Development): See Planned Unit Development.

Purchase Agreement: A written proposal by a buyer to purchase real estate that becomes binding upon the acceptance of the seller.

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Real Estate Settlement Procedures Act (RESPA): A federal regulation that requires lenders to provide home mortgage customers with information on known or estimated settlement costs.

Recognition Agreement: An agreement on the part of a co-op corporation to recognize specific rights of lenders who finance share loans in the project.

Redlining: The practice of restricting or denying mortgage loans for certain areas in a discriminatory pattern.

Refinance: The replacement of the existing mortgage loan on a property with a new one; the financing of a property by an owner who has no loan against it, but does not transfer title.

Release Amount: Loan amount minimum amount. Specific to a Dual Collateral loan.

Release LTV: Release amount divided by the lower of the appraised value or sales price. Specific to a Dual Collateral loan.

Relocating Household: Two-income household relocating as a result of one wage earner's transfer or acceptance of new employment.

Remaining Economic Life: The number of years of useful life left to a building from the date of appraisal.

Remaining Term: Original term less the number of payments that have been applied.

Rent Loss Insurance: Insurance that protects the landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenants is excused from paying rent.

Replacement Cost: The cost to replace a structure with one of equivalent value and function. The current cost of producing similar, but not identical, improvements possessing the same utility as the original items.

Rescission: The cancellation or annulment of a transaction or contract by the operation of law or by mutual consent.

RESPA (Real Estate Settlement Procedures Act): See Real Estate Settlement Procedures Act.

Revolving Debt: An arrangement for credit in which the customer receives purchases or services on an ongoing basis prior to payment. Repayment is usually at regular intervals, but not for a specified amount or term.

Right of First Refusal: A provision in an agreement that stipulates that the owner of the property must offer the first opportunity to purchase or lease a property to a specified person or company before offering it to others.

Row House: One of a series of houses connected by common sidewalls and forming a continuous group. Also known as attached housing, but not considered a townhouse or planned unit development.

- S -

S-Corporation: A business with a limited number of stockholders. Also known as a Subchapter S.

Sales Contract: Written agreement between competent parties stating terms and conditions of a sale.

Second Mortgage: A mortgage that has a lien position subordinate to the first mortgage.

Secondary Financing: A loan secured by a second mortgage on a property. Sometimes used to refer to any financing technique other than equity and first mortgage debt.

Second Home: A single-family property that the customer occupies for at least two weeks out of the year in addition to his/her primary residence. Also knows as a vacation home.

Security Instrument: The document (mortgage, deed of trust, deed to secure debt, etc.) that creates a valid lien on real estate.

Seller Financing: Any of a variety of programs where the seller assists the buyer by taking out a second mortgage, "buying down" payments in the early years of the loan, or effectively lending some of the funds through a wrap agreement.

Setback Lines: Lines that delineate the required distances for the location of a structure in relation to the perimeter of the property. They are defined in building codes, deed restrictions and zoning requirements.

Shelf Exception: A loan originated under a program designed for agency sale, but approved for shelf sale due to some departure from agency policy in approving it.

Small Residential Income Property Appraisal Report: Used to appraise 2-4 family properties including those located in Planned Unit Developments.

SMSA (Standard Metropolitan Statistical Area): See Standard Metropolitan Statistical Area.

Sole Proprietorship: Type of business whereby the individual owner has unlimited liability for all debts of the business. There is no distinction made between the owner's personal assets and the assets used in the business.

Standard Metropolitan Statistical Area (SMSA): A term describing a central city area and its surrounding suburbs and other small jurisdictions.

Subdivision: A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordinate Financing: Any mortgage or other lien that has priority lower than that of the first mortgage.

Subordination: The act of a party acknowledging - by written recorded instrument - that a debt is inferior to the interest of another in the same property.

Survey: A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements.

- T -

Tenancy by the Entirety: A form of ownership by husband and wife whereby each owns the entire property. In the event of the death of one, the survivor owns the property without probate.

Tenancy in Common: An undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists.

TIL (Truth-in-Lending): See Truth-in-Lending.

Title: The evidence one has of right to possession of land.

Title Insurance: Insurance against loss resulting from defects of title to a specifically described parcel of real property.

Title Insurance Company: A company, which issues insurance regarding title to real property.

Title Insurance Policy: A contract by which the insurer - usually a title insurance company - agrees to pay the insured a specific amount for any loss caused by defects in title to real estate, wherein the insured has an interest as purchaser, mortgagee, or otherwise.

Title Search: A review of all recorded documents affecting a specific piece of property to determine the present condition of title.

Total Debt Ratio: The portion of total installment obligations, including house payment, to total monthly income.

Townhouse: A residential unit on a small lot, which has coincidental exterior limits with other similar units. Title to the unit and lot is vested in the individual buyer with a fractional interest in common areas, if any. Also known as an attached home.

Transfer Tax: A state tax on the sale of real property, based on the sale price or equity transferred, being $.55 for each $500 of the taxable amount in most states. Some states use $1.10 per $1000; $.50 per $500; $1.00 per $1000.

Trust: A fiduciary relationship whereby legal title to a property is transferred to a trustee with the intention that such property be administered by the trustee for the benefit of another (beneficiary) who holds equitable title to such property.

Trustee: One who holds legal title to property for the benefit of another, or for the purpose of securing performance of an obligation.

Trustee Deed: The instrument given by a customer (trustor) to a trustee vesting title to a property in the trustee as security for the customer's fulfillment of an obligation.

Truth-in-Lending: A federal law requiring accurate disclosure of all amounts to be financed in connection with a loan and of an accurate annual percentage rate.

- U -

UCC (Universal Commercial Code): See Universal Commercial Code.

Underwriting: The analysis and the matching of risk to an appropriate rate and term.

Undivided Interest: A partial interest by two or more people in the same property, whether the interest of each is equal or unequal.

Uniform Residential Appraisal Report: Used to appraise single-family properties and units in Planned Unit Developments.

Universal Commercial Code (UCC): A code (laws), which regulates the transfer of personal property.

- V -

VA (Veterans' Administration): See Veterans Administration.

Vacation Home: See Second Home.

Variable Rate Mortgage: A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the Note.

Veterans' Administration (VA): An independent agency of the federal government created in 1930. The Servicemen's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low downpayment mortgages to eligible veterans by guaranteeing the lender against loss.

- W -

Wire Transfer: The funding method by which the loan proceeds are sent electronically from one account to another.

- Y -

Yield: Return on an investment.

- Z -

Zero Lot Line: A term generally used to describe the positioning of a structure on a lot so that one side rests directly on the lot's boundary line. Although such construction is usually prohibited by setback ordinances, it can be a part of a special space-conserving project.