Glossary

Adjustable-Rate Mortgage (ARM)

Mortgage loan under which the interest rate is periodically adjusted. The amounts and times of adjustment are agreed to at the inception of the loan.

Ad Valorem

"According to value." A method of taxation using the value of the object taxed to determine the amount of tax.

Amortization

The timely payment of principal of a mortgage loan until the debt has been paid in full.

Annual Analysis

A review of the adequacy of escrow funds performed on a predetermined annual date regardless of the date of the disbursements made.

Appraisal

An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.

Assumption of Note

Transfer by a mortgagor of title to a property where the purchaser accepts the primary liability for payment of the mortgage installments. The seller remains secondarily liable unless released by the mortgage holder.

Balloon Note

A note calling for periodic payments, which are insufficient to fully amortize the face, amount on the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.

Cap

The maximum, which an adjustable-rate mortgage may increase, regardless of index change.

Certificate and Release of Liens

A notarized certificate completed by the contractor that releases liens with a contract balance of $0 or no funds owed.

Chain of Title

A chronological list of recorded instruments tracing title to land, from the original owner to current owner.

Clear Title

Title to property, which is free from liens, defects or other encumbrances.

Contract

Signed agreement between you and the contractor including an itemization of the expected materials and total cost of repairs, including labor. This must be signed and dated by you and the contractor as well as list your property address on contractor's letterhead or stationary.

Contractor License

A certificate indicating a contractor's qualification to complete work in your state. This is typically issued by your local Contractor's State License Board.

Coupon Book

A book of preprinted, pre-coded tickets or punched cards provided to borrowers. A coupon is sent with each payment to enable the lender to identify the payment by name of borrower, account number, amount of payment, and type of mortgage loan.

Curtailments

A payment that is applied entirely to the principal balance of the loan.

Deed of Trust

A type of security instrument that conveys title to a third party until the payment of the debt; it accomplishes essentially the same purpose as a mortgage

Default

Nonperformance of the terms of a note or the covenants of a mortgage.

Delinquency

A debt on which payment is overdue.

Depreciation

Decreases in value to real property improvements caused by deterioration or loss in value.

Due on Sale Clause

A clause in a mortgage loan, which gives the lender the right to demand payment in full when property changes ownership.

Escrow

The account in which the borrower's monthly deposit for taxes, hazard insurance, and mortgage insurance premiums are placed and held in trust by the lender.

Federal Housing Administration (FHA)

A federal agency, which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

First Mortgage

A mortgage on property that is superior in position to any other mortgage.

Fixed Rate Loan

A loan on which the same rate of interest is charged for the life of the loan.

Foreclosure

A legal proceeding that extinguishes a mortgagor's right of redeeming a mortgaged estate.

Grantee

One to whom a grant is made.

Grantor

One who has made a grant.

Hazard Insurance

Protects the property of a mortgaged premise.

Homestead

The home and adjoining land occupied by a family.

Insurance Adjustor's Report

An itemized list of the damages and the estimated cost to repair each. The report is prepared by your insurance company. It may be referred to as an adjuster's worksheet or an estimate.

IRS Form W-9

Taxpayer Identification Number request from that must be completed by your contractor.

Late Charge

A penalty for failure to pay an installment payment on time.

Liability Insurance

Contractor's insurance secured for their business to protect against losses arising from injury or damage to another person or property.

Lien

The security interest created by a mortgage.

Loan to Value Ratio

The relationship, usually expressed as a percentage, of the principal amount that a mortgage loan bears to the appraised value of the mortgaged property.

Mortgage

A conditional conveyance of property as security for a debt.

Negative Amortization

A condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases.

Note

The security for the payment of debt; it empowers the lender to execute on the personality of a defaulted borrower.

Partial Release

A release of a portion of property covered by a mortgage.

Payoff

The payment in full of an existing loan or other lien.

Planned Unit Development (PUD)

A subdivision of five or more individually owned lots with one or more other parcels owned common or with reciprocal rights in one or more other parcels.

Point

One percent. When referring to mortgages or deeds of trust, the term is used to describe the percentage of discount rather than interest (for which the word percent is used). A fee charged by the lender to fund a loan, in addition to other fees.

Principal Reduction Modification/Recast

A borrower may make a written request to reduce their monthly payment by paying a large sum towards the principal of their loan. This is called a principal curtailment modification or Recast. The acronym is PRM (principal reduction modification). The PRM allows the borrower to lower their monthly payments based on the large sum they paid on the principal portion of their loan. The loan is reamortized using the new unpaid principal balance, current interest rate and remaining term.

Recording

To file a legal instrument in the public records.

Reinstatement

The acknowledgement by a lender that a delinquent or defaulted loan has been brought up to date by the borrower.

Security

Something of value given, deposited, or pledged to insure the fulfillment of an obligation.

Servicing

The collection of mortgage payments, securing escrow funds, payment of property taxes and insurance from the escrowed funds, follow-up on delinquencies, and the accounting for and remitting of principal and interest payments to the investor.

Tax Service

The accumulation of bills issued by municipalities for real estate assessments by an agent other than the mortgage servicer.

Title insurance

Protection of an individual's right to ownership of real estate.

Underwriting

The process of analyzing real estate and an individual's credit for determining the timely repayment of debt.