Glossary
Abstract of Title: A written history of ownership of a parcel of land, summarizing the material parts of any occurrence affecting the title.
Acceleration Clause: A common provision of a mortgage which allows the holder to demand the entire outstanding mortgage balance due and payable in the event of a breach of the mortgage contract.
Acceptance Letter: A document signed by a construction loan borrower stating that all work is complete and of acceptable quality.
Access Rights: A right to ingress and egress from one's property; may be implied or expressed.
Accrued Interest: Interest earned for the period of time elapsed since interest was last paid.
Acknowledgement: A formal declaration attached to or part of an instrument, made before a duly authorized officer (usually a notary public) by the person who has executed that instrument, the execution being a free act and deed.
Acquisition Cost: In a HUD/FHA transaction, the price the borrower paid for the property plus any of the following costs; closing, repairs, or financing (except discounts in other than a refinance transaction). Does not include prepaid discounts in a purchase transaction, mortgage insurance premiums, or similar add-ons.
Acre: A unit of measure for land, 43,560 square feet.
Act of God: An event which causes damage by nature such as a flood, earthquake, or winds; an occurrence which was not caused by man.
Addendum: An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.
Adjustable Rate Mortgage (ARM): A mortgage loan or deed of trust which allows the lender to adjusts the interest rate in accordance with a specified index periodically and a agreed to at the inception of the loan. Also called variable rate mortgage (VRM).
Adjusted Gross Income: A person's total income, as reported on the IRS 1040 tax return form, after allowable contributions, deductions and expenses.
Adjustment Date: The date of periodic interest rate adjustments for an adjustable rate mortgage loan.
Adjustment Interval: On an adjustable rate mortgage (ARM), the interval of time between changes in the interest rate and/or monthly payment, typically one, three or five years.
Ad Valorem Taxes: Latin meaning "According to value." Real estate taxes on the assessed value of property.
Advance: In real estate, a partial disbursement of funds under a note. Most often used in connection with construction lending.
Adverse Action: Under the Equal Credit Opportunity Act, adverse action occurs when a completed application is submitted to a lender and the credit request is denied or not approved for the amount or term requested by the applicant.
Affidavit: A sworn statement in writing, usually requiring notarization.
Agreement for Sale: A written document in which the purchaser agrees to buy certain real estate or personal property and the seller agrees to sell under stated conditions. Also called a sales contract, binder, or earnest money contract.
Amenity: A feature that enhances property value. Examples are off-street reserved parking within a condominium community, the proximity of public transportation, tennis courts, or a swimming pool.
American Land Title Association (ALTA): A national association of title insurance companies, abstractors, and attorneys specializing in real property laws. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.
Amortization: Repayment of a mortgage debt with periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.
Amortization Schedule: A table showing the amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made.
Amount Realized: The amount of money, or fair market value of other property, received in a sale or exchange.
Annual Mortgage Statement: A report prepared by the lender or servicing agent for the mortgagor, stating the amount of taxes, insurance, and interest that was paid during the year, and the outstanding principal balance.
Annual Percentage Rate (APR): A term defined in section 106 of the federal Truth in Lending Act (15 USC 1606), which expresses on an annualized basis the charges imposed on the borrower to obtain a loan (defined under the Act as "finance charges"), including interest, discount and other costs.
Anti-Coercion Statement: A Florida state provision that prohibits a lender from requiring an applicant to obtain hazard insurance through a particular company.
Applicant: A prospective borrower who has completed an application. An application is a series of steps, usually including the completion of documents that a lender requires of those seeking a loan.
Apportionment: A pre-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents, and other income and expenses. When a property is sold, apportionment is used to distribute or collect funds due from the buyer and seller for income and expenses.
Appraisal: An opinion or estimate of value. Also refers to the process by which a value estimate is obtained.
Appraiser: One qualified by education, training, and experience to estimate the value of real and personal property.
Appreciation: An increase in value for any reason, except inflation.
Appurtenance: Anything belonging to or attached to land such as a barn, garage, or easement that is part of the property and is therefore included in a sale or transfer.
Arm's Length Transaction: A transaction in which the parties involved are entirely independent of each other, deal with each other as strangers, and have no reason for collusion.
Arrears: The situation in which mortgage interest and real estate taxes are paid at or after the end of the period for which they are levied. Late payment is also described as being in arrears.
Assessed Valuation: The value that a taxing authority places upon real property that becomes the base for computing local property taxes.
Assessment: A value factor assigned to real property and used to determine real property taxes. The process of reaching the assessed valuation. Also, an add-on tax to reaise money for a special purpose.
Assessor: A public official who appraises taxable property to reach its assessed valuation or base on which taxes are collected.
Asset: A property or right owned, tangible or intangible, that has monetary value and is capable of providing future benefits to its owner.
Assignee: The person to whom ownership, rights, or interests in property is transferred.
Assignment: The transfer of ownership, rights, or interests in property, as in a mortgage, lease, or deed of trust.
Assignment of Mortgage: A document that evidences the transfer of a mortgage fro one party to another.
Assignment of Rents: A transfer to the mortgagee of the right to collect rents from tenants in the event of default b the property owner.
Assignor: One who transfers to another ownership or interest in property.
Assumption Agreement: A written agreement by one party to pay an obligation originally incurred by another.
Assumption Fee: The amount paid a lender for the paperwork and processing of records necessary to approve and document a new debtor.
Assumption of Mortgage: A buyer's acceptance of primary liability for payment of an existing note secured by a mortgage or deed of trust. The seller remains secondarily liable, unless specifically released by the lender.
Attorney-in-Fact: The agent who is granted authorizations to perform specific acts on behalf of another.
Back-end Ratio: This includes all other installment or revolving credit along with the housing expense.
Balance Sheet: A report of the financial position of a business at a specific point in time, showing its assets, liabilities, and owner's equity.
Balloon Mortgage: A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date, usually at the end of the term.
Balloon Payment: A final payment of a mortgage loan that is considerably larger than the required periodic payments because the laon amount was not fully amortized.
Bankrupt: An individual, firm, or corporation who, through court proceeding, is relieved from the payment of all debts. Bankruptcy may be declared under on of several chapters of the federal bankruptcy code: Chapter 7, which covers liquidation of individual or business assets' Chapter 11, which covers reorganization of bankrupt businesses; Chapter 12, which covers certain farm bankruptcies; and Chapter 13, which covers restructuring of debts by individuals.
Bankruptcy: A condition of financial insolvency in which a person's liabilities exceed assets and the person is unable to pay current debts. Generally, a person must wait four years following the discharge of the bankruptcy to be eligible for a mortgage loan. Bankruptcy is reported by most credit agencies for a period of ten years.
Basis Points: A unit of measurement used to describe yield. A basis point is 1/100 of 1%. Example: 100 basis points = 1%; 75 basis points = 3/4%; 50 basis points = 1/2%.
Bear Market: A market characterized by falling prices. A bear market in the mortgage industry may be triggered by rising interest rates.
Beneficiary: A person who benefits from a life insurance policy, will, contract, or deed of trust. In the latter case, the lender is the beneficiary.
Binder: Temporary hazard or title insurance granted prior to the issuance of a permanent policy. In real estate, a preliminary agreement between a buyer and seller which includes the price and terms of the contract.
Bi-Weekly Mortgage: A mortgage with payments due every two weeks, totaling 26 payments a year.
Blanket Mortgage: A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt.
Bridge Loan: A short-term loan to cover the period between the termination of one loan and the beginning of another. Requires a balloon payment.
Builder's Risk Insurance: Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the building progresses and terminates at completion.
Building Code: Regulations based on safety and health standards that govern design, construction, and materials used in construction.
Building Permit: Written authorization from a local government for the construction of a new building, or for extensive repairs or improvements on an existing structure.
Bull Market: A market characterized by rising prices. In the mortgage industry, a bull market may be prompted by falling interest rates.
Buy-Down Mortgage: A financing techniques used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender to buy down or lower the effective interest rate paid by the buyer, seller, or builder, thus reducing the monthly payments for a set time.
Capital: The net worth of a business represented by the amount that its assets exceed liabilities.
Caps: A limitation on either the interest rate increase of the periodic or lifetime rate or both for an adjustable rate mortgage.
Carryback Financing: An agreement in which the seller takes back a Note for part of the purchase price secured by a junior mortgage.
Cash Out Refinance: When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding of the existing mortgage being refinanced, and all or a portion of the equity is converted to cash.
Certificate of Completion: A document issued by the appraiser stating that construction is complete in accordance with the terms, conditions, approved plans, and specifications.
Certificate of Eligibility: A document used by the Department of Veteran's Affairs (DVA) to certify a veteran's eligibility for a VA loan.
Certificate of Occupancy: Written authorization given by a local municipality that allows a newly completed or substantially renovated structure to be inhabited.
Certificate of Reasonable Value (CVA): A VA appraisal.
Certificate of Title: A confirmation written by a title attorney or company stating that the title of a parcel of real property is legally vested in the present owner.
Chain of Title: A chronology of documents, which have transferred title to a parcel of real property from the original owner to the present owner.
Chattel: Personal Property.
Chattel Mortgage: An agreement between a secured party and a debtor creating a security interest in personal property.
Clear Title: Unencumbered title to real property, free of liens or defects. Also, "free and clear.
Closed-End Mortgage: A mortgage under which the mortgagor is prohibited from borrowing additional funds under the same mortgage.
Closing: In real estate, the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to consummate a sale or loan transaction. The final settlement between the buyer and the seller; the date on which title passes from the seller to the buyer.
Closing Costs: Fees paid to effect the closing of a mortgage, such as an origination fee, discount points, title insurance fees, survey fees and attorney's fees that must be paid in addition to the purchase price.
Closing Statement/HUD-1 Settlement Statement: A financial disclosure giving an account of all funds received and expected at closing, including escrow deposits for taxes and hazard insurance.
Cloud on Title: Any condition that adversely affects the title to real estate or curtails as owner's rights.
Collateral: Property pledged as security for a debt, for example, mortgaged real estate.
Commitment: A written promise to make or insure a loan for a specified amount and on specified terms.
Community Property: In some states, 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.
Comparables: Properties used for comparative purposes in the appraisal process that have similar characteristics to the subject property.
Condominium: A form of property ownership whereby the purchaser receives title to a unit in a multi-unit structure and a proportionate interest in common areas.
Conforming Mortgage Loan: A mortgage loan in compliance with the underwriting criteria and current loan limits of "Fannie Mae" and "Freddie Mac".
Construction Costs: All costs incurred in the completion of a construction project, including land, labor, overhead and builder's profit.
Construction Draw: A partial disbursement of the construction loan based on the schedule of payments in the loan agreement.
Construction Loan: A short term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as work progresses.
Construction Loan Agreement: A written agreement between a lender and a builder and/or borrower which details the specific terms and conditions of a construction loan, including the schedule of payments.
Construction/Permanent Loan: A loan where the proceeds will be used to finance the construction of a one-to-four family structure where the lot is already owned by the borrower.
Contingency: A clause in a contract that requires the completion of a certain act or the occurrence of a certain event before the contract is binding.
Conventional Financing: IN real estate, mortgage financing which is not insured or guaranteed by a government agency such as FHA, VA or FmHA.
Convertible Mortgage: A type of adjustable rate mortgage that may be converted to a fixed rate mortgage at specified intervals during a predetermined time period.
Conveyance: The document, such as a deed, lease or mortgage, used to effect a transfer.
Corporation: A business entity owned b a group of owners, called stockholders. A corporation is considered an artificial person under the law.
Correspondent: A specialized type of mortgage banker whose function is limited to the origination of mortgage loans that are sold to other mortgage bankers or investment bankers.
Cost Approach to Value: A valuation approach in which the value of a property is determined by computing the replacement value of improvements, depreciation and the value of the land.
Credit Life: Declining term life insurance taken out by a borrower as an added source of funds for the repayment of a loan.
Credit Rating: A rating given to a person or company that establishes creditworthiness based upon financial condition, experience and past credit history.
Credit Report: A report to a prospective lender on the credit standing of a prospective borrower, used to aid in the determination of creditworthiness.
Deed-in-Lieu: A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.
Deed of Trust: A type of security instrument in which the borrower conveys title to real property to a third party (trustee) to be held in trust as security for the lender, with the condition that the trustee shall re-convey the title upon the payment of the debt, and conversely, will sell the land and pay the debt in the event of a default by the borrower.
Default: A breach or nonperformance of the terms of a note or the covenants of a mortgage.
Defeasance Clause: Upon payment in full to the lender, this clause in a mortgage requires the lender to "give back" his security interest in the property and issue to the borrower a recordable Satisfaction of Mortgage. This clause also prohibits the lender from foreclosing as long as the borrower complies with the terms and conditions of the mortgage.
Deferred Maintenance: Postponed, infrequent or inadequate maintenance practices on a building or property, often resulting in physical depreciation and loss of value.
Deficiency: The difference between the balance outstanding on a loan and proceeds from the sale of the loan collateral.
Demand Note/Mortgage: A note or mortgage that the lender can call due at any time and without prior notice.
Depreciation: A decline in value of a building or other real estate improvement, resulting from age, physical wear and economic or functional obsolescence.
Disclosure: Information relevant to specific transactions that is required by law.
Discount Point: A one-time fee paid by the borrower or seller to permanently lower or buy down the interest rate. One point is equal to one percent of the loan.
Dower: The rights a widow has to his/her spouse's property at their death.
Down Payment: A portion of the sales price paid a seller by a buyer to close a sales transaction, with the understanding that the balance will be paid later. Also, the difference between the sale price or real estate and the mortgage amount.
Draw: Periodic advances of funds according to the schedule of payments in a construction loan agreement. Also called advance, disbursement, payout, progress payment or takedown.
Due-on-Sale: A clause in a mortgage stating that if the mortgagor sells, transfers, or in any way encumbers the property, then the mortgagee has the right to implement an acceleration clause making the balance of the obligation due.
Duress: Compulsion, pressure or coercion under protest.
Earnest Money: Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
Effective Age: For purposes of appraisal, the physical age given to a building based on its present condition, which may differ from its actual age.
Encroachment: An improvement that illegally violates anther's property or right to use that property.
Encumbrance: Anything that affects or limits the fee simple title to property, such as mortgages, leases, easements or restrictions.
End Loan: The final mortgage loan to the ultimate purchaser of a property, as opposed to a construction loan or other form of interim financing.
Equity: Net ownership, the difference between fair market value and current indebtedness, sometimes called owner's interest.
Escrow: An item of value, money or documents, deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
Escrow Account: The segregated trust account in which escrow funds are held.
Escrow Agent: The person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried.
Escrow Analysis: The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance and other bills when due.
Escrow Overage or Shortage: The difference, determined by escrow analysis, between escrow funds required to make a payment when it becomes due.
Escrow Payment: That portion of a mortgagor's monthly payments held by a lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due.
Estate: The ownership interest an individual has in real property. The sum total of all the real and personal property owned by an individual at the time of death.
Examination of Title: The review of the chain of title as revealed by an abstract of title or public record.
Fair Market Value: The 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.
Fee Simple: The greatest possible interest a person can have in real estate, continuing forever. Includes the right to dispose of the property or pass it on to one's heirs.
Finance Charge: A term defined in the federal Truth-in-Lending Act, which generally includes all charges payable as an incident to the extension of a loan.
First Mortgage: A mortgage that gives the mortgagee a security right over all other mortgages of the mortgaged property.
Fixed Rate Mortgage: A mortgage in which the interest rate and payments remain the same for the life of the loan.
Fixture: Personal property that becomes real property upon being attached to real estate.
Floating Rate Loan: A loan originated without a firm commitment to the borrower, thereby closing at the market rate.
Flood Plain: Those lands subject to flooding when a stream or river is at flood stage.
Floor: The lowest the rate can ever go for the life of the loan.
Floor Plan: Scale architectural drawings showing details of floor design and layout.
Forbearance: The act of refraining from taking legal action despite the fact that the mortgage is in arrears. It is usually granted only when a mortgagor makes satisfactory arrangements to pay the amount owed at a future date.
Foreclosure: A legal procedure in which a mortgaged property is sold to pay the outstanding debt in case of default.
Front End Ratio: Housing expense which includes the principal, interest, taxes, insurance, mortgage insurance and any homeowner's association fees.
Funding: Payment of money be lenders for a mortgage loan settlement, or the receipt of money by lenders from investors that purchase mortgages.
Garnishment: A notice to an employer or other asset holder that moneys, wages or property of a debtor must be applied to a specific debt or creditor.
Grace Period: A period of time after an obligation is due during which a borrower can perform without incurring a penalty and without being considered in default.
Guarantee: In mortgage banking, the interest rate lock that lenders offer borrowers.
Hazard Insurance: Insurance coverage which provides compensation to the insured in case of property loss or damage.
Highest and Best Use: The use of land which will bring the greatest return.
Home Equity Loan: An open-end loan, usually recorded as a second mortgage, that permits borrowers to obtain cash advances based on an approved line of credit.
Homeowner's Policy: A multiple peril insurance policy available to owners of private dwellings which covers the dwelling and its contents, as well as personal liability.
Improved Land: Land having utilities, roads or other improvements.
Improvements: Additions to raw land that normally increase its value, such as buildings, streets and sewers.
Income and Expense Statement: The actual or estimated schedule of income and expense items reflecting net gain or loss during a specified period.
Income Approach to Value: The appraisal technique used to estimate real property value by capitalizing net income.
Income/Expense Ratio: A qualifying ratio used in underwriting a residential mortgage loan that computes the percentage of monthly income required to meet the monthly housing expense.
Income Limits: Income restrictions established for low to moderate income persons to qualify for admission into subsidized housing programs. The limits are established by law and are based on family size and geographic location.
Income Property: Real Estate developed or improved to produce income.
Index: A published interest rate, such as the prime rate, LIBOR, or Treasury bill rate. Lenders use indexes to establish interest rates charged on mortgages. On ARMs, a predetermined margin is added to the index to compute the interest rate adjustment.
Ingress and Egress: The right to enter and exit land.
Initial Closing: The date on which a construction lender funds a construction loan.
Inspection Certification: A document verifying that a property is as described.
Installment: The periodic payment that a borrower agrees to pay a mortgage lender.
Insured Closing Letter: A document issued by a title insurance company which protects a mortgagee against embezzlement or failure to follow specific closing instructions.
Interest: consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share, or title in property.
Interim Financing: Financing used from the beginning of a project to the closing of a permanent loan. Usually a construction or development loan.
Joint Tenancy: Form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship.
Judgment: Final determination by a court of the rights and claims of the parties to an action.
Judgment Lien: Lien upon the property of a debtor resulting from a decree of the court.
Judicial Foreclosure: Type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
Jumbo Loan: A mortgage that is larger than the legislated purchase limits of Fannie Mae and Freddie Mac.
Junior Mortgage: An obligation, such as a second mortgage, that is subordinate in right or lien priority to an existing lien on the same realty. A mortgage of lesser than first-lien priority.
Land Contract: An agreement to transfer title to a property once conditions of the contract have been fulfilled.
Late Charge: An additional charge that a borrower is required to pay as a penalty for failure to pay a regular installment when due.
Lease: A written document containing the conditions under which the possession and use of real and/or personal property are given by the owner to another for a stated period and consideration.
Lease-Purchase: A method of acquiring ownership of real estate through gradual payments under which a lease is substituted for a mortgage obligation. Also referred to as a lease with option to purchase.
Leasehold: An estate or interest in real property held by virtue of a lease.
Legal Description: A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.
Letter of Intent: A formal letter stating that a buyer or developer is interested in a property. The letter creates no legal obligation.
Lien: A legal hold or claim of a creditor on the property of another as security for a debt. Liens are always against property, usually real property.
Lien Waiver: A waiver of mechanic's lien rights. A document signed by a supplier or subcontractor stating that the firm has been compensated for its work, thereby giving up its right to file a claim against the property.
Limited Partnership: A form of business ownership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.
Line of Credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain period of time to a specific borrower.
Liquidity: The ability to readily convert assets or investments to cash.
Listing: A written authorization for an agent to sell or lease real estate.
Loan Administration: A mortgage banking function which includes the receipt of payments, customer service, escrow administration, investor accounting, collections and foreclosures. Also called Loan Servicing.
Loan Fee: A fee charged a borrower by a lender for negotiating a loan; sometimes used in reference to an additional fee over and above the origination fee.
Loan Submission: A package of pertinent papers and documents regarding a specific property or properties, delivered to a prospective lender to obtain financing.
Lock-In Period: The period of time during which a lender guarantees a borrower a specific interest rate on a mortgage.
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 insured property.
Lot: A measured parcel of land having fixed boundaries as shown on the recorded plat.
Manufactured Home: Factory build or pre-fabricated housing, including mobile homes.
Margin: The spread between the index and the mortgage interest rate.
Market Approach to Value: In appraisal, a market value estimate of property based on actual prices paid in similar market transactions.
Market Rent: The price a tenant pays a landlord for the use and occupancy of real property based on current prices for comparable properties.
Market Value: The most probable price a property would bring in an arm's length transaction under normal conditions on the open market.
Marketable Title: A title that may not be completely clear, but has only minor objections that a well-informed and prudent buyer of real estate would accept.
Maturity: The date on which an agreement expires; termination of a mortgage note.
Mechanic's Lien: A claim created by law to secure priority of payment for work performed and materials provided by a vendor. Land may be attached as well as buildings, equipment or other property.
Metes and Bounds: A description of a parcel of land in a deed which the boundaries are defined by directions and distances.
Mobile Home: A factory assembled residence consisting of one or more modules, in which a chassis and wheels are an integral part of the structure, and can be readied for occupancy without removing the chassis and/or wheels.
Modular Home: A factory assembled residence built in units or sections, transported to a permanent site and erected on a foundation. Excludes mobile homes.
Mortgage: A pledge of property, especially real property, as security for a debt. by extension, the document evidencing the pledge. The document may contain the terms of repayment of the debt.
Mortgage Banker: An individual, firm or corporation that originates, sells and/or services loans secured by mortgages on real property.
Mortgage Broker: A firm or individual who matches borrowers and lenders. A mortgage broker does not retain servicing.
Mortgage Commitment: An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term and amount.
Mortgage Life Insurance: Term life insurance paid by the borrower in which the amount of coverage decreases as the mortgage balance declines. In the event the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.
Mortgage Note: A written promise to pay a sum of money at a stated interest rate during a specified time. A mortgage note is secured by a mortgage.
Multifamily Mortgage: A mortgage on a dwelling that is designed to house more than four families.
Negative Amortization: The unpaid interest which is added to the mortgage principal in a loan where the principal balance increases rather than decreases because the mortgage payments do not cover the full amount of interest due.
Negative Cash Flow: The deficit that is created when expenditures required to maintain an investment exceed income received on the property.
Net Operating Income: The amount remaining after total operating expenses (excluding interest payments) are deducted from effective gross income.
Net Worth: The value of all assets, including cash, less total liabilities. Often used as an underwriting guideline to indicate creditworthiness and financial strength.
Nominal Interest Rate: The stated rate of interest in a loan agreement.
Non-Conforming Mortgage Loan: A mortgage loan in which the loan amount, the LTV, the term or some other aspect of the loan exceeds permissible limits as specified in the regulations for conforming mortgage loans.
Non-Conforming Use: A permitted use of real property that does not conform to current zoning laws because it was lawfully established before the current zoning laws were in effect.
Note: A general term for any kind of paper or document signed by a borrower that is an acknowledgment of the debt, and is, by inference, a promise to pay. When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee.
Notice of Default: Notice recorded after a default under a deed of trust or mortgage.
Obsolescence: Loss of value resulting from outmoded physical features, technical advances or economic influences.
Occupancy Rate: The percentage of space or units that are leased or occupied.
Offer: The price asked by a seller of securities. Asking Price.
Open-End Mortgage: A mortgage with a provision that the outstanding loan amount may be increased upon mutual agreement of the lender and the borrower.