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11/15/2010
A New Asset Class?The nation’s unprecedented housing distress has created new opportunities in the residential mortgage securities market. Residential mortgage investments have always been a component of diversified investment portfolios until now.[More] |
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Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Adjustable Rate Mortgage: (ARM). Also know as a variable rate mortgage. A mortgage where the interest rate will adjust based on changes in a preselected index.
Amortized Mortgage: A mortgage loan where the periodic payments include a portion being applied to the accruing interest on the loan, and the remainder being applied to the principal. As the loan balance decreases, the interest portion will decrease and the amount applied to principal will increase resulting in the loan paying off in the specified time.
Appraisal: An in depth opinion of a property’s value by a recognized industry expert who is licensed as an appraiser. Value is determined primarily by analyzing the sales of nearby similar properties.
Assignment: A document that transfers the beneficial interest in a Note and Deed of Trust or Mortgage. When ownership is transferred, it is referred to as an assignment.
AVM: Automated Valuation Model. Used to determine the value of a property using statistical data.
Balloon: A final payment due on a loan where the periodic payments did not satisfy the debt. It is the final payment due at the end of a balloon mortgage where the remaining principal must be paid at the end of a specified time.
Bankruptcy: A legal proceeding where a debtor is allowed to discharge obligations without paying the full amount due. It does not normally discharge obligations secured by a Deed of Trust or Mortgage, but it may. By filing in federal bankruptcy court individuals can restructure certain liabilities.
Bankruptcy Relief of Stay: The act of getting a bankruptcy discharged, usually so a foreclosure can proceed. An attorney will appear before the bankruptcy judge on behalf of a lender to get at least the lender’s loan discharged or removed from the bankruptcy procedures.
Beneficiary: The entity, also known as a Lender or Investor, to whom an obligation is owed.
Bid Authorization: A written notice from a beneficiary authorizing and designating the opening bid at a Trustee or Sheriff’s Sale.
BPO: See Broker’s Price Opinion.
Bridge Loan: A short term loan secured by real estate used to satisfy immediate fund needs before a more permanent loan is obtained. Often used by those who are purchasing a new property, but have not yet sold their previous property and need a bridge loan for the new purchase down payment.
Broker: In the real estate industry a Broker is usually licensed and authorized to arrange loans, sell properties, and service loans. A Realtor is referred to usually as an Agent who works under a Broker. A Broker in the mortgage industry arranges loans that are funded by other lenders.
Broker’s Price Opinion: Also BPO. An opinion of a property’s sale value from a licensed real estate agent or broker.
Cancellation of Notice of Sale: A recorded document that removes the effect of a previously recorded Notice of Trustee’s Sale. This is in reference to a non judicial foreclosure proceeding.
Closing: Also called a Settlement or an Escrow in some states. Refers to a meeting between the buyer, seller, lender and/or agents where the funds and the ownership of a property are exchanged. Also refers to a settlement service that handles the final procedures in the closing of a loan. In some states a loan may not be officially closed until the relevant documents are recorded.
Collateral: Security, commonly real estate, in addition to the personal obligation of the borrower. If the loan is not repaid according to the terms of the agreement, the borrower may lose the property.
Commercial Broker: In the mortgage industry, a licensed lender who specializes in commercial real estate transactions.
Conventional Loan: Refers to any loan not related to a GSE (government sponsored agency) or a government agency (VA, FHA).
Deed In Lieu: Refers to taking a deed in lieu of foreclosure. The deed to a property given by the borrower to the lender usually to stop a foreclosure. The lender may or may not accept a deed in lieu, and the non payment of the debt may still be listed on the borrower’s credit report.
Deed of Trust: A document identifying real property that is given as security for the repayment of an obligation. Is essentially the same as a mortgage, and is used in certain states.
Default: In real estate it is the failure to perform according to the terms of the commitment. Basically refers to the failure to make mortgage payments when they are due. A loan is considered in default when the payment is 30 days past due.
Document Signup Service: Authorized agents who bring loan closing documents directly to the principals for signature. Is used by closing services so the participants in a transaction can easily sign the related documents at a place that is convenient.
Down Payment: That portion of a loan which the borrower pays from his own funds, reducing the amount of the loan. It is the portion of the purchase price that is not financed.
Due Diligence: In real estate the process of examining data related to a loan and its collateral. It could include researching public records concerning the current ownership of a loan or property, any liens or encumbrances on the property, as well as determining the current market value of collateral.
Endorsement: A document with additional terms that is made part of a title policy.
Equity: The market value of a property minus existing liens against it. It is the owner’s financial interest in a property.
Escrow: Also known as a Closing in some states, is a third party settlement service that handles the closing of a loan. Money is held by the third party and delivered to the seller when related documents are signed. Escrow may also refer to an escrow account.
Escrow Account: Also referred to as Impounds in some states. Refers to the amount paid by the borrower beyond principal and interest and held in an impound or escrow account. Money is used most commonly for the payment of property taxes and hazard insurance on their respective due dates.
Extension Agreement: A document that extends the due date of a loan.
Fannie Mae: See Federal National Mortgage Association.
Federal Discount Rate: The interest rate paid by member banks to borrower from the federal reserve banks.
Federal Home Loan Mortgage Corporation: FHLMC. A federal agency that purchases conventional mortgages from mortgage bankers and insured depositories.
Federal National Mortgage Association: FNMA. A private organization with government supports that purchases and sells conventional, FHA and VA mortgages. Is congressionally chartered but shareholder owned.
FHA: Federal Housing Administration. An agency of HUD (U.S. Department of Housing and Urban Development) that insures residential first mortgages made by private lenders.
FHLMC: See Federal Home Loan Mortgage Corporation.
Fixed Rate Mortgage: A mortgage loan where the interest rate stays constant for the life of the loan.
FNMA: See Federal National Mortgage Association.
Forbearance Agreement: An agreement reached between a borrower and lender during a foreclosure process that adjusts the payment schedule on a loan for a period of time. The foreclosure process is put on hold for this period of time and will be cancelled if the obligations are met.
Foreclosure: The procedure used to enforce a creditor’s rights when there is a default on an obligation secured by a Deed of Trust or Mortgage. This is a legal process where the borrower will lose his interest in the property through a forced sale with the proceeds applied to the debt owed.
Foreclosure Redemption: Generally refers to the I.R.S. right to redeem a property for 120 days after a foreclosure sale.
Foreclosure Sale: The final step in the foreclosure process of a judicial or non judicial foreclosure. The auction of a property with the proceeds going first to satisfy the related debt. A Trustee’s Deed or Sheiff’s Deed will be issued to the successful bidder.
Freddie Mac: See Federal Home Loan Mortgage Corporation.
Full Reconveyance: A document, when recorded, that eliminates all liens from the title of a property when an obligation secured by a Deed of Trust or mortgage is paid off.
Ginnie Mae: GNMA, Guaranteed National Mortgage Association. A federal agency under HUD (U.S. Department of Housing and Urban Development). Provides funds to lenders for government loans (FHA, VA) only.
GSE: Government Sponsored Entities.
Guarantor: The entity making a guaranty.
Guaranty: An agreement to pay the debt when there has been a failure to pay the debt.
Hard Money: The cash given from a loan secured primarily by the value of the collateral, usually real estate. It is a specific type of Private Money since the source of the cash is usually private individuals.
Hard Money Lender: A Broker or lender who specializes in Hard Money loans.
Hard Money Loan: A loan made based primarily on the value of the collateral, usually real estate. The loan will be easier to obtain, require less documentation, but have a higher interest rate. See PrideCo Hard Money Loans.
Hazard Insurance: Also referred to as property insurance. In real estate refers to insurance on a property to protect the insured (the lender) from losses due to specific damage such as fire.
HELOC: Home equity line of credit. A normally junior position mortgage loan that allows the borrower to get cash against the equity of his property up to a predetermined amount.
Income Property: A property which is not totally owner occupied and produces income, usually in the form of rents.
Interim Financing: A short term loan made to complete a construction project. It is usually followed by a permanent or take out loan after completion of the project.
Investor: The person supplying the money for a particular venture or investment. In real estate this is the lender.
Judicial Foreclosure: A foreclosure proceeding done entirely through the courts as a civil lawsuit. Process would be handled by an attorney. Some states will use the judicial foreclosure process, and other states will use the non-judicial foreclosure process.
Junior Lien: A legal claim recorded subsequent to another legal claim upon the same property. A junior lien may be in second, third, or greater position behind a senior lien.
Letter of Intent: A non binding statement of interest usually in a property or project.
LIBOR: London Interbank Offered Rate. The rate banks pay to borrow funds in the London interbank system.
Lien: An encumbrance on real property for money owed. It is a legal claim against a property such as a mortgage.
Loan Modification: An adjustment to the original terms of a loan. A borrower and lender often agree to modify the terms of a loan to avoid the foreclosure process when the borrower is having difficulties making payment under the current terms.
Loss Mitigation: Actions taken to reduce losses on a delinquent loan using a variety of loan workout alternatives to foreclosure. Most common actions include repayment plans, modification agreements, and forbearance agreements.
Loan Servicing: The sending of statements, processing of loan payments, collection efforts on delinquent loans, and the handling of the default process on loans.
Loan Servicer: The entity that handles loan servicing. Typically an independent party, but could be the lender on a loan.
LTV: Loan to Value ratio. The relationship of the value of real property to the amount owed, expressed in a percentage. A higher LTV means the borrower has less equity in the property.
LTC: Loan to Cost ratio. The relationship of the cost of real property to the amount owed, expressed in a percentage. A higher LTC means the borrower has less equity in the property.
Manufactured Homes: Homes that are primarily pre assembled rather than on site constructed. Considered a type of single family home (SFR) as is a site built home.
Marketable Title: Title on a property that is considered by a prudent buyer to be free of encumbrances and other issues. Marketable title is necessary for a property to be sold.
Market Price: The selling price of a property in a specific market.
Market Value: The highest price a willing buyer would pay and the lowest price a willing seller would accept for a specific property at a given time. Officially determined by a licensed appraiser. May not be the same as the sales price.
Mortgage: The instrument by which real estate is used as security for the repayment of a loan. Pledges a property to a lender as security for repayment of a debt. The equivalent of a Trust Deed in some states.
Mortgage Banker: An individual or company that originates and funds loans. The loans may be kept or resold to the secondary market such as FNMA, FHMC, or private individuals.
Mortgage Broker: An individual or company that originates loans which are placed with a variety of other lenders per established agreements.
Mortgagee: The lender or investor.
Mortgage Insurance: Insurance that protects a lender against some the losses incurred if there is a default on a mortgage loan. High LTV loans (over 80%) usually require MI.
Mortgagor: The borrower.
Non conforming loan: Refers to any loan that would not normally be made by a regulated institution such as a bank.
Non Judicial Foreclosure: A foreclosure done by a trustee exercising the power of sale clause in a deed of trust or mortgage, rather than through the courts. Some states will use the judicial foreclosure process, and other states will use the non-judicial foreclosure process.
Notary Public: A person authorized by the state or federal government to verify the authenticity of documents or signatures.
Notice of Default: A formal written notice to a borrower that an obligation is in default and legal action may be taken if the terms of the obligation are not met.
Notice of Sale: Notice of pending foreclosure sale that is posted and published.
Notice of Trustee’s Sale: In a non judicial foreclosure process, a recorded, published and posted document that sets a specific date, time and place for a Trustee’s Sale.
Partial Reconveyance: A document, when recorded, that eliminates a lien, but not all liens, from the title of a property when an obligation secured by a Deed of Trust or mortgage is paid off.
Posting and Publishing: The acts of posting a property with notice and publishing the same notice.
Postponement: The act of delaying a scheduled foreclosure sale. It is announced at the time and location of the sale.
Preliminary Title Report: A title company’s offer to issue a policy of title insurance. Reflects what the policy would look like.
Prepayment Penalty: A fee charged when a loan is paid off before its due date. Used to compensate the lender for not getting the profits from continued interest payments. Prepayment penalties are subject to regulations by loan type and amount.
Pre-Publication Period: Generally (varies by state) the period of time during a non judicial foreclosure process before publication of a Notice of Sale or before a Foreclosure Sale when a borrower can reinstate a delinquent loan.
Principal: In real estate refers to the amount of a loan, not including interest. The part of the borrower’s monthly payment that reduces the remaining balance of a loan.
Principal Balance: The remaining amount of a loan, not including interest, at a particular time.
Private Money: Money that comes from private sources, usually individuals. Private money loans are typically based on the value of the securing property and have low LTVs. See Private Lending.
Promissory Note: A document signed by a borrower promising to pay a specific amount during a defined period of time to a lender.
Property Management: Refers to maintaining the good physical condition of a property, and could include managing rentals and collecting rents.
Publication Letter: In the non judicial foreclosure process, a letter signed by the beneficiary instructing the trustee to file the Notice of Trustee’s Sale.
Publication Period: Generally the period of time during a non judicial foreclosure process when a Trustee publishes the Notice of Trustee’s sale in a newspaper in the county where the property is located, and posts the Notice on the property and at the specified county courthouse.
Quitclaim Deed: A deed that releases without warranty any interest in a property at the time of conveyance.
Raw Land: Natural land which has not been subdivided into lots or had any improvements made to it.
Receivership: The process where the court appoints a person to take control of a property. Normally used when the borrower is not making scheduled payments to the lender on income property.
Reconveyance: A document, when recorded, that eliminates a lien from the title of a property when an obligation secured by a Deed of Trust or mortgage is paid off. Could be a partial or full reconveyance.
Redemption: See Right of Redemption.
Redemption Period: The period of time a borrower has in certain states to redeem a property after the Trustee or Sherriff’s Sale.
Reinstatement Period: Generally the period of time during a non judicial foreclosure process between the recorded start of a foreclosure and the foreclosure sale date, or a time shortly before the sale date, when the borrower can cure the default by paying all delinquent amounts owed.
REIT: Real Estate Investment Trust. A structure used to invest in real estate as a group.
Release: A document, when recorded, that eliminates the lien from the title of a property when an obligation secured by a Mortgage is paid off.
Relief of Stay: See Bankruptcy Relief of Stay.
REO: Real Estate Owned. Refers to property held by a lender and usually obtained through foreclosure. Also known as OREO: Other Real Estate Owned. REO properties are often distress and are typically sold for less. An abundance of REO’s can depress values in a particular area.
Rescission of a Notice of Default: In a non judicial foreclosure process, when recorded this document removes the effect of the previously recorded Notice of Default.
RESPA: Real Estate Settlement Procedures Act. A Federal consumer protection law. Among other things it mandates disclosing to consumers the settlement costs after a loan application is made. Also requires specific notification to borrowers of a change in loan servicers.
Right of Redemption: The right of the borrower to redeem the property for a period of time after the Trustee or Sherriff’s foreclosure sale.
Seller Carry Back: Refers to the sale of a property wherein the owner provides all or part of the financing to the buyer.
Servicing: See Loan Servicing.
Sherriff’s Deed: A deed that transfers ownership of real property to the successful bidder at a foreclosure sale. The final stage of a judicial foreclosure is the issuing and recording of the Sherriff’s Deed.
Statement of Breach: A statement done during the non judicial foreclosure process along with a Notice of Trustee’s Sale, that a breach has occurred and describing the nature of the breach and setting forth the beneficiary’s election to exercise his right to sell the property.
Subordination Agreement: An agreement that makes a loan subject to another encumbrance. A senior loan may subordinate to another loan and thus become a junior loan.
Substitution of Trustee: A document where the beneficiary designates a successor trustee to the trustee of record. Usually the first step in the non judicial foreclosure process.
Tax Lien: A lien placed against a property for the non payment of real estate taxes. It is usually senior to other private liens.
Title: Evidence that an entity has the right to ownership of property.
Trustee: The entity that hold title to real property in trust for the benefit of another entity.
Trustee’s Deed Upon Sale: A deed that transfers ownership of real property to the successful bidder at a Trustee’s Sale. The final stage in a non judicial foreclosure is the issuing and recording of the Trustee’s Deed Upon Sale. See PrideCo's Products & Services
Trustee’s Sale: During the non judicial foreclosure process, a public auction of a property open to all qualified bidders.
Trustee’s Sale Guarantee: A title policy that provides and guarantees information needed to process a Trustee’s Sale. A specific title policy purchased at the beginning of a non judicial foreclosure process to insure information needed to process the foreclosure.
Trustee Sales Officer: The person employed by a trustee that is in charge of handling the non judicial foreclosure process.
Trustor: The borrower on a Deed of Trust.
TSG: See Trustee’s Sale Guarantee.
TSO: See Trustee Sales Officer.
Unlawful Detainer: The process used to obtain possession of foreclosed properties. Commonly referred to as an eviction.
Valuation: In real estate refers to the value of a property based on its sale price at a particular time. Value could be determined by a licensed appraiser, or by obtaining a real estate broker’s price opinion (BPO).
Variable Rate Mortgage: See Adjustable Rate Mortgage.
Workout: In real estate refers to modifying or changing the terms of a loan to get a delinquent borrower making regular payments. See Loan Modification.