Finance Terms

Front 1

Acceleration Clause

Back 1

A clause in a loan document that would case the entire loan to be due

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ARM

Back 2

loan whose interest rate is periodically adjusted according to the terms of the promissory note

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adjustment period

Back 3

period between rate changes on an adjustable rate mortgage

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alienation clause

Back 4

clause giving the lender certain rights in the event of the sale or transfer of a mortgaged property

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assumption clause

Back 5

clause in loan contracts that allows a buyer to take over the existing loan from the seller and become liable for repayment of the loan

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back ratio

Back 6

percentage of income needed to pay for all recurring debt

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bare legal title

Back 7

refers to the title held by a trustee to a trust deed

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blanket loan

Back 8

loan often used in construction financing

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capital market

Back 9

market in which long-term or intermediate-term securities are traded

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closed-end loan

Back 10

loan in which the borrower receives all loan proceeds in one lump sum at the time of closing

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Collateralized Mortgage Obligation (CMO)

Back 11

type of mortgage-backed security in which the mortgages are put into separate pools with varying degrees of risk and maturities

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conforming loan

Back 12

loan with terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac

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constructive notice

Back 13

knowledge of a fact that is a matter of public record

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conventional loan

Back 14

any loan without government insurance or guarantees

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debt-to-income ratio

Back 15

percentage of a consumer's monthly gross income that goes toward paying debts

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deed of reconveyance

Back 16

document used to transfer legal title from the trustee back to the borrower after a debt secured by a deed of trust has been paid to the lender

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deficiency judgment

Back 17

judgment against a borrower for the balance of a debt owed when the security for the loan is not sufficient to pay the debt

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Equitable right of redemption

Back 18

right of a debtor before a foreclosure sale to reclaim property that had been given up due to mortgage default

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equitable title

Back 19

right to obtain absolute ownership to property when legal title is held in another's name

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foreclosure with power of sale

Back 20

forced sale when property is sold to satisy a debt secured by a trust deed or mortgage where the security instrument allows the property to be sold at auction by a trustee or mortgagee

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front ratio

Back 21

percentage of a borrower's monthly gross income that is used to pay the monthly housing expense

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fully amortized note

Back 22

note that is fully repaid at maturity through periodic reduction of the principal

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good faith estimate

Back 23

when homebuyer applies for a mortgage loan, lender must give the buyer a good faith estimate of settlement costs

Front 24

graduated payment mortgage

Back 24

loan in which the monthly payment graduates by a certain percentage each year for a specific number of years, then levels off for the remaining term

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hard money loan

Back 25

loan that takes cash out of a property

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HELOC

Back 26

Home Equity Line of Credit- form of revolving credit in which a borrower's home serves as collateral

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hypothecation

Back 27

to pledge property as security for a debt without actually giving possession or title

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intermediate title theory

Back 28

some stays say mortgage is a lien unless the borrower defaults.

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loan package

Back 29

file of documents the lender needs to determine whether to fund a loan

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loan portfolio

Back 30

set of loans that a financial institution, or other lender, holds at any given time

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loan-to-value (LTV)

Back 31

ratio of the amount borrowed to the appraised value or sales price of a parcel of real property, generally expressed as a percentage

Front 32

margin

Back 32

in an adjustable rate loan, amount added to the index rate that represents the lender's cost of doing business

Front 33

mortgage

Back 33

use of property as security for the payment of a debt, also the document used to establish a mortgage lien

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mortgage banker

Back 34

lender who originates new mortgage loans and services and sells existing loans in the secondary mortgage market

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mortgage broker

Back 35

person who brings borrowers and lenders together

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NOI

Back 36

annual gross income of a investment, less operating expenses

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non-conforming loan

Back 37

loan that does not meet the Fannie Mae or Freddie Mac lending guidelines

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novation

Back 38

substitution of a new obligation for an old one; substation of new parties to an existing obligation, as where the parties to an agreement accept a new debtor in place of an old one

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open end loan

Back 39

loan that is expandable by increments up to a certain amount

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or more clause

Back 40

clause in a promissory note that allows a borrower to pay it off early with no penatly

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package loan

Back 41

loan on real property that can be secured by land, structure, or personal property

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partially amortized installment note

Back 42

promissory note with a repayment schedule that is not sufficient to pay off the loan over its term. At maturity, the remaining principal balance is due in full.

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pledge account

Back 43

transfer of property to a lender to be held as security for repayment of a debt.

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power of sale

Back 44

clause in a trust deed or mortgage that gives the mortgage holder the right to sell the property in the event of default of the borrower

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prepayment clause

Back 45

clause in a trust deed that allows a lender to collect a certain percentage of a own as a penalty for an early payoff

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purchase money loan

Back 46

loan used to purchase real property

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RESPA

Back 47

ensures buyer and seller have knowledge of all settlement costs when the purchase of one-to-four family residential dwelling is financed by a federally related mortgage loan.

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Reverse annuity mortgage

Back 48

A loan that enables elderly homeowners to borrow against the equity in their homes by receiving monthly payments from a lender to help meet living costs.

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rollover mortgage

Back 49

loan that allows the rewriting of a new loan at the termination of a prior loan

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shared appreciation mortgage

Back 50

mortgage in which the lender and borrower agree to share a certain percentage of the increase in market value of the property.

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statute of limitations

Back 51

a statute limiting the period of time during which legal action may be taken on a certain issue

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satutory foreclosure

Back 52

legal process of terminating a debtor's right to a property as a result of default on a mortgage or other lien

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strict foreclosure

Back 53

foreclosure proceeding in which the debtor has a limited amount of time, once appropriate notice has been given, to repay the debt before their equitable and statutory redemption rights are waived and full legal title to the property is granted to the lender

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subject to clause

Back 54

clause in a security instrument that states the buyer will take over payments on an existing loan, but assumes no personal liability for the loan

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takeout financing

Back 55

long term, permanent loan used primarily in construction financing

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Third party originators (TPOs)

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those who originate but do not underwrite or fund loans

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Thrift

Back 57

organization formed to hold deposits for indivuduals

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title

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evidence of the ownership of land, publicly recorded in the county where the property is located

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title theory

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lender has the title to a mortgaged property until the loan is fully repaid. Borrower holds equitable title

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trust deed

Back 60

written security instrument that legally conveys property to a trustee.

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Vendee

Back 61

buyer under a contract of sale

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Vendor

Back 62

seller under a contract of sale

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warehouse line

Back 63

revolving line of credit extended to a mortgage company from a warehouse lender to make loans to borrowers

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warehousing

Back 64

process of assembling a number of mortgage loans into one package and holding them for a period of time prior to selling them to an investor

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wraparound mortgage

Back 65

method of financing in which a new loan is placed in a secondary position. New loan includes both the unpaid principal balance of the first loan and whatever sums are loaned by the lender. Also known as an all-inclusive trust deed.