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256 Cards in this Set
- Front
- Back
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5/1 ARM
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A common type of adjustable rate mortgage with an introductory fixed rate period of five years followed by an annually-adjusted interest rate for the life of the mortgage.
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absolute assignment of rents
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A present transfer of all the owner's rights, title and interest in the rents generated by the real estate. Compare with conditional assignment of rents.
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acceleration
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A demand for immediate payment of all amounts remaining unpaid on a loan or extension of credit by a mortgage lender or carryback seller.
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accrual note
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An installment note calling for payments to be credited first to accrued interest with the remainder to principal.
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add-on note
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A note in which interest is charged on the original loan amount for the entire term of the loan, then added to the original loan amount to set the total amount of principal and interest to be paid over the life of the note, payable in equal monthly installments.
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adhesion contract
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An agreement in which one party has dramatically superior bargaining strength, forcing the weaker party to either accept or reject all the agreement's stated terms, a dynamic present to some degree in all lender/borrower relationships.
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adjustable rate mortgage (ARM)
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A variable interest rate note, often starting out with an introductory teaser rate, only to reset at a much higher rate in a few months or years based on a particular index.
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adjustment interval
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The predetermined period of time after which the interest rate and payment amount on an adjustable rate mortgage (ARM) or other variable rate mortgage is recast.
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affirmative duty
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An agent's obligation to voluntarily undertake an advisory activity when in a fiduciary relationship.
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alienation clause
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A trust deed clause limiting the rights of the owner of the mortgaged property to freely transfer their interest in the property by sale, lease or further encumbrance.
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all-inclusive trust deed (AITD) note
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A note entered into by the buyer in favor of the seller to evidence the amount remaining due on the purchase price after deducting the down payment, an amount inclusive of any specified mortgage debts remaining of record with the seller retaining responsibility for their payment. Also referred to as a wraparound mortgage or overriding mortgage.
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allonge
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An attachment to a note occurring between preparation of the note and closing the transaction providing information necessary to update entries on the note at the time it becomes effective.
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antideficiency
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A limitation placed on a mortgage lender's ability to recover losses on default when the secured property's value is insufficient to satisfy the mortgage debt.
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anti-deficiency law
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California legislation limiting a mortgage holder's ability to recover losses on a default when the mortgaged property's value is insufficient to satisfy the mortgage debt.
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applicable federal rate (AFR)
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Rates set by the Internal Revenue Service for carryback sellers to impute and report income at the minimum interest when the note rate on the carryback debt is a lesser rate.
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assignment
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1) A transfer to another of a person's right under a contract such as a mortgage, lease, purchase agreement or option. 2) A tenant's transfer of possessory rights to another.
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assignment of rents provision
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A trust deed clause which creates a lien on unpaid rents as additional security to the real estate described in the trust deed.
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assumption agreement
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A promise given by a buyer to the seller or an existing mortgage holder to perform all the terms of the mortgage taken over by the buyer on the sale.
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average prime offer rate
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An annual percentage mortgage interest rate derived from average interest rates, points and other pricing terms offered by lenders on consumer mortgages which have low-risk pricing characteristics and are used to fund a higher-priced mortgage loan. These rates are published weekly by the Consumer Financial Protection Bureau (CFPB).
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balance sheet
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An itemized, dollar-value presentation for setting an individual's net worth by subtracting debt obligations (liabilities) from asset values.
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balloon-payment qualified mortgage
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A type of qualified mortgage (QM) under Regulation Z (Reg Z) which allows small community mortgage lenders in rural or underserved areas to include a balloon feature.
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beneficiary
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One entitled to the benefits of properties held in a trust or estate, with title vested in a trustee or executor.
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beneficiary statement
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A document issued by a mortgage holder on request noting future payment schedules, interest rates and balances on a mortgage assumed by an equity purchase (EP) investor.
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bill of sale
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A written instrument given to pass title of personal property from vendor to the vendee. Compare with a grant deed.
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blanket mortgage
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A mortgage which is secured by two or more parcels of real property.
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bona fide purchaser (BFP)
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A buyer who purchases a property for valuable consideration in good faith without notice or knowledge of pre-existing encumbrances or conditions affecting their right to full ownership.
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business mortgage
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A debt incurred for other than personal, family or household (consumer) purposes and secured by any type of real estate.
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buyer mortgage capacity
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A buyer's ability to make mortgage payments based on their debt-to-income ratios (DTI).
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buyer-seller assumption agreement
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A promise given by the buyer to the seller to perform all the terms of a mortgage taken over by the buyer on the property purchased.
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call
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A lender's demand for the balance of the loan to be immediately paid in full.
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call provision
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A provision in a note giving the mortgage holder the right to demand full payment at any time or after a specified time or event, also called an acceleration clause.
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carryback mortgage
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A note and trust deed executed by a buyer of real estate in favor of the seller for the unpaid portion of the sales price on closing, also known as an installment sale, credit sale or seller financing.
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carryover provision
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An adjustable rate note provision allowing the lender to apply any margin exceeding a periodic rate cap on a given adjustment to the next scheduled rate adjustment.
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cash collateral
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In Chapter 11 Bankruptcy, cash or cash equivalents from the sale of property in which the lender has an interest.
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certificate of sale
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A certificate issued to the successful bidder on the completion of a judicial sale of a property.
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collateral assignment
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An agreement providing additional, cumulative and concurrent security for a debt, in the form of personal property, to additionally secure the property owner's performance under the debt.
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comparative advantage
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The advantage a person who produces a product at a greater margin of profit has over a competitor.
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compensation
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Any financial or economic incentive, including salaries, fees or commissions for rendering a service.
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compounding
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The adding of accrued and unpaid interest to principal which thereafter accrues interest as principal at the note rate.
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compounding on default
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An interest provision triggered by a delinquency in a payment causing interest to accrue on the amount of interest contained in the delinquent installment at the note rate until the delinquent payment is paid, a type of late charge.
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computation period
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For impound account analysis, the 12-month period beginning on the date of the initial impound deposit during which monthly deposits, disbursements and any applicable interest occur.
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conditional assignment of rents
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A trust deed provision which creates a lien on all rents in favor of the lender. The rents become additional security to the real estate which is also liened by the trust deed. Compare with absolute assignment of rents.
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conforming loan
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A conventional mortgage with terms, conditions and a maximum principal amount set by Fannie Mae and Freddie Mac, excluding FHA/VA or other government-insured mortgages.
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consumer mortgage
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A debt incurred primarily for personal, family, or household purposes and secured by a parcel of real estate containing one-to-four residential units.
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conventional financing
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A mortgage securing a loan made by institutional lenders without governmental underwriting, i.e., which is not FHA insured or VA guaranteed.
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cost basis
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The cost incurred to acquire and improve an asset subject to adjustments for destruction and depreciation, used primarily for tax reporting and recovery of capital.
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cost of funds
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The interest rate a lender pays on money it uses to fund loans.
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cramdown
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The reduction by forgiveness or bankruptcy order of the principal balance of a loan when the debt exceeds the value of the secured property.
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creditworthiness
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An individual's ability to borrow money, determined by their present income, wealth and previous debt payment history.
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cross-collateralization
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The use of one trust deed to describe multiple parcels of real estate or a UCC-1 financing statement encumbering personal property together with a trust deed as additional security for payment of a debt.
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dealer property
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Real estate held for sale to customers in the ordinary course of an owner's trade or business, where the earnings on the sales of the properties are taxed as business inventory at ordinary income rates.
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debt service
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The amount of principal and interest paid on a debt periodically, also referred to as the loan payment amount.
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debt-to-income ratio (DTI)
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Percentage of monthly gross income that goes towards paying debt.
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Declaration of Default and Demand for Sale
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A document delivered to the trustee under a power of sale provision by the mortgage holder instructing the trustee to initiate foreclosure on the secured real estate by recording a notice of default (NOD).
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deed-in-lieu of foreclosure
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A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.
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default rate provision
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A note provision increasing the note rate on the remaining principal when the final/balloon payment becomes delinquent.
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deficiency
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Losses experienced by a mortgage holder at a foreclosure sale due to insufficient value of the mortgaged property to satisfy the mortgage debt.
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deficiency judgment
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A judgment awarded by a court in a judicial foreclosure when the value of mortgage property on the borrower's default is insufficient to pay off the mortgage debt.
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discharge-of-indebtedness income
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Reportable income resulting from a mortgage holder's discount on a payoff of a mortgage debt. Called a short pay.
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Dodd-Frank Wall Street Reform and Consumer Protection Act
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A 2010 enactment of significant changes to U.S. financial regulation in reponse to the 2007 financial crisis.
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dragnet clause
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A provision in a trust deed that purports to use the mortgaged real estate as security for all debts between the parties to the security agreement.
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due-on clause
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A trust deed provision used by lenders to call the loan immediately due and payable, a right triggered by the owner's transfer of any interest in the real estate, with exceptions for intra-family transfers of their home.
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effective yield
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The actual rate of interest received by the mortgage holder as a result of leveraging, discounts and bonuses, distinct from the interest rate charged on the mortgage, also known as the effective rate of return.
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eminent domain
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The right of the government to take private property for public use on payment to the owner of the property’s fair market value.
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Energy Efficient Mortgage (EEM)
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An FHA-insured purchase-assist or refinance mortgage which includes the additional amount to cover the costs of constructing energy improvements on the mortgaged property.
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equity purchase (EP) investor
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A person who acquires title to a seller-occupied, one-to-four unit residential property in foreclosure for dealer, investment or security purposes.
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equity purchase transaction
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A sales transaction on a one-to-four unit residential property in foreclosure occupied by the owner as their principal residence, is acquired for dealer, investment or security purposes by an equity purchase investor.
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excluded debt
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Extensions of credit by sellers of real estate creating a debt obligation in sales transactions which avoid usury laws.
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exculpatory clause
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A provision in a note secured by a trust deed which converts a recourse debt into nonrecourse debt to bar recovery by a money judgment against the borrower.
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exempt debt
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Private party transactions exempt from usury laws involving the origination of a mortgage secured by real estate and made or arranged by a real estate broker. See non-exempt lender.
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fair market value (FMV)
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The price a reasonable, unpressured buyer would pay for property on the open market.
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fair value hearing
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The court proceeding at which a money judgment is awarded for any deficiency in the secured property's fair market value (FMV) at the time of the judicial foreclosure sale to fully satisfy all debt obligations owed the mortgage holder.
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Federal Home Loan Bank Board (FHLBB)
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The Depression-era regulatory body established to fund savings and loan associations (S&Ls) and provide mortgage market liquidity. The FHLBB became the Office of Thrift Supervision in 1989, and then dissolved in 2011 shifting its duties to the Consumer Financial Protection Bureau (CFPB) and other federal agencies.
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Federal Housing Administration (FHA)-insured mortgage
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A mortgage originated by a lender and insured by the FHA, characterized by a small down payment requirement, high loan-to-value (LTV) ratio and high mortgage insurance premiums (MIPs), typically made to first-time homebuyers.
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final payment
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Any final payment on a note which is greater than twice the amount of any one of the six regularly scheduled payments immediately preceding the date of the final/balloon payment.
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Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)
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Federal legislation enacted in 1989 in the wake of the savings and loan (S&L) crisis to strengthen regulations on lenders and appraisers and improve the availability of mortgage funds.
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fixed payment ratio
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A debt-to-income ratio (DTI) used to determine eligibility for an FHA-insured mortgage limiting the buyer's total fixed payment on all debts to 43% of the buyer's gross income, also called the DTI back-end ratio.
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forbearance agreement
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An agreement that the lender will temporarily reduce monthly mortgage payments for the homeowner at risk of default, without altering the original loan terms.
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foreclosure decree
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A court judgment ordering the sale of mortgaged property.
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formal assumption
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A buyer's promise to perform all the terms of the mortgage, given to the mortgage holder on the buyer's takeover of an existing mortgage, typically involving a modification of the interest rate and payments and an assessment of points and fees. Compare with a subject-to transaction.
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full credit bid
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The maximum amount the foreclosing mortgage holder may bid at a trustee's sale without adding cash, equal to the debt secured by the property being sold, plus trustee's fees and foreclosure expenses.
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fully-indexed rate
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For adjustable-rate notes, the index figure at the time of application plus the gross margin stated in the note.
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further encumbrance
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A claim or lien on a parcel of real estate, such as junior trust deeds, CC&Rs, easements, taxes or assessments.
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further-approval contingency provision
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A provision in an agreement calling for the further approval of an event or activity by the seller, buyer or third party as a condition for further performance or the cancellation of the transaction by a person benefitting from the provision.
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future advances clause
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A trust deed provision authorizing a mortgage holder to advance funds for payment of conditions impairing the mortgage holder's security interest in the mortgaged property, such as delinquent property taxes, assessments, improvement bonds, mortgage insurance premiums or elimination of waste.
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Garn-St. Germain Federal Depository Institutions Act of 1982
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Federal legislation which preempts state-level limitations on a mortgage holder's enforcement of the due-on clause contained in mortgages.
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general ability-to-repay (ATR) rules
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A consumer mortgage conforming to the federal ability-to-repay (ATR) rules, without a qualified mortgage (QM) safe harbor or rebuttable presumption status.
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general qualified mortgage
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A type of qualified mortgage (QM) which meets the definition of a qualified mortgage under Regulation Z (Reg Z) and has a debt-to-income ratio (DTI) of 43% or less, other than a balloon-payment QM, small lender QM and temporary QM.
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Generation Y
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The forthcoming generation of first-time homebuyers, consisting of individuals born in the 1980s and 1990s.
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good faith estimate of costs (GFE)
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An estimate of a buyer's settlement charges and mortgage terms handed to the buyer on a standard form within three business days following the lender's receipt of the mortgage application.
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good faith interference
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A mortgage holder's interference in the transfer of property ownership based on a genuine concern for the impairment of their security interest or increased risk of default.
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government-sponsored enterprise (GSE)
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Privately held corporations chartered by the federal government with the purpose of stimulating lending and borrowing in a given sector of the economy by insuring or guaranteeing financial arrangements with the implicit backing of the U.S. government. Fannie Mae and Freddie Mac are GSEs.
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grace period
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The time period following the due date for a payment during which payment received by the lender or landlord is not delinquent and a late charge is not due.
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graduated payment mortgage (GPM)
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A mortgage providing for installment payments to be periodically increased by predetermined amounts to accelerate the payoff of principal.
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Great Recession
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A period of global economic decline lasting roughly, in the U.S., from early 2008 through 2009, attributed chiefly to imprudent lending practices and the proliferation of unstable financial instruments in the mortgage-backed bond market.
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guarantee agreement
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An agreement to be obligated to pay the debt or perform on a contract of another person if that person defaults or does not perform.
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guarantor
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A person who agrees to pay a money obligation owed by another to a mortgage holder or a landlord under a lease agreement on a default in the obligation and demand for the sums remaining unpaid.
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hazard insurance provision
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A trust deed provision granting the mortgage holder the option to retain and apply any insurance proceeds to the loan balance or release the proceeds to the owner of the building to reconstruct the damaged structure.
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holdover tenant
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A tenant who retains possession of the rented premises after their right of possession has been terminated, called a tenant-at-sufferance.
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home equity mortgage
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A junior mortgage encumbering the value in a home remaining after deducting the principal on the senior mortgage from the market value of the home.
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hybrid ARM
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A type of adjustable rate mortgage which features a fixed rate for an introductory period and thereafter a periodically adjusted interest rate based on a predetermined formula.
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hypothecate
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To pledge a thing as security without the necessity of giving up possession of it. To mortgage a property.
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impairment
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The act of injuring or diminishing the value of a fee interest.
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implicit rent
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The dollar value of the use of a property by the owner.
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impound account
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A money reserve of a mortgage borrower's funds held by a lender or carryback seller to pay for annual property obligations owed by the owner to others.
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impound account provision
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A trust deed provision establishing a reserve of the owner's funds for the payment of annually recurring ownership expenses.
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imputed interest rate
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The applicable federal rate (AFR) set by the Internal Revenue Service (IRS) for carryback sellers to impute and report as minimum interest income a portion of principal when the note rate on a carryback debt is a lesser rate.
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index
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A regularly issued composite market interest rate for an investment such as Treasury Securities or inter-bank loans used to set the basis for periodic interest rate adjustments.
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individual mortgage loan originator
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A natural person performing mortgage loan origination services.
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inflation
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The price change in consumer goods and services, stated in the consumer price index (CPI) as a figure which is reported as a percentage change over one year ago.
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installment note
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A note calling for periodic payments of principal and interest, or interest only, until the principal is paid in full by amortization or a final balloon payment.
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installment sale
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Financing provided by a seller who extends credit to the buyer for future periodic payments of a portion of the price paid for real estate, also known as carryback financing.
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institutional lender
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A financial intermediary such as a savings and loan association (now called Thrifts), credit union, commercial bank, hedge fund, REIT or life insurance company which pools deposits and invests them in various ways, including origination or acquisition of mortgages.
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inter vivos (living) trust
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A title holding arrangement used as a vesting by a property owner for probate avoidance on death.
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interlineation
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The process of modifying boilerplate wording in a form by inserting additional language between the printed lines.
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introductory interest rate
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The initial rate of interest on an adjustable rate mortgage (ARM), typically lower than the fully-indexed note rate and lasting for a set introductory period, allowing for a greater loan amount to be borrowed. Also known as a teaser rate.
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itemized deductions
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Deductions taken by a taxpayer for allowable personal expenditures which, to the extent allowed, are subtracted from adjusted gross income (AGI) to set the taxable income for determining the income tax due, called Schedule A.
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judicial foreclosure
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The court-ordered sale by public auction of the mortgaged property. Also known as a sheriff's sale.
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kickback
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A fee improperly paid to a transaction agent who renders no service beyond the act of referring in exchange for a referral fee when the agent is already providing another service in the transaction for a fee.
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land sales contract
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An agreement infrequently used by a carryback seller in a sale of real property to retain title to the property until all or an agreed part of the purchase price has been paid. Also commonly called a land-contract, conditional sales contract, installment sales contract or real property sales contract.
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late charge provision
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A provision in a promissory note which calls for an additional charge if payments are not received when due or during a grace period.
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lease-purchase sale
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A sales transaction characterized by a purchase agreement containing a provision for the present transfer of possession on a lease and buildup of equity in ownership by the tenant over the term of the lease before closing the sale by crediting the purchase price with a portion of the buyer's lease payments.
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lender-paid mortgage insurance (LPMI)
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Default mortgage insurance provided by private insurers in which the lender pays the mortgage insurance premium and recovers the cost through a higher interest rate.
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letter of credit
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A commitment made by a bank to a mortgage holder assuring payment of a stated amount on presentation to the bank, used by mortgage holders as a supplemental security device to avoid anti-deficiency laws.
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leveraging
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A double-edged sword of possible greater returns or potential total loss. In real estate, leveraging is the concept that a lien either increases the owner's risk they will lose the property (and their investment) to foreclose or increases the return on their investment.
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levying officer
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A court-appointed receiver or sheriff who conducts a judicial foreclosure sale.
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lien
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Interests in real estate which secure payment or performance of a debt or other monetary obligation.
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liquidated damages provision
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A provision in a purchase agreement specifying the amount of money the seller will receive from the buyer if the buyer breaches the agreement.
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lis pendens
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A notice recorded for the purpose of warning all persons that the title or right to possession of the described real property is in litigation.
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listing agreement
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A written employment agreement used by brokers and agents when an owner, buyer, tenant or lender retains a broker to render real estate transactional services as the agent of the client.
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litigation guarantee
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A title insurance policy which lists all parties with a recorded interest in a property and theiraddresses of record, ensuring that all persons with a recorded interest in a property are named and served in litigation.
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loan-to-value ratio (LTV)
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A ratio stating the outstanding mortgage balance as a percentage of the mortgaged property's fair market value. The degree of leverage.
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lock-in clause
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A promissory note provision limiting repayment to no more than the regularly scheduled installment amount, in contrast to an "or more" clause.
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masked security device
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Alternative documentation for a carryback sale, substituted for a note and trust deed in a deceptive attempt to avoid due-on enforcement, Regulation Z, reassessment for property taxes, profit reporting and the buyer's right of reinstatement or redemption on default.
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material breach
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A significant contractual breach that prevents the completion of the agreed upon activity.
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Millennium Boom
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The years 2000-2007 leading up to the 2008 economic recession, characterized by loose lending practices and unsustainably high real estate sales volume and prices.
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mixed collateral transaction
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A transaction which is evidenced by one note and secured by both real estate (using a trust deed) and personal property (using a UCC-1 Form).
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MLO organization
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An entity performing mortgage loan origination services.
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modification
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A mutual agreement between a mortgage holder and a property owner to alter, add or rescind one or more of the terms of a mortgage.
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money judgment (on foreclosure)
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An award for any unpaid balance remaining after a judicial foreclosure sale due to the secured property's insufficient fair market value (FMV) on the date of the sale to satisfy the debt owed, also called a deficiency.
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mortgage commitment
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A lender's commitment to make a mortgage, enforceable only when written, unconditional and signed by the lender for consideration.
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mortgage insurance premium (MIP)
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The cost for default insurance incurred by a borrower on an FHA-insured mortgage set as a percent of the mortgage amount paid up front and an annual rate on the principal balance paid with monthly principal and interest for the life of the mortgage.
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mortgage interest deduction (MID)
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An itemized deduction for income tax reporting allowing homeowners to deduct interest and related charges they pay on a mortgage encumbering their primary or second homes.
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mortgage loan originator (MLO)
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A California Bureau of Real Estate (CalBRE) licensee who receives fees to arrange a consumer mortgage other than a carryback.
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mortgage package
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A collection of documents required to process a mortgage application and sent to a mortgageunderwriting officer for review after receipt of the appraisal on the property offered as security.
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mortgage payment ratio
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A debt-to-income ratio (DTI) used to determine eligibility for an FHA-insured mortgage limiting the buyer's mortgage payment to 31% of the buyer's gross effective income.
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mortgage shopping worksheet
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A worksheet designed for use by buyers when submitting applications for a consumer mortgage to compare mortgages offered by different lenders based on a list of all the variables commonly occurring as costs at the time of origination and over the life of the mortgage.
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mortgage-backed bond (MBB)
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An asset-backed security representing the bond holder's claim on the cash flow received on mortgage obligations.
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mortgagee-in-possession
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A lender who possesses a property, receiving any income it produces, and is obligated to operate or manage the property.
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mortgage-in-fact
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A grant deed given by an owner for the sole purpose of securing the performance of an obligation owed a creditor, such as payment of a debt.
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negative amortization
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Occurs when monthly installment payments are insufficent to pay theinterest accruing on the principal balance, requiring the unpaid interest to be added to the principal.
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nominal interest rate
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The interest rate agreed to between the homebuyer and the lender as stated on the promissory note.
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nominal rate of return
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The interest rate agreed to between the buyer and the mortgage holder as stated on the promissory note, also called the note rate.
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non-exempt lender
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A lender subject to usury limitations when making a loan.
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nonjudicial foreclosure
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When property is sold at a public auction by a trustee as authorized under the power-of-sale provision in a trust deed.
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nonrecourse mortgage
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A mortgage subject to anti-deficiency laws which do not permit the mortgage holder (lender or carryback seller) to pursue a borrower to collect any loss due to a deficiency in the value of the secured property on foreclosure or a short payoff.
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note
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A document, often secured by a trust deed on real estate, evidencing an obligation to pay money to a creditor, usually a lender or carryback seller.
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Notice of Default (NOD)
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The notice filed to begin the nonjudicial foreclosure process. Generally, the NOD is filed following three or more months of delinquent mortgage payments.
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Notice of Delinquency (NODq)
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The notice sent by a mortgage holder to a person who requested the notice within 15 calendar days after four consecutive months of unpaid and delinquent monthly installments on their mortgage.
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novation
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An agreement entered into by a mortgage holder, buyer and seller to shift responsibility for a mortgage obligation to the buyer by an assumption and release the seller of liability.
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one-action rule
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The prohibition of more than one action to recover a mortgage debt, requiring the mortgage holder to first resort to foreclosure on the real estate before pursuing other collection remedies. The enforcement of the assignment of rents provision by collecting rents does not bar a mortgage holder from later foreclosing on the real estate and, if a recourse mortgage, seeking a deficiency judgment.
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origination charge
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A charge for lender-performed services integral to the administrative process of originating a mortgage.
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passive income
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Profits and losses from rental real estate, operations and sales, and from non-owner-operated businesses designated for income tax reporting purposes.
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pass-through provisions
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An all-inclusive trust deed (AITD) provision used by a carryback seller which provides for the payment of any demands made by the underlying mortgage holder, other than regular principal and interest payments, to be passed through to the buyer when triggered by the buyer's conduct.
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payoff demand statement
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A written demand, prepared by a mortgage lender, for the total dollar amount required on the date of preparation to pay off the mortgage as a requisite for recording a reconveyance of their trust deed lien on a property.
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perfecting the lien
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The preparation and filing of a UCC-1 Financing Statement (UCC-1) to put the public on notice of the lien created by a security agreement.
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personal property
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Moveable property not classified as part of real estate, such as trade fixtures.
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personal use loan
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A mortgage origination which funds a personal use, such as a loan that funds the purchase or improvement of an owner's principal residence or second home.
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PITI (principal, interest, taxes and insurance)
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The sum of the components of a monthly payment to a mortgage holder applied in part on the debt and in part as an impound account deposit for payment of annually recurring ownership expenses such as property taxes and insurance premiums.
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pledge
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To offer an asset (such as an existing carryback note) as collateral or security for another, unrelated debt. Also known as hypothecation.
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portfolio income category
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Unearned income from interest on investments in bonds, savings, stocks and mortgage notes, and income, profits and losses from management-free income property.
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portfolio investor
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An investor who seeks income from interest earned on bonds, savings and trust deed notes and earnings on stocks, land held for profit and management-free long-term property leases.
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portfolio yield
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Any lender earnings from fees or interest on a mortgage.
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power-of-sale provision
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A trust deed provision authorizing the trustee to initiate a non-judicial foreclosure sale of the described property on instructions from the beneficiary.
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pre-foreclosure workout
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Negotiations between a mortgage holder and defaulting property owner with the purpose of exploring options to avoid foreclosure.
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prepayment penalty
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A provision in a note giving a lender the right to levy a charge against a borrower who pays off the outstanding principal balance on a loan prior to expiration of the prepayment provision.
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prime offer rate
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A base rate used by banks to price short-term business loans and home equity lines of credit, set 3% above the federal funds rate.
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principal residence
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The residential property where the homeowner resides a majority of the year.
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priority
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The order in which trust deed liens on title to real estate hold their security interest in the property in the event of foreclosure.
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private lender
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An individual or non-government organization that loans money.
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private mortgage insurance (PMI)
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Default mortgage insurance coverage provided by private insurers for conventional loans with loan-to-value ratios higher than 80%.
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privity of estate
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A mutual or successive relationship to the same rights in property; a connection between persons to the same estate in property.
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probate referee (on foreclosure)
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An appraiser appointed by the court in a judicial foreclosure action to advise the court on a property's fair market value (FMV) on the date of the judicial foreclosure sale.
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promissory note
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A document given as evidence of a debt owed by one person to another.
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property profile
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A report from a title company providing information about a property's ownership, encumbrances, use restrictions and comparable sales data.
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purchase agreement
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The primary document used as a checklist to negotiate a real estate sales transaction between a buyer and seller.
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purchase-assist funding
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The use by a buyer of proceeds from a mortgage to fund a portion of the price paid to acquire real estate.
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purchase-money mortgage
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Nonrecourse mortgage financing provided by a lender as purchase-assist funding for the purchase of a one-to-four unit residential property the buyer is going to occupy, or a seller carryback note and trust deed as an extension of credit to a buyer of any type of real estate which is secured solely by the property sold. Anti-deficiency mortgage.
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put option
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The provision in all trust deeds which, in tandem with anti-deficiency laws, grants an owner-occupant of a one-to-four unit residential property under a purchase-assist mortgage the right to defulat and force the lender to buy the property through foreclosure for the remaining loan amount.
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pyramiding
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The practice of assessing a late charge for the delinquent payment of a previously assessed late charge.
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qualified interest
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Interest on a mortgage which has accrued and been paid and is an allowable interest deduction for ownership of a first and second home.
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qualified mortgage (QM)
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A consumer mortgage granted safe harbor status under Regulation Z (Reg Z) ability-to-repay (ATR) rules under one of four definitions.
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rate lock
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A lender's conditional, unsigned commitment to fund a mortgage at a quoted interest rate, origination fee and points, regardless of whether interest rates rise or fall prior to funding.
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real estate
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Land and anything permanently affixed or appurtenant to it.
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real estate fixture
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Personal property attached to the real estate as an improvement, which becomes part of the conveyable real estate.
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Real Estate Settlement Procedures Act (RESPA)
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Legislation prohibiting brokers from giving or accepting referral fees if the broker or their agent is already acting as a transaction agent in the sale of a one-to-four unit residential property which is being funded by a purchase-assist, federally-related consumer mortgage.
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real rate of return
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The nominal interest rate on a mortgage minus the rate of inflation.
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recast
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A mortgage holder's demand to modify the note terms and receive payment of additional fees in exchange for waiving the due-on clause in their mortgage.
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reconveyance
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A document executed by a trustee named in a trust deed to release the trust deed lien from title to real estate, used when the secured debt is fully paid.
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recourse
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On a debt secured by real estate and not subject to anti-deficiency defenses, the creditor may pursue a borrower on default for a loss due to a deficiency in the value of the secured property if the lender forecloses judicially.
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redeem
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The clearing of title to a parcel of real estate of a monetary lien, such as a mortgage, through payment of the debt in full as is required during a redemption period to avoid loss of the property either at a trustee's foreclosure sale or following a judicial foreclosure sale.
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referral fee
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A fee paid by one service provider to another for referring a client to them. Prohibited by the Real Estate Settlement Procedures Act when consumer financing funds the purchase of one-to-four unit residential property.
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Regulation X
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The regulation which implements the Real Estate Settlement Procedures Act (RESPA) dictating federally related mortgage origination activities by consumer mortgage originators.
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Regulation Z (Reg Z)
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A component of the Truth-in-Lending Act requiring consumer mortgage lenders to timely disclose a loan's annual percentage rate and all associated costs to potential borrowers, enabling borrowers to competively shop for loans.
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reinstatement
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A property owner or junior lienholder's right to reinstate a mortgage and cure any default prior to five business days before the trustee's sale by paying delinquent amounts due on the note and trust deed, plus foreclosure charges.
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replacement cost
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The cost to replace a structure with one having utility equivalent to that being appraised, but constructed with modern materials and according to current standards, design and layout.
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rescind
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The cancellation of a contract which restores the parties to the same position they held before they entered into the contract.
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residential mortgage
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A consumer mortgage other than a carryback mortgage requiring the licensee arranging the mortgage to be mortgage loan originator (MLO) endorsed by the California Bureau of Real Estate (CalBRE).
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restraint on alienation
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A limit placed on a property owner's ability to sell, lease for a period exceeding three years or further encumber a property, as permitted by federal mortgage policy.
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restricted real estate mortgages
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All mortgages made by private party lenders which are neither made nor arranged by a real estate broker.
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retroactive interest differential (RID)
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The mortgage holder's losses, calculated based on the interest differential between the note rate and the market rate on the date of a third party's unlawful interference with the mortgage holder's right to call a mortgage.
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reverse lease-option
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A sale-leaseback agreement with the option to purchase as an addendum.
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right of redemption
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A property owner's or junior lienholder's right to clear a property's title of a mortgage lien prior to the completion of the trustee's sale by paying all amounts due on the mortgage, including foreclosure charges.
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right of rescission
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The right to cancel a completed transaction such as a sale or letting of property, including restoration, after the transaction has been closed.
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sale-leaseback and purchase option arrangement
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A disguised mortgage arrangement created when a seller conveys title to an investor/lender and retains possession under a lease agreement with the right to repurchase title and redeem the property for a fixed dollar sum.
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savings and loan association (S&L)
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A financial depository institution which accepts deposits and makes mortgages and other loans, also known as a thrift.
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second home
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An individual's alternative residence where they do not reside a majority of the year.
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secondary financing
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A loan secured by a second mortgage or trust deed on real property. These can be third, fourth, fifth, sixth mortgages or trust deeds, on and on ad infinitum.
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secondary mortgage market
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A market for the sale of bonds collaterally seured by a pool of mortgages.
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Section 32 high-cost consumer mortgage
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A class of Regulation Z consumer mortgages characterized by an annual percentage rate (APR) charge which exceeds the average prime offer rate for a comparable mortgage by various percentage spreads set by the mortgage's priority on title and principal balance, and subject to consumer protection rules.
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secular stagnation
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An abnormally lengthy period of sluggish economic growth.
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Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)
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A federal consumer protection law which created a uniform national licensing and registration scheme for mortgage loan originators (MLOs).
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secured loan transaction
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A mortgage transaction which places a lien on the owner's interest in a property for the amount of the debt owed the mortgage holder, including financial transactions documented by sellers as sale-leaseback and purchase lease-option arrangements.
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security agreement
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An agreement entered into between a mortgage holder and buyer to grant the mortgage holder additional security in the form of a lien on personal property described in the agreement.
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security interest
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A generic term designating the interest held in real estate or personal property by a lender, carryback seller or judgment creditor which is evidenced by either a trust deed, UCC-1 financing statement or abstract of judgment.
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self-help
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One of several enforcement steps taken by a lender when an owner defaults on a post-1996 trust deed, in which the lender takes possession of the property and collects rents nonjudicially.
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seller financing
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A note and trust deed executed by a buyer of real estate in favor of the seller for the unpaid portion of the sales price on closing. Also known as an installment sale, credit sale or carryback financing.
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servicing
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Supervising and administering a mortgage after its origination, involving collection of payments, maintenance of records, computation of interest and principal, foreclosure of defaulted loans and so on.
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settlement service
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Any service provided in connection with a prospective or actual Regulation X mortgage origination, including all services rendered in the sales transaction in which a consumer mortgage is originated.
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shared appreciation mortgage (SAM)
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A type of split-rate note calling for the proprty owner to periodically pay interim interest at a fixed rate, and when the balance is due, to further pay the holder of the note as additional interest an agreed fraction of the property's increased value.
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small lender
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A lender with assets of $2 billion or less which made 500 or fewer first-lien consumer mortgages in the preceding calendar year.
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small lender qualified mortgage
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A type of qualified mortgage (QM) under Regulation Z (Reg Z) which allows small community mortgage lenders to include features otherwise prohibited in consumer mortgages.
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stepped-up basis
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The setting of an asset's cost basis to fair market value for income tax purposes when transferred by death of the owner.
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straight note
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A note calling for the entire amount of its principal to be paid together with accrued interest in a single lump sum when the principal is due.
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subject-to transaction
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A sale of mortgaged property calling for the buyer to take title subject to the mortgage, the principal balance being credited toward the purchase price paid. Compare with formal assumption.
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subordination
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An agreement entered into by a mortgage holder to permit their security interest in title to the mortgaged property to take an inferior position to another encumbrance.
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subordination agreement
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An agreement entered into by a mortgage holder to permit their security interest in title to the mortgaged property to take an inferior position to another encumbrance.
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subprime
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In mortgage lending, a borrower who poses a higher risk of not timely repaying a mortgage, or a mortgage with a high risk of default due to inferior underwriting standards.
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surplus funds
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The price paid for property by the successful bidder at a trustee's sale in excess of the amount of debt and costs due under the foreclosed trust deed.
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temporary qualified mortgage
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A transitional qualified mortgage (QM) under Regulation Z (Reg Z) for lenders originating mortgages insured or guaranteed by the federal government or sold to Fannie Mae or Freddie Mac.
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The Federal Reserve Bank (the Fed)
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The central bank in control of regulating the U.S. financial and monetary system.
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title insurance
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A form of indemnity insurance issued by a title insurance company which holds harmless the named insureds against monetary loss caused by an encumbrance not listed in Schedule B of the policy and not known by the insured when the policy was issued.
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trade fixture
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A fixture used to render services or make products in the trade or business of a tenant.
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transaction agent (TA)
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The term lenders use to identify the buyer's agent in a sales transaction, its closing contingent on the buyer obtaining a mortgage to fund the purchase price.
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treble damages
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A usury penalty computed at three times the total interest paid by the borrower during the one year period immediately preceding their filing of an action on a non-exempt private lender mortgage.
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trustee (on a mortgage)
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A party to a mortgage who, as a legal fiction, holds title to property as security for the performance of an obligation with the authority to sell the property or reconvey the trust deed on instructions from the mortgage holder.
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trustee's sale guarantee
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A policy issued by a title insurance company to a trustee before or at the time the notice of default is recorded providing coverage for the trustee should they fail to serve notices on any party of record due to an omission in the guarantee.
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Truth-in-Lending Act (TILA)
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A law designed to protect buyers applying for a consumer mortgage with a lender which requires lenders to make upfront disclosure of mortgage rates and charges.
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unconscionable advantage
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When an equity purchase investor or a mortgage holder exploits an element of oppression, helplessness or surprise to exact unreasonably favorable terms from a property owner or tenant.
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Uniform Residential Loan Application
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A standardized mortgage application completed by the buyer with the assistance of the transaction agent and the mortgage lender's representative.
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unsecured debt
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A mortgage balance remaining unpaid following reconveyance of property subject to a trust deed, exhaustion of the security by foreclosure of a prior lien or errors in the principal amount of a mortgage debt in a beneficiary statement or payoff demand.
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unsecured note
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A document evidencing a debt owed by one person to another where the debt is not secured by collateral, also called an unsecured promissory note.
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usury
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A limit on the lender's interest rate yield on nonexempt real estate mortgages.
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vicious economic cycle
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The economic climate in which growth slows after a boom, causing property owners to sell at reduced prices (referred to as a buyer's market).
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waiver agreement
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An agreement in which a mortgage holder consents to the owner's present or future transfer of an interest in the mortgaged property as a waiver of the mortgage holder's due-on rights. Also known as an assumption agreement.
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waste
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The intentional destruction or neglect of property which diminishes its value.
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