THIS COMPLIMENTARY GLOSSARY HAS BEEN COMPILED FROM VARIOUS SOURCES AND IS PROVIDED AS A GENERAL REFERENCE AND SHOULD NOT BE A SUBSTITUTE FOR LEGAL, ACCOUNTING, OR BUSINESS ADVICE. IF YOU CANNOT FIND THE WORD OR TERM YOU NEED, OR IF YOU IDENTIFY AN ERROR IN MEANING OR SPELLING, PLEASE CONTACT ME AT SHORTSALEBLUE@AOL.COM

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Abandonment     A process in bankruptcy wherein the court releases a property from it's control when it is deemed to have no value to the estate.

Abstract   A succinct summary; (e.g. an abstract of judgment; an abstract of title, etc.)

Abstract of Judgment   The essentials of a money judgment obtained via an adjudicated lawsuit. When an abstract is recorded in the recorder's office the judgment becomes a general lien on all the debtor's property located in that particular county.

Comment by JohnMerchant "The reason for an AJ is that a J itself is NOT recordable, so an AJ is drafted and recorded to show the details of the J. If you'll go to your county recorder and ask to see their AJ records, you can see the exact form that's used in your state...and you can also see the existent, current, outstanding Js by date the AJs were recorded."

Acceleration Clause  Clause in a deed of trust or mortgage which "accelerates" the time when the indebtedness becomes due. For example, some mortgages or deeds of trust contain a provision that the note balance shall become due immediately upon the resale of the land or upon the default in the payment of principal and interest.

Acknowledgment    A formal declaration before a duly authorized officer (such as a notary public) by a person who has executed an instrument that such execution is his own. An acknowledgment is necessary to entitle an instrument (with certain specific exceptions) to be recorded, to impart constructive notice of its contents, and to entitle the instrument to be used as evidence without further proof. The certificate of acknowledgment is attached to the instrument or incorporated therein.

Acquisition   An act or process, such as foreclosure, by which one procures ownership of property

Addendum   An addition or change to a contract.           

Adjournment   A putting off or postponing of business or of a session until another time.

Adjudication  A judicial determination

Adjustable Rate Mortgage (ARM)   A loan with an interest rate that fluctuates based on a specified financial index.

Administrator  If a person dies without a Will (Intestate) the Court will appoint a person, or Administrator to handle the Estate, whose functions are similar to those of an Executor

Ad Valorem Tax   A tax based on the value of the property as a percentage of that value.

Advances   Moneys paid, on behalf of an owner, by a junior interest holder. Done to temporarily cure a delinquency on a senior encumbrance that threatens to extinguish the junior's position. Thereafter the junior lien holder can start their own foreclosure if they are not immediately reimbursed for the advances paid out.

Adverse Possession  A means of acquiring title where an occupant has been in actual, open, notorious and continuous occupancy of a property under a claim of right for the required statutory period.

Affidavit   A sworn, notarized statement that's signed by the affiant before witnesses

Agency   The relationship of trust that exists between sellers and buyers and their agents. The agency is formed through a written contract.

Agent   A person who is authorized by another to represent him/her.  (real estate agent) A person licensed by the state to conduct real estate transactions.                        

Agreement of Sale    Also known as an agreement to convey. A signed, written contract entered into between the seller and buyer for sale of real property under certain specific terms and conditions.

Alienation   The transfer of an interest in or title to property to another.

Amortization   The gradual repayment of a debt in a series of equal periodic amounts until the total debt, including interest, is paid in full. Senior loans are typically amortized over 30 years, whereas junior loans are generally amortized over a much shorter time period.

Appraisal  A statement of value or estimation of the value of a property as of a certain date conducted by a disinterested person with suitable qualifications.  Generally, value for single family properties is based upon a review of recent market activity using sales of comparable properties as a basis and then making value adjustments based upon the comparison of comparable property to the subject property. 

Appreciation   Increase in value or worth. The difference between the increased value of property and the original sales price.

Annual Percentage Rate (APR) The cost of the loan expressed as a yearly rate on the balance of the loan.          

Answer  In a lawsuit, this is a legal document that the defendant must file in response to the claims alleged in the complaint.

Anticipatory Breach  A communication that informs a party that the obligations of the original contract will not be fulfilled.

Appurtenance  A right, privilege, or improvement belonging to, or passing with, the land.

Arm's Length Transaction  A transaction between relative strangers, each trying to do the best for himself, or herself.

As-Is Condition    The purchase or sale of a property in its existing condition

Assessment   A bonded tax imposed to pay for public improvements (e.g. street/alley paving, curbs, sidewalks, etc.) beneficial to a limited area . Paid semiannually over a 10 year period to the Bond Division of the city or county treasurer's office where the property is located.

Assessed Value  Assessed Value applies in ad valorem taxation and refers to the value of a property according to tax roles.  Assessed value may not conform to market value, but it is usually calculated to a market value base.  A tax assessor's determination of the value of a home in order to calculate a tax base.

Assignee  One to whom a transfer of an interest is made (i.e. assignee of a deed of trust).

Assignor  One who transfers property by assignment.

Assignment  Written document by which property, other than real property, is transferred from one person to another. Assignment of mortgage, assignment of deed of trust, assignment of lease, assignment of rentals, etc. are common assignments. The "assignee" receives the property assigned.

Assumability  When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.

Assumption Clause   A provision that allows a buyer to take responsibility for the mortgage from a seller.

Assumption of Mortgage   A formal agreement with a lender in which a new property owner agrees to be personally liable for the repayment of a preexisting lien. Generally entails paying the lender an assumption fee and sometimes a higher interest rate. Doesn't release the original borrower from further liability unless the agreement specifically provides for it.

Attorney-in-Fact   An agent authorized to act for another. Commonly evidenced by a recorded Power of Attorney. Holder of the power can exercise it only as long as it has not been revoked and the grantor remains alive and competent enough to act on their own behalf if need be.

Automatic Stay  A bankruptcy case automatically prevents continuation of creditor collection activity. Filing bankruptcy is the only way to get this protection.  (mortgagees may petition the Court to "lift" the stay and permission to resume collection activity (usually foreclosure).

Backup Offer   A secondary bid for a property that the seller will accept if the first offer fails.       

Balloon Payment   A lump sum final installment payment of a promissory note that is much larger than the regular installment payments.

Bankrupt  A person who is insolvent; one whose total property s legally declared insufficient to pay his/her debts.

Bankruptcy   A proceeding in U.S. District Court wherein debtors who can not meet the claims of their creditors may be adjudged bankrupt by the court. There are three different types (and many chapters) of bankruptcy proceedings:  (see Cramdown)

            Chapter 7 - "Debtor Wipeout". The court oversees the liquidation of the debtors' nonexempt                                    assets, distributing the cash proceeds proportionally amongst their creditors. Most of                                  the time this is not the bankruptcy proceeding mortgagors/trustors will choose since                              their real objective is to stall off the trustee's sale as long as they can rather than                                           liquidate everything.

            Chapter 11 - This is a business reorganization proceeding.

            Chapter 13 - "Debtor Workout". This is the almost-automatic choice of most                                                          mortgagors/trustors seeking to use a bankruptcy filing to delay the inevitable sheriff's                                  sale or             trustee's sale as long as they can. It's hypothetically possible to drag out a                                    Chapter 13 proceeding for several years. The purpose of this proceeding is to give a                             "wage earner" time for rehabilitation . . a temporary respite free from the collection                                  efforts of creditors. But a sharp mortgagee's &/or beneficiary's attorney can usually                               cut the delay down to about 90 days by  persuading the court to grant relief from the                                     automatic stay when the debtors are unable to keep current with their post-petition                                     payments on their property.

"Bare Bones" Petition  Initial, tentative filing of a bankruptcy petition that qualifies the petitioner to the benefits of the automatic stay pending the filing of the full petition within the following 15 days. Failure to complete the filing of the full petition will result in the dismissal of the "face sheet filing" and a bar to any subsequent refiling for the next 180 days.

Bargain and Sale Deed  A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title.

Bargain and Sale Deed w/Covenant  A deed in which the grantor warrants or guarantees the title against defects arising during the period of his or her ownership of the property, but not against defects existing before that time.

Bargain Sale   The sale of property for less than market value.

Basis  The cost of an asset increased by the cost of a allowable improvement and reduced by depreciation and amortization deductions... to calculate gain or loss on sale.

Bootleg Improvement   Building, expanding, or modifying a structure without benefit of a required permit.

Breach of Contract  The failure to perform provisions of a contract without a legal excuse.

Broker A person licensed by the state to work in a specific field including real estate, mortgage loans, insurance, securities, etc.

Broker Price Opinion (BPO)  A written estimate of the most probable sales price of a property provided by a licensed real estate broker with experience in the specific locality of the subject property.  Value of the subject property is estimated by comparing like properties that recently sold and adjusting for differences.  Often provided as a means to establish a listing price for a property.

Bullet Mortgage A mortgage that requires monthly payments of interest only until the final mortgage payment when full payment of principal is due.

Business Plan  is a written document used to describe your business, and summarizes an organized sequence of predetermined actions to complete future objectives. 

Buy Down   An upfront payment to a lender to reduce a loan's interest rate, either temporarily (the first year or two) or permanently

Buyers' Broker  A real estate broker who exclusively represents the buyer's interests in a transaction and whose commission is paid by the buyer rather than the seller.  

Buyers Market   A market with a lot fewer buyers than there are sellers. Indicated by a prolonged marketing time of more than 90 days and generally high mortgage interest rates of more than 12%.

By-Laws   The internal rules of management by which an entity conducts it's business.

Cancellation Clause   A clause that details the conditions under which each party may terminate the agreement.            

Cap   A negotiated upper limit the interest rate on a variable rate mortgage can rise, both annually and over the life of the mortgage.

Capitalization  Capitalization occurs when items owed on a loan are treated as part of a new, principal balance.  When arrears are capitalized, the amount of the arrears is included in the principal before the interest is applied.  Also a mathematical process for estimating the value of a property using a proper rate of return on the investment and annual net income expected to be produced by the property.  [ Income ÷ Rate = Value ]

Capital Gains   Profits an investor makes from the sale of real estate or investments.

Capital Gains Tax  A tax placed on the profits from the sale of real estate or investments.

Cash Flow   The surplus left over out of the rents after paying out all operating expenses and mortgage payments.

Certificate of Occupancy   (CO, or CofO) Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value (CRV)  An appraisal issued by the VA approved appraiser which establishes the property's current market value.

Chain of Title   A chronological list of documents that comprises the title record history to a specific parcel of real property.

Charge Off  The process of writing off sums that have been deemed uncollectible.

Chronic Delinquent  A payment pattern wherein the borrower habitually violates the terms of the note by paying late.

Clear Title   Title that is not encumbered or burdened with defects.

Closing The final procedure in which documents are signed and recorded, and the property is transferred.

Closing Costs  The miscellaneous costs that the buyer and seller incur to complete or "close" a real estate transaction. These costs are in addition to the price of the property. Expenses incidental to the sale of real estate, including loan, title and appraisal fees. The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.

                BUYER'S EXPENSES                                SELLER'S EXPENSES

                Documentary Stamps on Notes                   Cost of Abstract

                Recording Deed and Mortgage                    Documentary Stamps on Deed

                Escrow Fees                                             Real Estate Commission

                Attorney's Fee                                           Recording Mortgage

                Title Insurance                                           Survey Charge

                Appraisal and Inspection                             Escrow Fees

                Survey Charge                                           Attorney's Fee

Closing Statement   A document which details the final financial settlement between a buyer and seller and the costs paid by each party.

Clouded Title   Any claim, encumbrance or defect that contradicts the title record as understood by the property owner. Intractable disputes are resolved judicially (quiet title action).

Code  A collection of laws relating to a certain topic, such as real property, patents, etc.

Codicil             A change to a will that adds or subtracts provisions or clarifies portions of the document.    

Collateral   Anything of value, like real property, pledged as security for a debt.

Collateralized Mortgage Obligation (CMO) A multiple class pay-through bond which is structured using prioritized classes of securities and divided into different maturity terms. The issuer pays cash inflows from the collateral to the holders of the class or classes or securities which holders are then entitled to payment in accordance with the trust indenture. The creation of classes of securities reduces the prepayment risk on each holder's investment.

Commission   A fee paid to a real estate agent/broker by a principal as compensation for finding a buyer or seller and completing the sale. Usually a percentage of the sale price and commonly amounts to 6 to 7 percent on houses and 10 percent on raw land.

Commitment   A promise or firm agreement; a lender's contractual obligation to make a loan to a qualified borrower

Community Property    Some state's laws provide that where a couple acquires any asset during marriage, the husband and wife will be considered to have one-half interest in the property.

Comparables (Comps)  Similar properties (situated near the property you're interested in) that are currently listed for sale or have recently sold.

Comparable Market Analysis (CMA)  / Competitive Market Analysis (CMA)  A study, intended to assist an owner in establishing a listing price, of recent, comparable sales, properties that failed to sell, and property presently on the market.

Complaint   A document commencing a lawsuit. 

Comprehensive Environmental Response, Compensation and Liability Act of 1980 CERCLA The Act that establishes the potential for lender liability for environmental clean up on a mortgaged property.

Compromise Sale   A VA approved short sale.

Conditional Commitment    A promise by a lender to make a loan if the borrower meets certain conditions

Conduit  The financial intermediary that sponsors the conduit between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases loans from third party correspondents under standardized terms, underwriting and documents and then, when sufficient volume has been obtained, pools the loans for sale to investors in the CMBS market.

Confirmation Hearing (Bankruptcy)  A hearing where the Debtors proposed Chapter 13 plan is reviewed and either approved or denied by the bankruptcy judge.

Confirmation Hearing (Foreclosure)  A hearing held subsequent to the Sheriff's Sale to confirm the sale and transfer title to the successful bidder.

Contingency    A condition specified in a purchase contract, such as the perspective buyer making an offer contingent on his or her sale of a present home, or such as a satisfactory home inspection.     

Contract  An agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertakes to do or refrain from doing some legal act, or acts.  Essential elements of a valid contract are parties competent to contract, a proper subject matter, consideration, mutuality of agreement, and mutuality of obligation.

Contract for Deed  A contract for the sale of real estate wherein the purchase price is paid in periodic installments by the Purchaser, who is in possession of the property even though title is retained by the seller until the final payment.  Also called an installment contract, or a land contract.

Contract to Purchase   A contract the buyer initiates which details the purchase price and conditions of the transaction and is accepted by the seller. Also known as an agreement of sale.        

Controlling Party A party designated in a CMBS that has the right to approve and direct certain actions of the Special Servicer with respect to specially serviced loans.

Constructive Notice   Notice imparted by the public records (e.g. the county recorder's records). The law presumes that one has knowledge of instruments that are properly recorded.

Conventional Mortgage     A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes.

Conversion  (Bankruptcy)  The change to a case under a chapter different that the one originally filed under,  The court may convert a case on the request of the debtor or the request of a party in interest.

Corporate Guarantee A guarantee made by the issuer (issuer guarantee) or a third party to cover losses due to delinquencies and foreclosures up to the guaranteed amount. The rating of the guarantor is commonly required to be, at minimum, equal the highest rating of the securities. This is a form of credit enhancement.

Corrected Mortgage Loan A Mortgage Loan that had previously incurred a default or related event, had been transferred to the Special Servicer for handling and becomes a Specially Serviced Mortgage Loan, had cured the default by any of a number of avenues available to the Special Servicer and thus became a Corrected Mortgage Loan returned to the Master Servicer for administration.

Cosign  Agreeing to be responsible for someone else's debt.

Cost Approach  The process of estimating the value of property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation.

Cramdown   A controversial procedure in bankruptcy wherein the court reduces a secured debt (i.e. trust deed or mortgage) to the current value of the property. The court actually splits the mortgage debt into two parts. The amount equal to the current value of the home is treated as a secured claim that the debtor must continue to pay. The portion of debt in excess of the property's current value becomes an unsecured claim that's usually not repaid in full.

Credit   The money a lender extends to a buyer for a commitment to repay the loan within a certain time frame.       

Credit Bureau   A company that receives information about a consumer's credit history, and keeps records that are available to others seeking information on that consumer.

Credit History   A record of an individual's current and past debt payments.

Credit Rating    The degree of credit worthiness assigned to a person based on credit history and financial status.  

Credit Report   A credit bureau report that shows a loan applicant's history of payments made on previous debts. Several companies issue credit reports, but the three largest are Trans Union Corp., Equifax and Experian (formerly TRW ).  

Cure a Default   With respect to delinquent mortgage loans, all missed payments have been made and loan payments are current.

Days on the Market  (DOM)  The period of time a property is listed for sale until it is sold or taken off the market.

Dealer   A repeat buyer whose intent to resell quickly rather than holding for investment. There are no tax breaks for those who make money with quick turnover properties. The income, or gain is taxed as ordinary income.

Debt Collector   The term 'debt collector' applies to collection agencies and lawyers that are collecting debt for others.        

Debtor's Examination  This is normally a court ordered proceeding in which a debtor must answer questions about current income and assets from which a judgment may be collected.

Decree  A judgment by court ( a divorce decree)

Deed   A written document that transfers ownership of land from one party to another. The seller is called the "grantor" and the buyer is called the "grantee". Deeds may be of many kinds. For example, there are grant deeds, quitclaim deeds, gift deeds, guardians' deeds, administrators' deeds, warranty deeds, etc. depending upon the language of the deed, the legal capacity of the grantor, and other circumstances.

Deed-in-Lieu of Foreclosure  (DIL)   Used by owners to voluntarily convey the title of their property to the mortgagee/beneficiary (lender) to avoid the negative credit consequences of a foreclosure. Lenders are generally reluctant to accept a "deed in lieu" unless the title is free and clear of any other encumbrances junior to theirs and the owners execute an estoppel affidavit acknowledging that they are acting volitionally, with informed consent.

Deed of Trust (Trust Deed)  A three party security instrument conveying the legal title to real property as security for the repayment of a loan. The owner is called the "trustor". The neutral third party to whom the bare legal title is conveyed (and who is called on to liquidate the property if need be) is the "trustee". The lender is the "beneficiary". When the loan is paid off the trustee is directed by the beneficiary to issue a deed of reconveyance to the trustor, which extinguishes the trust deed lien.

Default   Failure to make the loan payments as agreed in the promissory note.

Default Judgment   A judgment in a lawsuit against a defendant who did not meet the legal requirements in connection with the case ( failure to appear, failure to file an answer, missing deadlines,  etc.).

Defendant    In a lawsuit, the person(s) or business(s) being sued.

Deferred Interest When the amount of interest a borrower is required to pay on a mortgage loan is less than the amount of interest accrued on the outstanding principal balance. This amount is usually added to the outstanding principal balance of the mortgage loan.

Deferred Maintenance                Any repair or maintenance of a piece of property that has been postponed, resulting in a decline in property value.

Deficiency    The amount a debtor owes a creditor on a debt after the creditor seizes and sells the collateral.  A deficiency arises when the collateral is sold for less than the amount of the debt.    

Deficiency Judgment   A personal judgment against a debtor for the amount remaining due after a judicial foreclosure of a mortgage or a trust deed.

Delinquency A loan payment that is at least 30 days past due. Usually after 90 days delinquency, the lender has the right to initiate foreclosure proceedings against the loan which is in default.

Delinquent Mortgage   A mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings.        

Demand  The payoff amount necessary to retire a secured debt

Depreciation   A decline in the value of property. Usually due to the obsolescence or wear and tear of the improvements on the land or adverse changes in the neighborhood.

Discharge  A document that ends a debtor's legally enforceable obligation to pay a debt.

Disclosure   Regarding real estate, it is revealing all known facts concerning the property being transferred such as the presence of high levels of radon gas,  or lead paint.            

Disposition Fee "Workout fees" paid to a special servicer for making a loan current or liquidating a problem loan or foreclosed property. Can also include late fees, modification fees and loan administration charges. These fees are negotiated with each CMBS.

Distressed Property      Property that is in poor physical or financial condition.      

Documentary Stamps   A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.

Down Payment   The upfront cash commitment paid by the buyer. It makes up the difference between the sales price of a property and the loan amount obtainable.

Due Diligence The legal definition: due diligence is a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances; not measured by any absolute standard but depends on the relative facts of the special case. In CMBS, due diligence is the foundation of the process because of the reliance securities investors must place on the specific expertise of the professionals involved in the transaction. It is physically and financially impossible for most CMBS investors to perform the many duties required to prepare, analyze, deliver and service commercial mortgages. Due Diligence protects these investors from unethical improprieties and unprofessional practices. Prevailing industry standards are used as the primary benchmark from which prudence is judged. Due diligence is said to be the cornerstone of securities law.

"Due on Sale" Clause  (DOS)  Provision in a mortgage or deed of trust calling for the total payoff of the loan balance in the event of a sale or transfer of title to the secured real property. A contract provision which authorizes the lender, at its option, to declare immediately due and payable sums secured by the lender's security instrument upon a sale of transfer of all or any part of the real property securing the loan without the lender's prior written consent. For purposes of this definition, a sale or transfer means the conveyance of real property of any right, title or interest therein, whether legal or equitable, whether voluntary or involuntary, by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three years, lease-option contract or any other method of conveyance of real property interests.  Standard language  which states that the loan must be paid when a house is sold.

Duress  Unlawful constraint or action exercised upon a person who is forced to perform an act against his or her will.

Earnest Money    An advance payment towards the purchase price of property that binds the parties to a purchase contract for property. It is usually not refundable if the purchase doesn't go through as a fault of the buyer, unless specified otherwise.  Also known as Good Faith Deposit.

Emergency Petition   See "Bare Bones" petition.

Encumbrance   A legal right, claim or lien upon real property that diminishes the owner's equity or the land's value. Typical encumbrances are mortgages, trust deeds, judgments, assessments, mechanic's liens, easements, etc.

Environmental Risk Risk of loss of collateral value and of lender liability due to the presence of hazardous materials, such as asbestos, PCB's, radon or leaking underground storage tanks (LUSTS) on a property. CERCLA (Comprehensive Environmental Response, Compensation Liability Act) of 1980 discusses potential liabilities due to environmental problems.

Equal Credit Opportunity Act  Prohibits discrimination in any aspect of a credit transaction on the basis of race, religion, age, color, national origin, receipt of public assistance funds, sex, or marital status.

Equity (in property)   The property's current value minus the sum of all liens against it.

Equity Line of Credit (HELOC)   A mortgage loan that works much like a charge card, wherein a homeowner borrows money as needed, up to a pre-negotiated limit. Interest is paid only on the amount of the loan used and the borrower can pay off the balance as quickly or as slowly as they like.

Equity of Redemption    A right of the owner to reclaim property before it is sold through foreclosure by the payment of the debt, interest, and costs.

Escheat  The reversion of property to the state or county, as provided by state law, in cases where a decedent dies intestate without heirs capable of inheriting or when the property is abandoned.

Escrow  Amounts set aside for a particular purpose.  For example, one type of escrow would be money paid to your mortgage company for payment of property taxes, and insurance.  

Escrow Analysis  A lender's periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower's monthly mortgage payment to pay for expenses such as property taxes and insurance.

Estoppel   A bar to the assertion of a right or a defense in consequence of a previous position, act or representation.

Estoppel Certificate  A document in which a borrower certifies the amount he or she owes on a mortgage loan and rate of interest.

Exclusive Agency Listing   A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property, on the owner's stated terms, for a commission.  The owner reserves the right to sell without paying anyone a commission.

Exclusive Right to Sell Listing   A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, and agrees to pay the broker a commission when the property is sold whether by the broker, the owner, or another broker.

Executory Contract  A contract under which something remains to be done by one or more of the parties.

External Obsolescence   Reduction in a property's value caused by factors outside the subject property such as social or environmental forces or objectionable neighboring property.  Also called locational obsolescence or economic obsolescence.

Eviction    A legal procedure to remove a tenant (including former homeowner) for reasons including failure to pay rent.

Exempt Property   Property that the law allows you to keep when you are faced with collection on an unsecured debt.        

Exit Strategy    The way in which an investor closes out a specific investment, usually for cash.

Fair Debt Collection Practices Act   A federal law passed in 1977 which outlaws debtor harassment and other types of collection practices. The act regulates collection agencies, original creditors who set up a separate office to collect debts, and lawyers hired by the creditor to help collect overdue bills. An original creditor--the company or individual that originally granted the credit--is not covered by the act, but may be covered by similar measures approved by state governments.  

Fair Market Value  The highest price a property in it's as-is, where-is, with all faults condition, will bring on the open market, given an informed and freely willing buyer and seller.

FANNIE MAE  (FNMA)  Federal National Mortgage Association . . . the largest secondary-market investor in residential mortgages in the United States. Provides a constant and orderly market for banks to go to when they need to sell mortgages in order to keep their loan portfolios in balance with government-mandated liquidity ratios.

Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac) A stockholder-owned corporation chartered by Congress to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages from lenders and packages them into securities that are sold to investors.

FHA (FHA Loan) Federal Housing Administration (formed in 1934). It's now a branch of H.U.D. It's basic function is to spur housing in the directions that Congress mandates by issuing mortgage insurance to institutional lenders on the loans they make under the 47 different loan programs that FHA now sponsors. With such loan insurance lenders are willing to lend with smaller down payments and at lower rates of interest. A loan insured by the Federal Housing Administration open to all qualified home purchasers. Interest rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans. FHA loans cannot exceed the statutory limit.

Fiduciary  A person serving in a position of trust.

Fiduciary Duty             The relationship of trust that buyers and sellers expect from a real estate agent. The term also applies to legal and business relationships.            

Financial Institutions Reform, Recovery and Enforcement Act of 1989 FIRREA This Federal Act was passed for the primary purpose of facilitating the "bailout" of the savings and loan industry in the wake of the insolvency of its insurer, the Federal Savings and Loan Insurance Corporation. Title XI of FIRREA sets forth appraisal guidelines which are frequently followed in the appraisal of commercial real estate assets for CMBS.

Flipping   Buying and then reselling property for a profit within a very short holding period.

Flipping the Contract  occurs when a contract to purchase a property is assigned to another before the first contract is closed.

Forced Sale   When one sells or loses his property without actually wanting to dispose of it.

Forbearance    A course of action a lender may pursue to delay foreclosure or legal action against a delinquent borrower.

Forbearance Agreement  A formal agreement between a borrower and a lender to temporarily postpone an ongoing foreclosure.

Foreclosure The process by which a lender takes back a property on which the mortgagor has defaulted. A servicer may take over a property from a borrower on behalf of a lender. A property usually goes into the process of foreclosure if payments are more than 90 days past due.

For Sale By Owner (FSBO)  The owner markets and sells the home without using a licensed real estate broker to avoid paying a sales commission.     

Fraud  Deception that causes a person to give up property, or a lawful right.

Fraudulent Transfer  Giving away property to keep it from creditors.

Free and Clear   Ownership of property free of all indebtedness. When an owner's equity is equal to the fair market value of her property.

Friendly Foreclosure   A foreclosure that is actually instigated by the mortgagor/trustor for some ulterior reason - generally to clear up clouded title, etc.

Functional Obsolescence  A loss of value to an improvement to real estate due to functional problems often caused by age, or poor design.

Funding  Money that someone loans, invests in, or gives you because they believe in the plan you've submitted.

Garn-St. Germain Act   Sec. 1701j-3. - Preemption of due-on-sale prohibitions. Exempt from DOS includes a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property

Garnishment   A creditor's seizure, to satisfy a debt, of property belonging to the debtor that is in possession of a third party. An example would be the seizure of money from your bank account, or your wages (wage garnishment).

Good-Faith Estimate  An estimate from an institutional lender that shows the costs a borrower will incur, including loan-processing charges and inspection fees.

Government Sponsored Enterprise GSE Agency, such as GNMA, FHLMC, etc., formed by the Federal government to provide a secondary market for residential real estate loans.

Grace Period   A period of days during which a debtor may cure a delinquency without penalty (before triggering a late charge, a foreclosure or an acceleration of the balance due).

Grantee   The person acquiring title to real property by a deed.

Grantor   The person transferring title to real property by a deed.

Guilty Knowledge  Where a broker was aware of his or her salesperson's wrongdoing, but did not report the activity to the applicable authority.

Hard Money Loan    A loan made based primarily upon the collateral's equity, rather than the creditworthiness of the Borrower.

Highest and Best Use  That possible use of land that would produce the greatest net income and thereby develop the highest land value.

Holdover Tenancy    A tenancy whereby a lessee retains possession of a leased property after his or her lease has expired and the landlord, by continuing to accept rent, agrees to the tenant's continued occupancy. 

Home Equity Loan HEL Loan made to provide homeowners with access to excess built-up equity in their residence. Typically, secured by a junior lien mortgage where a superior lien mortgage exists.

Homesteading   A document that protects some of a home's equity from lawsuits.           

HUD-1 Uniform Settlement Statement   A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.          

Index    A published measure of economic conditions usually relative to other financial instruments such as Treasury notes or Treasury bills. The lender uses a particular index to calculate the interest rate on an adjustable rate mortgage (ARM) by adding a fixed margin to the index. The most common indexes are:

            Constant Maturity Treasury (CMT)

            Treasury Bill (T-Bill)

            12-Month Treasury Average (MTA)

            11th District Cost of Funds Index (COFI)

            London Inter Bank Offering Rates (LIBOR)

            Certificates of Deposit (CD) Indexes

            Prime Rate

Interest Rate Cap Limits the interest rate or the interest rate adjustment to a specified maximum. This protects the borrower from increasing interest rates.

Institutional Lenders    Banks, savings & loan associations, and insurance companies who lend out depositors' money as contrasted with private individuals lending out personal funds.

Insolvent    A person or business that does not have sufficient assets to pay it's debts.

Illiquid   (an investment) Not readily convertible to cash.

Insurable Interest   An interest in property substantial enough to cause the owner of it an actual loss if it were damaged or destroyed. The beneficiary of any insurance policy, even a title insurance policy, must show an "insurable interest" in order to be covered by it.

Interest   The cost of using borrowed money. It's quoted as an annual percentage of the loan amount. The rate can either be fixed or fluctuate ("adjust") over the life of the loan.

Inter-Vivos Trust     A trust created during the Decedent's lifetime, also called a living trust.

Involuntary Lien   A lien imposed upon property by the operation of law rather than at the will of the owner. Property taxes, federal income taxes, bonded assessments and abstracts of judgment are examples of involuntary liens.

Involuntary Prepayment   Prepayment on a mortgage loan due to default

Joint Tenancy   An estate owned by two or more parties in equal shares that is created by a single transfer document. Upon the death of a joint tenant the surviving joint tenants take the entire decedent's share of the property, so nothing passes to the heirs of the deceased.

Judgment   The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person's property.         

Judgment Lien   A general lien (good for 10 years) created by a court ordering a debtor to pay a certain amount of money to the judgment creditor. The lien will bind to the debtor's real property once an abstract of the judgment is recorded. Thereafter the debtor won't be able to resell, refinance or buy any other property in the county without paying off the lien.

Judicial Foreclosure   A foreclosure that's processed via a court action. Usually limited to a collection action on an involuntary, judgment lien that automatically attached against a debtor's real property by operation of law (such as a recorded abstract of judgment).

Judgment Proof    People or businesses with property of minimal value, which can be entirely protected by exemptions, making it difficult or impossible for any creditor to force you to pay a debt.

Junior Bene Buyout  The purchase of a junior mortgagee or beneficiary's mortgage or trust deed position via an assignment at a steep discount because of an impending foreclosure on a senior mortgage or trust deed. If done correctly the new mortgagee/beneficiary will be paid in full via the resale or refinancing of the real property.

Junior Lien   A lien that does not have first claim on the property it is secured by because it was recorded later than a competing lien secured by the same property.

Junior Mortgage   A mortgage loan that is subordinate to the primary, or senior loan(s).

Late Charge   A fee imposed on a borrower when the borrower does not make a payment on time.

Late Payment   A payment a lender receives after the due date has passed

Lease Option  A lease that contains the right to purchase the property for a specific price within a certain time frame.         

Letter of Credit (LOC)  An obligation by a third party to cover losses due to delinquencies and foreclosure. The rating of the third party is commonly required to be, at minimum, equal to the highest rating of the securities. A form of credit enhancement

Lien    A claim against real property. Also called a 'security interest' or an 'attachment'.

Liquidation The sale of a defaulted mortgage loan or of the REO property that previously secured the loan.

Liquidation Fee That portion of the Special Servicer's compensation that is payable when the Special Servicer obtains a full or discounted payoff with respect to any Specially Serviced Mortgage Loan or obtains any Liquidation Proceeds with respect to any Specially Serviced Mortgage Loan or REO property. The fee is calculated by applying the Liquidation Fee Rate as set forth in the Pooling and Servicing Agreement to the related payment or proceeds.

Lis Pendens  (LPs)  A recorded notice of pending litigation, the outcome of which could affect the title to a particular piece of property.

Listing Agreement   A limited-time agreement with a licensed real estate broker that authorizes the broker to represent the seller in the sale of their property.

Lock  A lender's promise to hold a certain interest rate and points for you, for a given number of days, while your loan application is processed.

Loan-To-Value (LTV)   The relationship between the dollar amount of the loan and the value of the property.  For instance, a loan with a $70,000 loan balance on a property with a $100,000 value would result in an LTV of 70%. Lenders require a protective equity cushion between their loan positions and the fair market value of a secured property. Nonguaranteed lenders generally require that their loans amount to no more than 75% to 85% of their appraiser's estimate of the market value of the encumbered property.

Lock-Out Period A period of time after loan origination during which a borrower cannot prepay the mortgage loan.

London Interbank Offered Rate LIBOR The short-term (1 year or less) rate at which banks will lend to each other in London. Commonly used as a benchmark for adjustable rate financing.

Loss Severity Rate of loss on a liquidated mortgage; defined as the ratio of (a) the outstanding principal on the mortgage loan(s) minus the realized loss over (b) the outstanding principal on the mortgage loan(s).

Low-Ball Offer    An offer made to a seller that is substantially below their asking price, and/or market value.

Low Income Housing Tax Credit  Tax credit given to owners for the construction or rehabilitation of low income housing. 

 

Marketable Title    A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Market Conditions   Factors affecting the sale and purchase of homes at a particular point in time.            

Market Value   The highest price which a buyer, willing, but not compelled, would pay, and the lowest price a seller, willing but not compelled to sell, would accept. The current value of property as determined by exposure to offers from willing buyers in the open market.

Master Servicer Required to service mortgage loans collateralizing a CMBS on behalf of, and for the benefit of, certificate holders. Responsibilities vary according to the servicing agreement. Common responsibilities include a) collection of mortgage payments and delivery of the funds to the trustee; b) advancement of any late payments to the trustee; c) provision of mortgage performance reports to bond holders; and d) transfer of all loans that become non-performing to the special servicer.

Mechanic's Lien   A non-voluntary, statutory lien recorded against a specific property in favor of contractors/materialmen for unpaid improvements made to the property. A mechanic's lien priority is established when the improvements were begun (visible to the eye test) rather than when it was recorded. The lien must be coupled with a court action to be perfected

Memorandum of Agreement   A writing meant to memorialize the essentials of a transaction or act as an actual contract.

MLS  Multiple Listing Service    An exclusive listing with the additional authority and obligation on the part of the listing broker to distribute the listing to other brokers in the multiple listing organization.

Modification     A change in any of the terms of the loan agreement.        

Mortgage   A written pledge of property that is put up as security for the repayment of a loan. The lender is the mortgagee and the property owner is the mortgagor.

Mortgagee Approved Preforeclosure Short Sale   see short sale

Mortgage Banker     A loan originator that uses its own funds to make real estate loans which it then resells to long term mortgage investors.

Mortgage Broker   An agent that matches borrowers with lenders in exchange for a referral fee that amounts to part or all of the "loan points" being charged the borrower.

Mortgage Insurance Premium   The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

Mortgage Servicer   A bank, mortgage company, or similar business that communicates with property owners concerning their mortgage loans.  The servicer usually works for another company that owns the mortgage. A mortgage servicer may accept and record payments, negotiate workouts, and supervise the foreclosure process in the event of a default.

Motivated Seller    Any seller with a strong incentive to make a deal.

Multifamily Property A building with five or more residential units. Usually classified as a high rise, low rise or a garden apartment. There are three rating types for multifamily properties: Class A, B, and C.  Class A Properties are above average in terms of design, construction and finish; command the highest rental rates; have a superior location in terms of desirability and/or accessibility; and generally are professionally managed by national or large regional management companies. Class B Properties frequently do not possess design and finish reflective of current standards and preferences; construction is adequate; command average rental rates; generally are well- maintained by national or regional management companies; and unit sizes are usually larger than current standards. Class C Properties provide functional housing; exhibit some level of deferred maintenance; command below average rental rates; usually located in less desirable areas; generally managed by smaller, local property management companies; tenants provide a less stable income stream to property owners than Class A and B tenants.

Multiple Listing Service (MLS)  The combined property listings of local real estate brokers, /members that are pooled together in an MLS book and computer network for the widest marketing exposure to their membership at large.

Negative Amortization Occurs when interest accrued during a payment period is greater than the scheduled payment and the excess amount is added to the outstanding loan balance. For example, if the interest rate on an ARM exceeds the interest rate cap, then the borrower's payment will not be sufficient to cover the interest accrued during the billing period. The unpaid interest is added to the outstanding loan balance.

Net Operating Income (NOI) Total income less operating expenses, adjustments, etc., but before mortgage payments, tenant improvements and leasing commissions.

Net-Net Lease (NN) Usually requires the tenant to pay for property taxes and insurance in addition to the rent.

Non-Assumption Clause    A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.

Nonconforming Loan  Loans that do not comply with FNMA or Freddie Mac guidelines. These guidelines establish the maximum loan amount, down payment, borrower credit and income requirements, and suitable properties. Loans that do conform to these guidelines may be sold to Fannie Mae or Freddie Mac.

Notary Public   A bonded officer licensed by the state to "acknowledge and attest" to the validity of signatures of others. Notarized signatures are required of the general public for any documents that individuals record in order to prevent the perpetration of fraud by forgery.

Notice of Default  (NOD) To initiate a non-judicial foreclosure proceeding involving a public sale of the real property securing the deed of trust, the trustee under the deed of trust records a Notice of Default and Election to Sell ("NOD") the real property collateral in the public records.

 

Offer and Acceptance   Two essential components of a valid contract; a "meeting of the minds," when all parties agree to the exact terms.

Optional Termination A legal provision in a CMBS that defines when and who can liquidate a CMBS prior to the last payment on the mortgages in the pool.

Option   A legal right to purchase property at some future date for a specified price and terms. The right is forfeited if not exercised in time.

Oral   By mouth; not written; verbal; spoken; parol.

Other Real Estate Owned (OREO) A term used primarily by commercial banks to identify real estate on the books that was taken back through foreclosure of a mortgage loan. The term "Other" REO is used by banks to distinguish foreclosure real estate from bank real estate owned (REO) which is corporate real estate assets. Typically, the real estate industry uses the term REO for foreclosed real estate.

Overbid   That amount of money bid in excess of the trustee's or sheriff's minimum bid. It is distributed, pro tanto, to the succeeding equity holders.

Partial Claim is a loss mitigation technique used with HUD insured loans wherin HUD pays a claim to the loan servicer which brings the account current.

Per-Diem Interest     Interest charged or accrued daily.  

Personal Property   Property that is movable or harvestable, i.e. securities, furniture, cars, promissory notes, clothing, intangibles, etc.

Physical Deterioration   Loss of value due to wear and tear or action of the elements.

P.I.T.I   Refers to the monthly housing expenses of: Principal, Interest, Taxes and Insurance

Plaintiff   The person or business that initiates a lawsuit.

Points    A charge made by a lender that's part of the borrower's cost of obtaining a loan. Each point equals one percent (1%) of the loan amount. Points increase the effective yield on the loan above the nominal interest rate being charged.

Pooling and Servicing Agreement A legal contract defining the responsibilities and the obligations for management of a CMBS particularly for the Master Servicer and the Special Servicer. This primary document governs and controls much of the CMBS process. Also abbreviated as PSA, not to be confused with the Public Securities Association which is also known as PSA.

Portfolio Loan   A loan that a lender intends to hold in inventory rather than resell in the secondary market. Such a loan only has to satisfy the lender's guidelines rather than the arbitrary rules of the secondary mortgage market.

Posting   Giving notice by physically attaching it to a prescribed bulletin board and/or attaching it to the affected property itself.

Postponement   An oral announcement, made in lieu of a scheduled sheriff's or trustee's sale, that reschedules the pending sale.

Power of Attorney  (POA)  A document that authorizes an individual to act on behalf of someone else.

Pre-Approval Letter   A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.            

Preliminary Title Report  ("Prelim")   A title company report showing the open title record of a property prior to the issuance of a title insurance policy.

Prepayment Penalty   A fee charged by a lender if a loan is paid off earlier than required.