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ABSTRACT OF TITLE | A complete historical summary of all recorded documents affecting the title of a designated parcel of real estate.
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ACCELERATION CLAUSE | A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a payment is missed or on the sale of a property.
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ADDITIONAL PRINCIPAL PAYMENT | A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
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ADJUSTABLE RATE MORTGAGE (ARM) | A mortgage program, in which the interest rate may adjust periodically according to a predetermined index (i.e. Libor, MTA COFI) and margin.
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ADJUSTMENT DATE | The predetermined date on which the interest rate for an adjustable rate mortgage will change.
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ADMINISTRATOR | An individual appointed by a probate court to administer the estate of a person who died in testate.
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AD VALOREM | Latin phrase for "According to value". Real Estate taxes are known as Ad Valorem taxes, that being based upon the value of the property.
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ADVERSE ACTION | Under the Equal Credit Opportunity Act, adverse action occurs when a complete mortgage application is submitted to a lender, mortgage banker or a mortgage broker and the credit request or request for extension of credit is denied or not approved for the amount or term requested by the applicant. Written notice must be given to the applicant
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AMORIZATION (POSITIVE) | Repayment of a debt in periodic installments of principle and interest resulting in payment in full at the end of the loan term. (See Negative Amortization for additional information).
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AMORTIZE | A loan with predetermined regularly scheduled payments that cover both principal and interest.
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ANNUAL PERCENTAGE RATE (APR) | The cost of a mortgage as stated as a yearly interest rate; including accruing interest, mortgage insurance, third party charges (appraisal fees, filing fees, etc) and mortgage origination fees. Under the Federal Truth-In-Lending Act (Regulation "Z"), the APR must be disclosed to the borrower within 3 business days of receipt of a loan application.
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APPRAISAL | A physical report prepared by a qualified appraiser that sets forth an opinion or estimate of value for the purpose of financing. The most common type of appraisal for residential properties is the Comparable Sales Approach. Other appraisal methods are the Cost Approach and the Income Approach. An appraisal is usually ordered by the lender, the mortgage banker or the mortgage broker, whom ever originates the loan application.
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APPRECIATION OF REAL ESTATE | An increase in property value due to changes in economic factors; the inverse of depreciation.
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ARREARS | Payment of an obligation at the end of the period for which it is due or levied; the opposite of payable in advance. Mortgage interest and real estate taxes are generally paid in arrears. A mortgage payment due on the 1st is generally for the previous month.
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ASSESSED VALUE | The valuation placed on property for the purpose of real estate taxation by a public tax assessor.
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ASSESSMENT | A levy placed against property for a special purpose. This is common for PUD's, condo's and Co-op's.
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ASSESSMENT ROLLS | The public record of a taxable property.
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ASSIGNEE | The person or party who receives an ownership interest in a mortgage.
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ASSIGNOR | The person or party who transfers an ownership interest in a mortgage.
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ASSIGNMENT OF MORTGAGE | A legal document that transfers the ownership of a mortgage from one party, or lender to another party or lender.
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ASSUMPTION OF MORTGAGE | An agreement by a purchaser of real property to assume liability on an existing debt secured by a mortgage with its original terms left intact. An assumption of mortgage does not automatically release the seller of the property from liability on the accompanying note.
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ATTORNEY-IN-FACT | A competent party having written power-of-attorney to legally perform certain acts for another person. Usually, a mortgage lender requires a limited power-of-attorney specific to the transaction.
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BALANCE SHEET | A financial statement showing assets, liabilities, and the net worth as of a specific date.
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BALLOON MORTGAGE | A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at the end of the term.
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BALLOON PAYMENT | The final lump sum payment that is made at the maturity date of a balloon mortgage.
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BANKRUPTCY | A condition of financial insolvency in which a person's liabilities exceed assets and the person is unable to pay current debts. Generally, a person must wait four years following the discharge of the bankruptcy to be eligible for a mortgage loan. Bankruptcy is reported by most credit agencies for a period of ten years.
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BASIS POINTS | A unit of measurement used to describe yield. A basis point is 1/100 of 1%. Example: 100 basis points= 1%; 75 basis points=3/4%; 50 basis points=1/2%.
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BEFORE TAX INCOME | Income before any taxes have been deducted.
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BINDER | A commitment to insure; a temporary report effective for a limited time until a permanent policy is issued. A title insurance binder lists all the known liens and defects affecting the title.
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BIWEEKLY MORTGAGE | A mortgage with payments due every two weeks totaling 26 payments a year thus reducing the cost of a 30 year mortgage to that of a 21 year mortgage.
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BLANKET MORTGAGE | A mortgage lien securing several parcels of property, frequently used by developers who have purchased a single tract of land intending to subdivide into individual parcels. The developer normally requires a "partial release" clause so that individual parcels can be released form the blanket mortgage as they are sold.
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BLEMISH ON TITLE | Any condition that adversely affects the title to real estate or curtails an owner's rights. Mortgages that were never properly cancelled, illegal encroachments etc.
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BRIDGE LOAN | Borrowing against the equity in one's present home to be able to purchase another home before the existing home sells.
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BROKER | A person or company, who for a commission or fee, brings together and assists in negotiating contracts between them.
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BUILDING CODE | Local regulations that control the design, construction and the materials utilized in the construction of a structure. Building codes are based upon health and safety standards. Most national codes were developed in the mid 1970's.
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BUY-DOWN | A cash payment to a lender to reduce the interest rate a borrower must pay. Buy-downs are usually temporary and help the borrower qualify at a lower rate. These mortgages are sometimes called two-step mortgages.
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CAP | A provision in an adjustable rate mortgage ARM that limits how much the interest rate of mortgage payments my increase or decrease in a specific period of time. There could be multiple CAP's: i.e. life of the loan caps, periodic payment cap, and periodic rate cap
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C.E.M.A. | The New York Consolidation, Extension & Modification Agreement. The New York CEMA is utilized for refinances in rather than opting for the traditional cancellation of the old Mortgage Note and release of the mortgage lien.
The CEMA enables borrowers with a mortgage secured by property located in New York to reduce the amount of the Mortgage Recording Tax. A copy of the NY CEMA Form 3172 can only be used on New York properties. The latest copy of this form is available through Freddie Mac on their website at http://www.freddiemac.com/uniform/.
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CERTIFICATE OF ELIGIBILITY | A document used by the Department of Veteran's Affairs (DVA) to certify a veteran's eligibility for a VA loan.
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CHATTEL MORTGAGE | A mortgage including a line of credit on personal property.
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CLOSING | See Real Estate Closing
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CLOSING COSTS (Mortgage) | The monies paid by a borrower at a real estate closing for the purpose of a mortgage loan. This could include origination or discount points, title insurance, survey, attorney's or closing agent fees, filing fees, transfer tax on new construction, mortgage taxes and prepaid items such as taxes and hazard insurance escrow payments.
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CLOSING STATEMENT (HUD1) | The HUD-1 settlement statement shows how costs/fees are allocated between buyer and seller. .
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COMMITMENT | A written promise to make a loan for a specified amount and on specified terms and conditions.
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CONFORMING LOAN | A mortgage loan in compliance with the underwriting criteria and current loan limits of Fannie Mae and Freddie Mac.
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CONSTRUCTION LOAN | A loan where the proceeds are used to finance the actual construction of a structure. The loan is typically made in disbursements called "draws". The number of draws is dependent upon the size of the loan or the type of structure.
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CONTRACT FOR DEED (LAND CONTRACT, AGREEMENT FOR DEED, INSTALLMENT SALES CONTRACT) | A method of selling and financing property whereby, the buyer obtains possession but the seller retains the legal title.
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CONVENTIONAL MORTGAGE | A residential mortgage that is not insured by any federal government agency. The loan amounts are at or less than the maximum Fannie Mae loan limit. The Fannie Mae loan limits are subject to modification annually.
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CONVEYANCE | The transfer of the title to land from one person or class of persons to another.
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CO-OPERATIVE (co-op) | A type of ownership in which the residents of a multi-unit housing structure own shares of stock in the co-operative corporation that owns the specific structure. The corporation gives each resident the right to occupy their specific unit through a proprietary lease. Both the corporation and the individual could have a separate mortgages.
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COST OF FUNDS INDEX | An index utilized as a basis for a certain adjustable rate ARM program. The COFI represents the average of the cost of savings, borrowings and advances of the member banks in the 11th District of the Federal Home Loan Bank.
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COVENANT | The legally enforceable promise or restriction in a mortgage or deed.
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CREDIT HISTORY | An individual's personal record of their debt payment history. The credit history includes lines of credit, revolving and fixed payments, high balance, amount outstanding, month reported, delinquencies, judgments and charge-off's.
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CREDIT REPORT | A report of an individual's credit history prepared by a credit bureau and used by the lender in determining a loan applicant's credit worthiness.
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CREDIT SCORING | A numerical measurement that reflects the ability of a borrower to manage credit.
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DEBT SERVICE | The periodic payment of principal and interest as specified in a promissory note.
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DEED | A written document that transfers an ownership interest in real property from a seller (grantor) to a buyer (grantee).
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DEED IN LIEU | A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.
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DEED OF TRUST | An instrument used in some states in place of a mortgage. The borrower conveys legal title to a trustee who holds the title as collateral for the benefit of a lender and subsequently re-conveys the title to the borrower upon payment of the debt.
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DEED RESTRICTION | A limitation placed in a deed limiting or restricting the use of real property.
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DEFAULT | Breach or failure to make mortgage payments on a timely or scheduled basis which, if not cured, could lead to foreclosure.
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DEFEASANCE CLAUSE | Upon payment in full to the lender, this clause in a mortgage requires the lender to "give back" his security interest in the property and issue to the borrower a recordable Satisfaction of Mortgage. This clause also prohibits the lender from foreclosing as long as the borrower complies with all the terms and conditions of the mortgage.
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DEFICIENCY JUDGEMENT | A personal judgment levied against the borrower for the balance of the mortgage debt when a foreclosure sale fails to generate funds sufficient to satisfy the debt.
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DEPRICATION | A loss of value in real estate brought about by age, physical deterioration, functional or economic obsolescence. Broadly, a loss in value from any cause; the opposite of appreciation.
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DESKTOP UNDERWRITER | Fannie Mae's automated underwriting system designed to enable mortgage lenders to process loan applications efficiently and objectively. Referred to as DU. Freddie Mac version is known as LP
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DIRECT ENDORSEMENT PROGRAM | Authorization provided to an approved lender to originate and underwrite FHA insured loans without obtaining approval from the FHA prior to funding the loan.
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DISCOUNT | The sale of a note for less than its face value. The purpose of a discount is to adjust the annual yield on the note.
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DISCOUNT POINT | A percent of the face amount of the loan. Discount points are a one-time charge assessed at closing by the lender to increase the lender's yield to a competitive level. Points paid.
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DISINTERMEDIATION | The flow of funds out of savings institutions into short-term investments in which interest rates may be higher. This shift normally results in a net decrease in the amount of funds available for long-term real estate financing.
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DOCUMENTARY STAMPS | A tax by the Florida State Department of Revenue on deeds of conveyance and mortgage notes.
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DOWER | The rights of a widow / widower in the property of their spouse at death.
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DUE-ON-SALES (ALIENATION) CLAUSE | A form of acceleration clause that gives a lender the option to call a mortgage loan due upon the sale or transfer of the property. A mortgage with Due-On-Sale clause is not assumable.
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EASEMENT | A right or interest in the land of another entitling the easement holder to a specific limited use, such as installing power and telephone lines, or crossing over the property. Ingress is the right to enter upon another's land, whereas egress is the ability to move about and exit unchallenged from that land. While size and location are important aspects of an easement, the age is immaterial.
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ENROACHMENT | A physical intrusion upon the property of another. It is usually revealed by a survey.
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ENCUMBRANCE | Items that affect or limit the fee simple title such as mortgages, leases, easements, and restrictions.
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EQUAL CREDIT OPPORTUNITY ACT (ECOA) | A federal law that requires lenders and other creditors to make credit equally available without discrimination based on; race, color, religion, national origin, age, sex marital status, or receipt of income from public assistance programs. Commonly referred to as (Regulation "B").
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EQUITY (OWNER'S EQUITY) | The difference between a property's fair market value and the current indebtedness on a property.
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ESCHEAT | The reversion of property to the state if the owner dies intestate and without heirs.
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ESCROW | Documents entrusted to a disinterested third party who assumes responsibility for disbursement of paperwork and funds.
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ESCROW IMPOUNDS | That portion of a mortgagor's monthly payment held by the lender to pay for real estate taxes, hazard insurance, and mortgage insurance, as they become due.
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ESTATE | The ownership interest of an individual in real property which is measured by its potential duration; the degree, quantity, nature, and extent of interest that a party has in real property.
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ESTOPPEL CERTIFICATE (LETTER) | A written statement that bars the signer from making a claim that is inconsistent with that party's prior statement. An Estoppels Certificate verifies the loan balance and is sometimes referred to as a "payoff letter".
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EVICTION | The lawful expulsion of an occupant from real property.
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EXCULPATORY CLAUSE | A provision in a mortgage or note in which the lender waives the right to a deficiency judgment against the borrower and the borrower is relieved of personal liability to repay the loan.
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EXECUTE | To sign or to ratify a document.
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FAIR ISAAC & CO. (FICO) | The developer of a credit scoring system used by some credit scoring reporting agencies.
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FANNIE MAE | A congressionally chartered by Congress in 1938, shareholder owned, to support the secondary mortgage market by purchasing and selling government underwritten residential mortgages. Today Fannie Mae purchases more conventional mortgages than FHA or VA and their stock is publicly traded.
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FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) | A Federal agency that provides assistance to victims of natural disasters. FEMA publishes Flood Insurance Rate Maps.
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FEDERAL HOUSING ADMINISTRATION (FHA) | A division of HUD. Its main activity is insuring residential mortgage loans made by private lenders.
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FEDERAL TRADE COMMISSION (FTC) | A federal agency that monitors advertising practices and investigates and prosecutes unfair and deceptive trade practices.
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FEE SIMPLE | The most complete possible ownership in land. Fee Simple title has an indefinite duration is freely transferable, and inheritable.
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FICO SCORE | A FICO score is a statistical program developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrower's credit history into a single number.
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FIDUCIARY | A party in a position of trust and confidence for another.
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FIRST MORTGAGE | A mortgage having priority over all other voluntary liens against certain property, as evidenced by recording; the earliest recorded mortgage remaining unpaid.
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FIXED RATE MORTGAGE (FRM) | A mortgage in which the interest rate and monthly payments remain constant over the life of the loan.
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FLOOD CERTIFICATION FEE | A fee paid to an independent third party to determine whether or not property improvements located in a flood zone.
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FLOOD INSURANCE | Insurance subsidized by the federal government required for poverty improvements in federally designated flood area (A&Z zones).
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FOREBEARANCE | Refraining from taking legal action despite the fact that a mortgage is in default.
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FORECLOSURE | The legal procedure undertaken by a mortgage holder for the purpose of having property seized, sold and the proceeds applied to the payment of a defaulted debt.
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FREDDIE MAC | A private corporation authorized by Congress in 1970 to provide secondary mortgage market support for conventional mortgages originated by Savings & Loan Associations (currently known as Savings Associations). Today, Freddie Mac is a publicly owned corporation.
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FUNDING | The disbursement of funds to complete a transaction that occurs when a lender provides money to close a loan, or an investor provides funds to the lender to purchase a mortgage loan.
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GIFT | A gift of money by a family member. A letter confirming the gifting of the monies and that no repayment is required is usually required.
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GIFT OF EQUITY | Giving of a gift, whereby the gift is equity in a property. This is usually done when one family member gives a property to another family member in lieu a below market sum of money.
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GINNIE MAE | A government agency (Division of HUD) that administers the mortgage-backed securities program which channels new funds into residential financing through the sale of privately issued securities carrying a Ginnie Mae guarantee.
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GINNIE MAE MORTGAGE-BACKED SECURITIES | Mortgages guaranteed by Ginnie Mae are issued through mortgage bankers, commercial bankers, savings associations, savings banks, and other institutions. The GNMA security holder is protected by the "full faith and credit of the U.S." Ginnie Mae securities are backed primarily by FHA and VA loans.
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GRADUATED PAYMENT MORTGAGE (GPM) | A residential mortgage loan, which has initial low monthly payments that increase gradually and then level off for the duration of the loan term. A GPM with an adjustable interest rate may result in initial negative amortization.
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GRANT | A generic term applicable to transfers of real property.
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GRANTEE | The party who receives a deed; the buyer.
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GRANTOR | The party who signs and gives a deed; a seller.
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HAZARD INSURANCE | A contract whereby an insurer, for a premium, undertakes to compensate the insured for a loss on a specific property due to fire, windstorm, and other natural hazards.
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HIGHEST AND BEST USE | A principle of value that focuses on the most profitable, legal use to which a property can be put.
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HOME EQUITY LINE OF CREDIT | A revolving line of credit against the equity in one's home allowing the homeowner to borrow as needed, up to a predetermined maximum.
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HOMEOWNERS PROTECTION ACT | A federal law requiring automatic cancellation of Private Mortgage Insurance (PMI) when the loan-to-value ratio is reduced to 78%.
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HOMESTEAD TAX EXEMPTION | The Florida Constitution allows a tax exemption from assessed property value. The standard homestead tax exemption is $25,000 for all qualifying homesteads and is deducted from the assessed value when calculating taxable value.
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HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF (HUD) | Established in 1965 to implement and administer government and urban development programs. The range of programs include, community planning, equal opportunity n housing and FHA mortgage loans.
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HYPOTHECATE | To give a thing a security without the necessity of relinquishing title or possession.
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INCOME PROPERTY | Real estate developed or improved to produce income.
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INDEX | An economic measurement of the cost of funds used as a base to determine the periodic interest rate adjustments for Adjustable Rate Mortgages. Common indexes include Treasury Bills, both the 4th and 11th Federal Home Loan Bank District Cost of Funds COFI, MTA CMT and the London Interbank Offered Rate (LIBOR), etc.
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INTANGIBLE TAX | A Florida state tax on certain items of intangible personal property such as mortgages.
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INTEREST | A fee paid for the use of borrowed money, usually expressed as an annual percentage.
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INTEREST ONLY LOAN | A loan program designed whereby the borrower only repays interest on the loan for a specific period of time. The balance could balloon at the end of the period, become an adjustable rat mortgage of a fixed rate mortgage for a specified period of time, as noted in the Mortgage and Note.
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INTEREST RATE CAP | A provision in an adjustable rate mortgage ARM that limits how much the interest rate of mortgage payments my increase or decrease in a specific period of time. There could be multiple CAP's: i.e. life of the loan caps, periodic payment cap, and periodic rate cap
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INTERMEDIATION | The process whereby financial middleman consolidate small savings accounts of individual depositors and invest those funds in large, stable, diversified projects; the opposite of disintermediation.
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INVESTMENT PROPERTY | A residential property that is not owner occupied. The income could be derived by rental income or appreciation.
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INVOLUNTARY LIEN | A lien imposed against property without an owner's consent.
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JUDGMENT LIEN | A lien placed on property involuntarily as a result of a court action.
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JUMBO MORTGAGE | A mortgage that exceeds the loan limits as set forth by Fannie Mae, also, referred to as a non-conforming mortgage. Jumbo Mortgages limits were traditionally capped at $650,000, however many lenders have recently extended the limit to 1 - 1.2 million. Traditionally, loans over $650,000 have been considered Super Jumbo Mortgages.
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JUNIOR MORTGAGE | Any lien subsequent to the claims of the holder of a prior senior mortgage as evidenced by the time and date of recording.
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LATE CHARGE | A penalty computed on the principle & interest which a borrower is required to pay for failure to pay a regular installment when due.
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LEASEHOLD ESTATE | A manner of holding title to a property wherein the mortgagor does not actually own the property, but rather has a recorded long-term lease.
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LEGAL DESCRIPTION | A property description sufficient to locate and identify the property. Legal descriptions are found on loan applications, appraisals, real estate contracts, mortgages, surveys, and deeds.
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LEVERAGE | The use of borrowed funds to finance the purchase of an asset; the use of another's money to make more money.
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LIEN | A legal claim by one individual upon the property of another as security for a debt or encumbrance. A mortgage, once recorded, is a voluntary lien.
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LIEN THEORY | A concept followed in several states, including New Jersey, New York, Connecticut and Florida, providing that a mortgage represents a lien on a property with the mortgagor retaining legal title.
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LIFETIME PAYMENT CAP | For an adjustable-rate mortgage (ARM), a limit on the amount that the Payments can increase or decrease over the life of the loan. This could cause negative amortization of accelerated amortization.
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LIFETIME RATE CAP | As applies to an Adjustable Rate Mortgage, a preset interest rate that the mortgage can increase to or decrease over the life of the mortgage.
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LIS PENDENS | A notice recorded in the official records of a county to indicate there is a pending suit affecting property in that jurisdiction; notice of intent to file foreclosure proceedings or to place a lien on the property.
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LOAN | A sum of money provided by a lender to be repaid with or without interest.
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LOAN CLOSING | The process of formulating, executing, and delivering all documents required by a permanent investor. Including but not limited to the protection of the investor's security by security instruments, mortgage, note & etc, if applicable, disbursement of mortgage funds.
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LOAN PROCESSING | The assembling of a mortgage loan application and related documents for consideration by a lender.
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LOAN PROSPECTOR | Freddie Mac's version of desktop underwriting. Commonly referred to as LP.
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LOAN SUBMISSION | Documentation delivered to a prospective lender for review and consideration for the purpose of underwriting and making of a mortgage loan.
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LOAN-TO-VALUE RATIO (LTV) | The relationship between the mortgage amount and the appraisal market value (or sales price if lower) of the security property, and expressed as a percent.
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LOSS PAYEE | A clause in an insurance policy listing the priority of claims in the event of damage to the insured property. A mortgagee is generally the party appearing in the clause being paid the amount owed under the mortgage before the owner is paid.
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MARGIN | The number of basis points a lender adds to the index to determine the interest rate for an Adjustable Rate Mortgage.
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MANSION TAX | Common in New York City and New Jersey. Generally applies to the Purchase/Sale of a property in excess of one million dollars. Generally a 1% tax applies to the sale.
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MECHANIC'S LIEN | A lien placed against property by unpaid workmen or material suppliers.
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METES AND BOUNDS | The most accurate method of land description; "metes" means measurements and "bounds" means boundaries.
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MILL | The measure used to express a real estate property tax rate; One-tenth of one percent.
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MIXED-USE PROPERTY | A property that has both residential and commercial influence. Typically, a residential mortgage lender will not finance a mixed - use property under a residential program. An exception could be a large condominium project with a street level store (common to New York City).
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MODIFICATION | The act of changing any terms of a mortgage.
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MORTGAGE | A pledge of property given as a security for the payment of a debt. Most mortgages mature in more than one year and are considered capital market instruments.
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MORTGAGE-BACKED SECURITIES (MBS) | Bond-type instruments representing an undivided interest in a pool of mortgages.
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MORTGAGE BANKER | A company that originates mortgages for resale in the secondary mortgage market. A Mortgage Banker can act a Banker or a Broker.
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MORTGAGE BROKER | A licensee who brings a borrower and lender together and receives a fee for services performed.
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MORTGAGE CONTINGENCY | A condition on a real estate contract that requires that in consideration of making a bona fide effort by the buyer to acquire a mortgage the seller will not seek to enforce the contract is the mortgage is not approved.
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MORTGAGE INSURANCE PREMIUM (MIP) | Fees paid by FHA borrowers to obtain a loan (upfront and annual).
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MORTGAGE PORTFOLIO | The aggregate of mortgage loans held by an investor, or serviced by a mortgage lender.
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MORTGAGEE | The lender.
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MORTGAGOR | The borrower.
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MORTGAGE INSURANCE | An insurance policy used to protect a lender against loss caused by a borrower's default of the mortgage. Commonly known as PMI ( Private Mortgage Insurance) after a carrier of the mortgage insurance. There are actually a number of carriers of MI. MI is generally used when a borrower has less that 20% equity into an owner occupied property.
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MORTGAGE TAX | A tax assessed upon the value of the Mortgage. NY STATE mortgage tax is .25% of the mortgage. The mortgage tax for the 5 boroughs of New York City is 1.75%. Many of the counties surrounding New York City have mortgage taxes ranging from 0.5% to 0.75%(consult your attorney). (See CEMA). Effective August 2004 New Jersey now has a mortgage tax. The New Jersey Mortgage tax is a tiered tax. (consult your closing agent). See mansion tax.
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NEGATIVE AMORTIZATION | When a loan balance increases over time, rather than decreases (amortizes). Negative amortization typically occurs when the monthly mortgage payment is less than the amount required to pay at least the accrued interest and the unpaid interest is added to the outstanding loan balance.
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NET WORTH | The value of all assets less total liabilities.
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NINA Mortgage | No Income No Asset verification mortgage
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NO INCOME MORTGAGE | Originally developed for the self-employed borrower. This term has been expanded to varying levels. Some require no income documentation but require the IRS for 4506. Others levels require stating an income amount on the application. The less information verified, will generally yield a higher interest rate.
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NON-CONFORMING LOAN | A Jumbo or Super Jumbo Mortgage. Jumbo mortgages & Super Jumbo Mortgages that exceed the Fannie Mae underwriting guidelines and maximum loan limits are non-conforming mortgages.
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NOTE (PROMISSORY) | A promise to pay a sum of money at a stated interest rate during a specified term; legal evidence of a debt; sometimes referred to as a "mortgage note". A mortgage note is not an instrument filed at the county level.
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NOTICE OF SETTLEMENT | The recording of a document in the county where a property is located that is designed to give notice to everyone.
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NOVATION | A mortgagee's or current mortgage & note holder's agreement to allow a modification of or a new debtor (buyer) and release a mortgagor (seller) from liability on a note.
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OBSOLESENCE | The loss in value of a property occasioned by outdated styling and lack of modern functional requirements. Often seen on a real estate appraisal as 'functional obsolesence'.
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OPEN-ENDED MORTGAGE CLAUSE | Permits the mortgagor to draw and redraw funds which had been previously repaid, up to the original face amount of the loan. Example; home equity loans.
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ORIGINATION FEE | The fee paid to a lender for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan on behalf of the borrower(s). Origination Fee's are disclosed in the form of a percentage of the mortgage amount. They are typically called points. One point is equal to one percent of the loan amount.
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OWNER FINANCING | In a purchase transaction whereby the seller holds all or part of the mortgages.
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PARTICIPATION LOAN | A mortgage originated with funds provided by multiple lenders each being a participant in the total amount loaned.
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PERSONAL PROPERTY | Any property that is not real property.
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PITI | An acronym for Principal, Interest Taxes and Insurance.
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PREPAYMENT PENALTY | A restrictive clause in a mortgage that requires the borrower to pay a monetary penalty if the mortgage payments are made in advance of the normal due date or if the mortgage is paid in full ahead of schedule. Often called soft or hard penalties.
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P.O.C. | Paid outside of Closing, refers to fees paid by the borrowers outside of the cost paid at closing, i.e. an application fee.
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PRIME RATE | Traditionally, the interest rate that banks charge their best clients.
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PRINCIPAL | The outstanding mortgage principal, excluding interest per diem.
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PRIVATE MORTGAGE INSURANCE (PMI) | See mortgage insurance.
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PROFIT AND LOSS (P&L) | The itemization of income and expenses for a specified period of time.
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PROMISSORY NOTE | A written promise to repay a specified amount of money over a specified period of time. The Note is typically not filed.
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PUD (Planned Unit Development) | A subdivision that includes property with common ownership and is maintained by a homeowners association for the benefit and use of each of the individual unit owners.
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PURCHASE MONEY MORTGAGE | A mortgage given by the purchaser of real property to the seller as part of the consideration in the sales transaction. Seller financing is as arranged between the two parties.
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PURCHASE MONEY TRANSACTION | A typical real estate purchase transaction for the acquisition of a real estate by a buyer.
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QUITCLAIM DEED | A deed transferring the interest or right the grantor may have at that time. It is an individual(s) quitting their claim or right to a property.
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REAL ESTATE CLOSING | The event where the legal transfer of title of real estate property from a buyer to a seller occurs.
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REAL ESTATE SALES CONTRACT | A written agreement whereupon a seller commits to sell and a buyer commits to purchase certain real estate. Provisions include; price, terms, financing, down payment, and responsibility for property settlement expenses. Most contracts provide for buyer or seller to cancel the contract and permit return of buyer's deposit if diligent efforts to meet financing contingencies have been unsuccessful.
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REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) | RESPA requires a good faith effort be made to disclose all closing costs. These costs are to be disclosed on a Good Faith Estimate within 3 business days of the application.
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RECISSION | The cancellation of a mortgage refinance within 3 days of the date of the mortgage closing for any reason at the borrowers desecration. The law protects a homeowner by granting the three business days to cancel a mortgage on primary residences (1-4 units). This law affords the homeowner the ability to terminate a mortgage refinance during a specified period for any reason.
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RECORDING | To provide formal notice on the county level of a properly executed legal document, such as a deed, mortgage, or satisfaction of mortgage.
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RELEASE CLAUSE | The clause in a blanket mortgage (one covering multiple parcels) allowing for the release of certain individual parcels upon payment of a specified amount. Typically a release clause is used in real estate development loans.
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REVERSE MORTGAGE | A mortgage in which a lender may make scheduled monthly payments to the borrower using mortgage-free property as collateral. Typically, based upon life expectancy tables.
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RIGHT OF REDEMPTION) | The right to redeem property during the foreclosure period by paying the amount owed, including fees and interest.
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RIGHT OF RESCISSION | The law that gives a homeowner three business days to cancel a mortgage on primary residences (1-4 units) in some cases. Afford the homeowner the ability to terminate a mortgage refinance during a specified period for any reason.
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R.O.I. | Return - on - Investment is the annual percentage rate of return on a individuals financial investment in an asset.
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SATISFACTION OF MORTGAGE (NOTICE OF SATISFACTION) | A recordable instrument provided by the lender reflecting the payment in full of a mortgage obligation.
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SECONDARY MORTGAGE MARKET | The market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are originated, the general retail market.
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SETBACK | Restrictions established in a deed or by city codes on the space required between lot lines and buildings.
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STATED INCOME | A variation of the No Income mortgage.
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STATUTE OF FRAUDS | A Florida state law requiring certain contracts relating to real property be in writing and signed in order to be legally enforceable.
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STATUTE OF LIMITATIONS | A law limiting the time period during which a legal action may be commenced.
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SUBORDINATION | A subordinated mortgage is inferior in position to a senior mortgage.
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SUBSTITUTION of PRINCIPAL | An economic concept of value; no rational buyer would pay more for a property than the cost of an equally desirable comparable property.
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SUPER JUMBO MORTGAGE | The term super jumbo, mega loan and whale loans are newer made up terms to the mortgage industry to generally describe the fast growing industry for mortgage loans in excess of $1,000,000. The underwriting criteria for Super Jumbo Mortgage's is different from conforming mortgages in the weight placed upon credit and assets and job stability. Although most lenders severally curtail the Loan To Value as the loan amount increases new avenue to higher LTV's are being developed. Super Jumbo Loans have been emerged as a result of result of the massive appreciation in select real estate markets since the late 1990's.
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SURVEY | The procedure used to measure and describe a specific tract of land for the purpose of determining exact boundaries and the area contained therein.
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SWEAT EQUITY | An applicant's contribution to the construction or improvement of a property in the form of labor or services provided, in lieu of cash for part of the down payment of other costs.
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TABLE FUNDING | A financing technique that occurs when a correspondent lender or lender closes a mortgage loan with funds belonging to an acquiring investor and immediately assigns the loan to that investor.
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TAKE-OUT COMMITMENT | Long-term permanent financing used to pay off an interim construction loan; sometimes referred to as an "end loan".
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TAXABLE VALUE | The assessed value less allowable exemptions resulting in an amount to which the millage rate is applied to determine property taxes due.
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TENANCY IN THE ENTIRETIES | The ownership of property by a husband and wife providing for the automatic right of survivorship to the surviving spouse.
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TERM MORTGAGE | A mortgage wherein only interest periodically paid, with the entire principal amount due in one lump sum upon maturity.
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TITLE | The evidence of the right to ownership of property.
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TITLE INSURANCE POLICY | A contract by which the insurer agrees to pay the insured a specific amount for any loss resulting fro certain defects in the title to real estate.
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TITLE SEARCH | An analysis of the abstract of title on a specific piece of property in order to determine the present condition of title.
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TITLE THEORY | A concept used in some states providing that the mortgagee holds legal title to the property, as opposed to holding a lien against the property.
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TRANSFER TAX | A tax on the due upon the sale or transfer of real estate. Usually paid by the seller, it can in certain instances be applied to the borrower on the sale of new construction
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TRUTH-IN-LENDING ACT (REGULATION "Z") | A federal regulation requiring disclosure of APR, certain finance charges, the 3-day right of rescission when refinancing a primary residence, and certain additional disclosures when advertising financing terms.
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UNDERWRITING | The analysis of information relating to risk and making a decision whether or not to accept that risk. The underwriter evaluates the borrower's ability and willingness to repay the obligation and establishes that the property represents adequate security for the debt.
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UNENCUMBERED PROPERTY | A property the title to which is free and clear of mortgage liens.
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USURY | Charging more for the use of money than allowed by law.
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VA LOAN | A loan partially guaranteed by the government made by a DVA approved lender to a qualified veteran.
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WAREHOUSING | A revolving line of credit used for funding mortgages, by a mortgage banker, with a commercial bank, secured by the pledge of first mortgages on residential property. The line of credit is used to accumulate and hold mortgage loans pending sale to an investor or other provider of financing.
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WARRANTY DEED | A deed in which the grantor warrants or guarantees title against any and all claims.
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WDO INSPECTION REPORT | A report from a certified pest control inspector determining the presence or absence of visible current termite infestation, or any visible evidence of structural damage from prior infestation or wood rot.
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WDO CLEARANCE LETTER | Certification that no visible current termite infestation or any visible evidence of structural damage exists.
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WHOLE LOAN | Total ownership of a loan, as opposed to multiple lenders participating in the ownership of a single loan.
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WRAPAROUND MORTGAGE | A junior mortgage which secures a debt that includes the balance due on an existing senior mortgage plus an additional amount due to the wraparound mortgagee. The wraparound mortgagee thereafter receives all payments and then remits the payments on the senior mortgage. In most cases, the purchase price minus the down payment will equal the wraparound mortgage amount.
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YIELD | The annual return on an investment stated as a percentage of the equity invested.
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