Glossary of Terms

A B C D E F H I J K L M N O P Q R S T V W Y Z



Accrued interest	Interest earned for the period of time elapsed since interest was last paid.

Adjustible rate mortgage	A mortgage loan or deed of trust which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan.

Amortization	repayment of a mortgage debt with periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.


Back-to-back escrow	An escrow set up to facilitate the simultaneous purchase of one property and the sale of another property by the same party.

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 a specified date, usually at the end of the term.


Closing	In real estate, the delivery of a deed, financial adjustments, the signing of note, and the disbursement of funds necessary to consummate a sale or loan transaction.


Deed-in-lieu	A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.

Delinquency	Failure of a borrower to make timely payments under a loan agreement.

Due date	Date which the borrower must pay the principal and interest due on his or her mortgage, as stated in the note, as well any escrow payment.


Equity	Net ownership, the difference between fair market value and current indebtness, sometimes called owner's interest.

Escrow	A item of value, money or documents, deposited with a third party to be delivered upon fullfillment of a condition.

Escrow account	The segregated trust account in which escrow funds are held.

Escrow analysis	The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.


Fair market value	The price at which property is transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.

Federal housing administration	A federal agency within the Department of Housing and Urban Development (HUD) that provides mortgage insurance for residential mortgages and sers standards for construction and underwriting.

First mortgage	A mortgage that gives the mortgagee a security right over all other mortgages of the mortgaged property.


Home equity loan	A revolving line of credit based on the equity in the mortgagor's house. The property is the security for the loan, which is usable for any purpose.

Home improvement loan	Mortgage to finance an addition to or rehabilitation of a residence.


Index	A published interest rate, such as the prime rate. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns.

Interest	Consideration in the form of money paid for the use of money, usually expressed as an annual percentage.


Judgment	Final determination by a court of the rights and claims of the parties to an action.

Judicial foreclosure	Type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.

Junior mortgage	A mortgage that is subordinate to ther claims of a prior lien or mortgage.


Late charge	An additional charge that a borrower is required to pay as a penalty for failure to pay a regular installment when due.

Lender	Person or entity that invests in or originates mortgage loans, such as a mortgage banker, credit union, commercial bank, or savings and loan. In single-family property usage, the lender is generally whosever name the loan is closed in.

Letter of credit	A letter authorizing a person or company to draw on a bank, or stating that the bank will honor their credit up to the stated amount.

Lien	A legal hold or claim of a creditor on the property of another as security for a debt. Liens are always against property, usually real property.

Loan administration	A mortgage banking function which includes the receipt of payments, customer service, escrow administration, investor accounting, collections, and foreclosures. Also called servicing.

Loan-to-value ratio (LTV)	The ratio of amount borrowed to appraised value or sales price of real property expressed as a percentage.

Lockbox	A postal address, maintained by the firm's bank, that is used solely for the purpose of collecting checks. A major goal of a lockbox is to reduce collection float, since the receipts are immediately credited to the firms bank account.

Loss draft	Insurance payments in settlement of a claim for damage to mortgaged property. Drafts are generally made out to both the mortgagee and mortgagor.


Margin	In an adjustible rate mortgage, the spread between the index and the mortgage interest rate.

Master servicer	Contractually responsible servicer of a mortgage or pool of mortgages that is included in a subservicing arrangement.

Maturity	The date on which an agreement expires; termination of a mortgage note.

Military indulgence	The protection enacted and provided by the Soldier's and Sailor's Civil Relief Act to a mortgagor who is about to enter or is in the military and whose ability to keep a loan current has been materially affected by military service.

Mortgage	A pledge of property, especially real property, as security for a debt. By extension, the document evidencing the pledge. The document may contain the terms of repayment of the debt. By further extention, "mortgage" is used to describe both the mortgage proper and the separate promissory note evidencing the debt and providing the terms of the debt's repayment.

Mortgage commitment	An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term, and amount.

Mortgage note	A written promise to pay a sum of money at a stated interest rate during a specified term. A mortgage note is secured by a mortgage.

Mortgage servicing rights	The contractual obligations undertaken by one party to provide servicing for mortgage loans owned by another party, typically for a fee.

Mortgagee	The lender in a mortgage transaction.

Mortgagee clause	A clause that may be attached to an insurance policy stipulating that the lender will receive a portion of insurance proceeds sufficient to satisfy the unpaid amount of a loan in the event of a loss.

Mortgagor	The borrower in a mortgage transaction who pledges property as a security for a debt.


Negative amortization	The unpaid interest which is added to the mortgage principal in a loan where the principal balance increases rather then decreases because the mortgage payments do not cover the full amount of interest due.

Nonjudicial foreclosure	Power to sell property at foreclosure without court procedure. This foreclosure proceeding can be used by a trustee named in a deed of trust.

Note	A general term for any kind of paper or document signed by a borrower that is an acknowledgment of debt, and is, by inference, a promise to pay.


Origination	Securing a completed mortgage application from a commercial or residential borrower.

Origination date	Date of the mortgage note.


Partial payment	In loan collection, receipt of less than the full payment due.

Payoff figures	The unpaid principal balance and escrow amounts to be used for payment in full of the mortgage or for closing sale of the property.

Prepayment	The payment of all or part of a mortgage debt before it is due.

Prepayment penalty	A charge the mortgagor pays the mortgagee for the privilege to prepay the loan.

Principal	The original balance of money lent, excluding interest. Also, the remaining balance of a loan, excluding interest.

Private mortgage insurance	Insurance written by a private company protecting the mortgage lender against financial loss occasioned by a borrower defaulting on the mortgage.

Purchase agreement	A written agreement between a buyer and seller of real property, setting forth the price and terms of sale.


Quitclaim deed	A deed relinquishing all interest, title, or claim an owner has in a property. A quitclaim deed implies no warranty.


Reconveyance	An instrument used to transfer title from a trustee to the equitable owner of real estate, used when the performance of debt is satisfied under the terms of a deed of trust.

Refinancing	The repayment of a debt from the proceeds of a new loan using the same property as security.

Release of lein	An instrument discharging secured property from a lein.

RESPA	A federal statute and regulation promulgated by HUD governing real estate leanding practices and disclosures. Its main features pertain to the provision of a good faith estimate of loan settlement costs and the provision of the HUD settlement booklet within three days of making a loan application.


Second mortgage	A mortgage that has rights subordinate to a first mortgage.

Settlement	The closing of a mortgage loan. Also, the delivery of a loan or security to a buyer.

Subservicer	Lender that performs the on-going servicing activities for the mortgage or pool under an agreement with the contractually responsible servicer.


Tax lien	A claim against property for unpaid taxes.

Tax sale	The sale of property by a taxing authority or an officer of the court acting on a judgment to satisfy the payment of delinquent taxes.

Title	Written evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed that specifies in whom the legal estate is vested and the history of ownership and transfers.

Title search	An examination of public records,laws, and court decisions to ensure that no one except the seller has a valid claim to the property, and to disclose past and current facts regarding ownership of the subject property.


VA loan	Mortgage loan made by an approved lender and guaranteed by the Department of Veteran Affairs. VA loans are made to eligible vetrans and those currently serving in the military, and can have a lower down payment than other types of loans.

Verification of mortgage	Form that requests and secures verification of payments made on an applicant's current or past mortgage.

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