Abstract of Title A condensed history of the title to a parcel of
real estate showing conveyances, liens, and charges on the property.
Acceleration Clause A provision in a Mortgage, Deed of Trust, or
Note, providing that the entire principal shall become immediately payable
in the event of a default. Common reasons for acceleration are:
pay when due
the premises insured
waste to the property
complete construction during the construction period
Actual Cash Value In property insurance, Replacement cost less
depreciation. The most basic definition of value in a property policy, ACV
is depreciated over time.
Adjustable Rate Mortgage (ARM) A loan where the interest rate
changes in accordance with changes to specific index, such as the prime rate
or some other index.
Ad Valorem Tax A tax based on a percentage of value. Ad valorem is
Latin for according to value. Property taxes and sales taxes are ad
Advance A partial disbursement of loan funds; used by Origen in
its construction loans, such as the One-Time-Close loan.
Agreement for/of Sale Contract of the sale of real property; the
terminology differs in many jurisdictions – often called binder, sales
contract, or Agreement of Sale. (See Binder).
Agreement to Sell An Agreement for Sale to be
performed in the future, generally if certain conditions are met.
Agreed Value When the insurance company and the insured agree to a
specific price for each piece of property before the contract is written. If
there is a loss, the company pays the Agreed Value as specified with no
regard for depreciation or for the replacement cost of the item.
“All Risk” (Open Perils) Policy “All Risk” is now referred to as
“Open Perils”. Property insurance can be written on either a Named Perils
basis or an Open Perils basis. An Open Perils policy covers every
conceivable peril (even unusual ones) except for those specifically excluded
in the policy.
Amenities Aspects of a property, which make it more valuable, such
as recreational areas or a private road. Used in
Amount Financed The amount of credit provided to the borrower
including amounts paid out to others on the borrower’s behalf.
Annual Percentage Rate (APR) The overall cost of borrowing funds,
expressed a yearly rate. Reflects the total cost of a
loan, including interest charges at the note rate plus points (See Point)
and other finance charges.
Appraisal A valuation of real property made by a qualified
individual. The valuation is based on an on-site inspection, which is then
evaluated in light of local real estate values, sale trends, neighborhood
factors, and other local conditions.
Appraiser An expert in real estate values who conducts appraisals.
Appraisers who are outside consultants are often certified by the Society of
Real Estate Appraisers or the American Institute of Real Estate Appraisers.
Any appraiser, including an employee of a home lender, may also be a member
of the American Society Review Appraisers or Independent Fee Appraisers.
Appurtenance Attachments to the land considered part of the
property. A tool shed and garage are examples of tangible appurtenances.
Intangible appurtenances include easements.
Assessment The process of valuing property for taxation.
A levy against property for single purposes such as
school taxes, water or sewage hook-up, or front footage charges. An
unpaid assessment of this type is an open lien and generally takes
precedence over a lien created according to a home equity loan.
Assignee A person to whom property rights are transferred or
Assignment of Mortgage The transfer of
ownership of a mortgage from one mortgagee to another.
Assignor A person who transfers or assigns property rights or
title to another (i.e., assignee).
Basis Point 1/100 of 1 percent (used to express the yield of many
Binder A temporary certificate of insurance used to show coverage
until a permanent policy is issued. An agreement for/of
Sale in some jurisdictions. Origen must have an insurance binder
before checks are disbursed. (See Agreement for/of
Broad Causes of Loss/Perils A list of named perils that insured
property is covered against. In both commercial lines and personal line the
Broad form covers more perils than the Basis form, but fewer that the
Special (All Risk) form.
Building Code Regulations that control construction, including
materials, used in building. In construction lending, it is important to
watch for contractors who do not build to code or fail to get proper
Buy For The Buy For Program (BFP) is
designed for established borrowers that currently own a primary residence
and wish to finance the purchase of a manufactured home as a primary
residence for another person.
Certificate of Occupancy A certificate
from the local building inspector stating that a house is habitable.
Certificate of Title A statement furnished by an attorney that an
Abstract of Title reflects that title to real estate is legally vested in
the present owner. (See Abstract of Title). A statement furnished by a title
insurance company that, in the opinion of the company’s examiner, the title
is complete and the insurer is liable only for error by the examiner.
(See Title Insurance.)
Chain of Title A chronological history of all transfers of title
to a piece of real estate. The Abstract of Title is a condensed version of
the chain. (See Abstract of Title).
Chattel Personal Property
Claim Notification to an insurance company that payment of an
amount is due under the terms of a policy.
Closing Often called settlement. The consummation of a real estate
transaction where the loan is made, the Mortgage of Deed of Trust is
executed, and the funds are disbursed.
Closing Costs Expenses incidental to the making of a loan
including (where Applicable) title insurance premiums, appraisal fees,
credit reports Surveys, document preparation fees, and notary expenses.
Closing Statement A written accounting of the payment and receipt
of funds at Closing.
Cloud on Title Claim on a title revealed in a title search, which
if valid, would affect the rights of the owner. The cloud may be removed by
a quitclaim deed, release, or court order. (See
Commitment An agreement to fund a loan at a future date.
Comparables Properties that have been sold
which are similar to a property under consideration for a loan.
Comparables help in determining the fair market value of property. (See Fair
Comprehensive Physical damage coverage for the
insured’s own vehicle for damage resulting from perils such as fire, theft
hail, or contact with a bird or animal. Comprehensive coverage
Conditions The Conditions section of the policy spells out the
procedures which enable the parties to function effectively under the
contract. They establish the rules of conduct between the parties of the
contract such as: how to report a loss, appraisal provisions, time and
manner of paying a loss, subrogation, cancellation, assignment rights and
definition of terms. The policy Conditions are the bulk of the policy.
Condominium A form of real estate ownership where each purchaser
receives Title to a particular unit and a proportionate interest in the rest
of the common areas.
Conforming Loan To make a Land/Home mortgage
loan in accordance with secondary market rules, particularly those rules of
Fannie Mae and/or Freddie Mac.
Construction Loan A loan for the financing of new construction or
home Improvements where the lender disburses the loan in a series of checks
called draws as various segments of construction are completed or
separate subcontractors finish their portion of work.
Conveyance The transfer of title to property from one person to
another. Also the written document whereby such transfer is
Covenant An agreement written into a Mortgage or Deed of Trust
promising the performance of certain acts, such as keeping fire insurance on
the property; breaching a covenant is a default, and can be the basis for
foreclosure. Restrictive covenants include agreeing never to fence a
property or to extend a house close to another lot line, or forbidding
commercial use in a home. Sometimes called deed
Deductible A dollar amount of a claim
which the insured must pay before the policy starts paying benefits. The
company pays benefits only for the losses in excess of the amount specified
in the deductible provision.
Deed The document which transfers ownership of real property from
one party to another.
Deed in Lieu A deed given by a defaulting
borrower to a lender giving up property to avoid foreclosure.
Often a quitclaim deed.
Deed of Reconveyance
The transfer of title to property back to a borrower after payoff of a Deed
Deed of Trust/ Trust Deed A document by
which the borrower, called the trustor, conveys
title to a trustee covering property used as security. The Trustee may sell
the property in the event of a default and after payoff,
reconvey title to the borrower. Real estate
secured loans using deeds of trust may be called second trusts or third
trusts depending on their priority in title. Deeds of Trust may be used in
place of mortgages. In some states. The use of
Deeds of Trust or mortgages varies by county even where both forms are
Depreciation The decreases in value of property over time as the
result of deterioration, obsolescence or wear and tear. Depreciation is a
factor used in calculation Actual Cash Value.
Easement An interest in land owned by another that entitles the
holder to a specific limited use or enjoyment. A limited
right to use property. Examples are the right to run power lines or
sewer lines through another’s property.
Encroachment When an improvement to a property extends into
Encumbrance Any limitation on a property owner’s interest, such as
liens, mortgages, deeds of trust, easements, leases, or restrictive
Equity The value of a property owner’s interest in the property
after subtracting the balance of any indebtedness from the total value of
Escrow A transaction where a third party, agent, or company
handles documentation and disbursement of funds. Use of escrow agents
In real estate lending varies geographically and
is generally more common in the West.
Exclusions Losses that a policy does not cover.
Fair Market Value The price at which a
property can be sold on the open market, provided there is a willing buyer,
a willing seller, and reasonable time in which to complete the sale.
Fee Simple An absolute ownership interest in real property limited
to an individual and his/her heirs and assigns forever, without limitation
Fixture Personal property, which becomes part of the real estate
when permanently attached to the real estate, such as a wall safe, or
Flood A peril generally excluded from property policies which is
defined as a general and temporary condition of partial or complete
inundation by water of what is normally dry land. Mudslides caused by
flooding are also considered to be “floods”. Flood insurance is available
through the National Flood Insurance Program.
Foundation Survey Also known as final Survey, this survey is done
after home & improvements in place. It should show home, improvements and
General Contractor A licensed contractor who contracts directly with
the homeowner to construct improvements on the property.
Grantee A person to whom real property is transferred.
Grantor A person transferring real property.
Hazard Insurance The generic name for
homeowners, fire, or any other casualty insurance.
Homeowners Policy A package insurance policy containing coverage
for a variety of multiple perils, including fire, theft, property damage,
and personal liability. Additional hazard insurance may cover special risks
such as tornado or flood damage.
Homestead Exemption An exemption for part of a person’s property
(usually the primary residence) preventing attachment and forced sale for
general debts. It may be provided by state law or constitutional provision
and may have to be waived by the borrower to protect a home equity lender.
In some states, a portion of property exempt from property taxes.
Improvements Buildings or other permanent appurtenances located on or
attached to the land. Often a mortgage or Deed of Trust will state the land
is improved by a residence.
Insurable Value The term is used conventionally to designate the
amount of insurance that may be carried on destructible portions of a
property to indemnify the owner in the event of loss.
Insurable Interest In property insurance, an insurable interest is
any financial interest you have in a piece of property. An insurable
interest exists when damage or destruction to the property would result in a
direct financial loss to you. In property insurance, you will only collect
benefits under a policy if you have an insurable interest in that property
at the time of the loss.
Involuntary Lien A lien imposed on real property without the
owner’s consent, such as federal tax liens, judgment liens, or mechanic’s
Junior Mortgage A lien subordinate to the
claims of the holder of a prior (senior) mortgage.
Land Contract An installment sales
contract for land where title does not pass until the contract is paid in
Land Seasoning A term referring to previous ownership of land
evidenced by dated and notarized Deed documents and/or having these
documents filed for record in the county’s recorders office.
Legal Description A technical description of a plot of land which
is legally recognized and used in contracts.
Lessee One renting or leasing property from
another (a tenant).
One renting or leasing property to another (a landlord).
Liability In insurance, a legal obligation to pay, such as being
required by law to make good a loss or damage for which you are responsible;
a potential damage which you may be required to pay.
Also referred to as Casualty.
Lien A charge or security or encumbrance upon property.
Life Estate An estate or interest held during the term of that
person’s life or some other person’s life. Grants or gives an interest in
real property until the individual’s death or another individual’s death,
though the individual has no rights to convey, sell, or encumber the
A recorded notice that a law suit is pending affecting real property.
Loan-to-Value Ratio The relationship between the amount of the
loan and the appraised value of the property expressed as a percentage of
the appraised value.
Loss A financial damage; the basis for a claim under an insurance
policy,; the amount for which the insurance company becomes obligated to pay
the insured in the event of the insured’s financial harm.
Maintenance Agreement Recorded agreement stating who is responsible
for maintaining access easement.
Market Value The highest courts of most states have defined market
value. However, the definitions usually encompass the highest price a
willing buyer would pay for property and a willing seller would accept, both
being exposed to the property for a reasonable period of time. Market value
is not the actual price paid for property that is market price.
Marketable Title A title not subject to reasonable doubt, which
would prevent a prudent person from buying it, even though the title may not
be completely clear.
Maturity Date The final date of the term of a mortgage.
Mechanic’s Lien A claim against the estate or interest of the
owner in a property for the purpose of securing priority of payment for
labor, services, or furnished materials in the erection or repair of the
Metes and Bounds A description in a deed of the land location in
which the Boundaries are defined by directions and distances from fixed
points, often found in rural property never subdivided.
Mortgage A document pledging property as security for the
repayment of a loan under certain conditions.
Mortgagee in Possession A lender who has obtained real property
after default, whether by foreclosure or deed in lieu.
Mortgagor A borrower pledging real property under a mortgage.
Named Peril Policy A policy in which the
covered perils are literally named in the policy, such as the Standard Fire
Policy that covers the perils of Fire, Lightning and removal. Perils not
named are excluded from coverage.
National Flood Insurance Program The federal
government’s program to make flood insurance available at reasonable
(subsidized) rates to the general public.
Coverages are marketed by private insurance companies, but the risk
is borne by the federal government.
Negligence A tort theory that essentially is a failure to do, or
not to do, what a reasonable prudent person would do or would not have done,
in the same or similar circumstances. Negligence results from carelessness,
ignorance, thoughtlessness or inaction. It is never an intentional act. If
you are found negligent, you may be liable to pay for the damages you
Non-Conforming Loan A land/home mortgage loan, which does not
necessarily conform to the rules of Fannie Mae and/or Freddie Mac.
Occurrence This is a very broad definition
of “accident”, which includes the continuous or repeated exposure to
substantially the same general harmful conditions that occur over time.
Whereas an “accident” is a sudden event, an “occurrence” is a condition
caused by continuous and repeated exposure to the same peril over a long
period of time.
Occurrence limit Under a liability policy, the
limit that can be paid for any one claim.
Open Perils (“All Risk”) Policy In property insurance, the highest
form of peril coverage available. An Open Perils property policy covers all
risks not specifically excluded in the contract. They are more frequently
referred to as “All Risk” policies. However, this term can be misinterpreted
by the insuring public; hence, the new term, “Open Perils”.
Percolation Test A procedure to determine
the rate of seepage of water through soil, in order to receive a permit to
install a septic sewer system.
Premium The money a policy owner pays the insurance company for
insurance coverage the amount of money the insurance company charges for
insurance coverage. Premium is a portion of a
policyowner’s consideration in an insurance contract.
Pre-qualification A credit approval based on limited and
unverified information that is not considered a full approval until
Plat A map dividing a parcel of land into lots, as in a
Point An amount equal to one percent of an investment or note.
Power of Sale The right of a mortgagee to force a sale of the
property should default occur.
Prepayment Penalty A fee imposed by a lender to allow a borrower
to pay off all or part of indebtedness early.
Principal Balance The outstanding amount due
on a debt, not including interest.
Purchase Money A mortgage for the purchasing of real property.
Quitclaim Deed A deed operating as a
release; intended to pass any title, interest or claim which the grantor may
have in the property, but not containing any warranty of a valid interest or
title in the grantor.
Real Estate Origen Land/Home Loans are considered real estate (vs.
chattel). The home is permanently affixed and vehicle title is
surrendered/eliminated if required.
Reconveyance The transfer of title
back to a borrower after payoff of a Deed of Trust, in a Deed of
Recorder The public office, which keeps land records.
May be known as the Registrar of Deeds, Land Records
Office, or Clerk of the Court, depending on local custom.
Redemption A right some states allow, where a borrower may buy
back property after foreclosure by paying interest, principal, costs, and
Release The discharge of property as security. In some areas, a
discharge is used instead of a release.
Replacement Cost Cost of replacing the
subject property with one having exactly the same utility.
Rescission The right to cancel a contract, as in the three-day
right to rescind under federal law.
RESPA An acronym for the federal Real Estate
Settlement Procedures Act.
Satisfaction The release of a mortgage or Deed of Trust.
Seasoned A term referring to a mortgage,
indicating that payments have been made regularly over a period of time, and
that the contract or mortgage is not a new one.
Special Warranty Deed A deed containing a covenant whereby the
guarantor agrees to protect the grantee against any claims arising during
the period of ownership.
Subordination The act of acknowledging that a
lien is junior to another priority.
Survey The accurate mathematical measurements of land and
buildings made with the aid of instruments.
Tenant One who is not the owner but occupies real property under
consent of the owner and in subordination to the owner’s title. The
tenant is entitled to exclusive possession, use, and enjoyment of the
property, for a rent specified in the lease.
Term The number of years of the duration of a mortgage.
Title The evidence of the right to ownership in property.
May be acquired through purchase, inheritance, devise,
gift, or foreclosure.
Title Bring To Date Also known as gap coverage, on a construction
loan, the title is updated from time of closing to final draw.
Title Insurance A contract by which the title insurance company
agrees to pay the insured a specific amount for any loss caused by defects
of title to real estate, wherein the insured has an interest as purchaser,
mortgagee, or otherwise. Separate premiums protect the owner/borrower and
Title Search A condensed history of the property ownership,
showing the links in chain of title, with a statement of all liens, taxes,
charges or encumbrances against the particular property.
Unencumbered Property A property free and clear of all liens and
Warranty Deed A deed in which the grantor or seller warrants or
guarantees that good title is being conveyed, as opposed to a quitclaim deed
that contains no representation or warrant as to the quality of title being
Zoning The governmental regulation of
permissible uses of real property.