call
option
A provision in the mortgage that gives the mortgagee the
right to call the mortgage due and payable at the end of
a specified period for whatever reason.
cap
A provision of an adjustable-rate mortgage (ARM) that limits
how much the interest rate or mortgage payments may increase
or decrease. See lifetime
payment cap, periodic payment cap, and periodic
rate cap.
capital
(1) Money used to create income, either as an investment
in a business or an income property. (2) The money or property
comprising the wealth owned or used by a person or business
enterprise. (3) The accumulated wealth of a person or business.
(4) The net worth of a business represented by the amount
by which its assets exceed liabilities.
capital
expenditure
The cost of an improvement made to extend the useful life
of a property or to add to its value.
capital
improvement
Any structure or component erected as a permanent improvement
to real property that adds to its value and useful life.
cash-out
refinance
A refinance transaction in which the amount of money received
from the new loan exceeds the total of the money needed
to repay the existing first mortgage, closing costs, points,
and the amount required to satisfy any outstanding subordinate
mortgage liens. In other words, a refinance transaction
in which the borrower receives additional cash that can
be used for any purpose.
certificate
of deposit
A document written by a bank or other financial institution
that is evidence of a deposit, with the issuer’s promise
to return the deposit plus earnings at a specified interest
rate within a specified time period.
certificate
of deposit index
An index that is used to determine interest rate changes
for certain ARM plans. It represents the weekly average
of secondary market interest rates on six-month negotiable
certificates of deposit. See adjustable-rate
mortgage (ARM).
Certificate
of Eligibility
A document issued by the federal government certifying a
veteran’s eligibility for a Department of Veterans Affairs
(VA) mortgage.
Certificate
of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs
(VA) that establishes the maximum value and loan amount
for a VA mortgage.
certificate
of title
A statement provided by an abstract company, title company,
or attorney stating that the title to real estate is legally
held by the current owner.
chain
of title
The history of all of the documents that transfer title
to a parcel of real property, starting with the earliest
existing document and ending with the most recent.
change
frequency
The frequency (in months) of payment and/or interest rate
changes in an adjustable-rate mortgage (ARM).
chattel
Another name for personal property.
clear
title
A title that is free of liens or legal questions as to ownership
of the property.
closing
A meeting at which a sale of a property is finalized by
the buyer signing the mortgage documents and paying closing
costs. Also called "settlement."
closing
cost item
A fee or amount that a home buyer must pay at closing for
a single service, tax, or product. Closing costs are made
up of individual closing cost items such as origination
fees and attorney's fees. Many closing cost items are included
as numbered items on the HUD-1 statement.
closing
costs
Expenses (over and above the price of the property) incurred
by buyers and sellers in transferring ownership of a property.
Closing costs normally include an origination fee, an attorney's
fee, taxes, an amount placed in escrow, and charges for
obtaining title insurance and a survey. Closing costs percentage
will vary according to the area of the country; lenders
or realtors® often provide estimates of closing
costs to prospective homebuyers.
closing
statement
See HUD-1
statement.
cloud
on title
Any conditions revealed by a title search that adversely
affect the title to real estate. Usually clouds on title
cannot be removed except by a quitclaim deed, release, or
court action.
coinsurance
A sharing of insurance risk between the insurer and the
insured. Coinsurance depends on the relationship between
the amount of the policy and a specified percentage of the
actual value of the property insured at the time of the
loss.
coinsurance
clause
A provision in a hazard insurance policy that states the
amount of coverage that must be maintained -- as a percentage
of the total value of the property -- for the insured to
collect the full amount of a loss.
collateral
An asset (such as a car or a home) that guarantees the repayment
of a loan. The borrower risks losing the asset if the loan
is not repaid according to the terms of the loan contract.
collection
The efforts used to bring a delinquent mortgage current
and to file the necessary notices to proceed with foreclosure
when necessary.
co-maker
A person who signs a promissory note along with the borrower.
A co-maker's signature guarantees that the loan will be
repaid, because the borrower and the co-maker are equally
responsible for the repayment. See endorser.
commission
The fee charged by a broker or agent for negotiating a real
estate or loan transaction. A commission is generally a
percentage of the price of the property or loan.
commitment
letter
A formal offer by a lender stating the terms under which
it agrees to lend money to a home buyer. Also known as a
"loan commitment."
common
area assessments
Levies against individual unit owners in a condominium or
planned unit development (PUD) project for additional capital
to defray homeowners' association costs and expenses and
to repair, replace, maintain, improve, or operate the common
areas of the project.
common
areas
Those portions of a building, land, and amenities owned
(or managed) by a planned unit development (PUD) or condominium
project's homeowners' association (or a cooperative project's
cooperative corporation) that are used by all of the unit
owners, who share in the common expenses of their operation
and maintenance. Common areas include swimming pools, tennis
courts, and other recreational facilities, as well as common
corridors of buildings, parking areas, means of ingress
and egress, etc.
common
law
An unwritten body of law based on general custom in England
and used to an extent in the United States.
Community
Home Improvement Mortgage Loan®
An alternative financing option that allows low- and moderate-income
home buyers to obtain 95 percent financing for the purchase
and improvement of a home in need of modest repairs. The
repair work can account for as much as 30 percent of the
appraised value.
Community
Land Trust Mortgage Loan
An alternative financing option that enables low- and moderate-income
home buyers to purchase housing that has been improved by
a nonprofit Community Land Trust and to lease the land on
which the property stands.
community
property
In some western and southwestern states, a form of ownership
under which property acquired during a marriage is presumed
to be owned jointly unless acquired as separate property
of either spouse.
Community
Seconds®
An alternative financing option for low- and moderate-income
households under which an investor purchases a first mortgage
that has a subsidized second mortgage behind it. The second
mortgage may be issued by a state, county, or local housing
agency, foundation, or nonprofit organization. Payment on
the second mortgage is often deferred and carries a very
low interest rate (or no interest rate at all). Part of
the debt may be forgiven incrementally for each year the
buyer remains in the home.
comparables
An abbreviation for "comparable properties"; used for comparative
purposes in the appraisal process. Comparables are properties
like the property under consideration; they have reasonably
the same size, location , and amenities and have recently
been sold. Comparables help the appraiser determine the
approximate fair market value of the subject property.
compound
interest
Interest paid on the original principal balance and on the
accrued and unpaid interest.
condemnation
The determination that a building is not fit for use or
is dangerous and must be destroyed; the taking of private
property for a public purpose through an exercise of the
right of eminent domain.
condominium
A real estate project in which each unit owner has title
to a unit in a building, an undivided interest in the common
areas of the project, and sometimes the exclusive use of
certain limited common areas.
condominium
conversion
Changing the ownership of an existing building (usually
a rental project) to the condominium form of ownership.
condominium
hotel
A condominium project that has rental or registration desks,
short-term occupancy, food and telephone services, and daily
cleaning services and that is operated as a commercial hotel
even though the units are individually owned.
construction
loan
A short-term, interim loan for financing the cost of construction.
The lender makes payments to the builder at periodic intervals
as the work progresses.
consumer
reporting agency (or bureau)
An organization that prepares reports that are used by lenders
to determine a potential borrower's credit history. The
agency obtains data for these reports from a credit repository
as well as from other sources.
contingency
A condition that must be met before a contract is legally
binding. For example, home purchasers often include a contingency
that specifies that the contract is not binding until the
purchaser obtains a satisfactory home inspection report
from a qualified home inspector.
contract
An oral or written agreement to do or not to do a certain
thing.
conventional
mortgage
A mortgage that is not insured or guaranteed by the federal
government. Contrast with government
mortgage.
convertibility
clause
A provision in some adjustable-rate mortgages (ARMs) that
allows the borrower to change the ARM to a fixed-rate mortgage
at specified timeframes after loan origination.
convertible
ARM
An adjustable-rate mortgage (ARM) that can be converted
to a fixed-rate mortgage under specified conditions.
cooperative
(co-op)
A type of multiple ownership in which the residents of a
multiunit housing complex own shares in the cooperative
corporation that owns the property, giving each resident
the right to occupy a specific apartment or unit.
cooperative
corporation
A business trust entity that holds title to a cooperative
project and grants occupancy rights to particular apartments
or units to shareholders through proprietary leases or similar
arrangements.
cooperative
mortgages
Mortgages related to a cooperative project. This usually
refers to the multifamily mortgage covering the entire project
but occasionally describes the share loans on the individual
units.
cooperative
project
A residential or mixed-use building wherein a corporation
or trust holds title to the property and sells shares of
stock representing the value of a single apartment unit
to individuals who, in turn, receive a proprietary lease
as evidence of title.
corporate
relocation
Arrangements under which an employer moves an employee to
another area as part of the employer's normal course of
business or under which it transfers a substantial part
or all of its operations and employees to another area because
it is relocating its headquarters or expanding its office
capacity.
cost
of funds index (COFI)
An index that is used to determine interest rate changes
for certain adjustable-rate mortgage (ARM) plans. It represents
the weighted-average cost of savings, borrowings, and advances
of the 11th District members of the Federal Home Loan Bank
of San Francisco. See adjustable-rate
mortgage (ARM).
covenant
A clause in a mortgage that obligates or restricts the borrower
and that, if violated, can result in foreclosure.
credit
An agreement in which a borrower receives something of value
in exchange for a promise to repay the lender at a later
date.
credit
history
A record of an individual's open and fully repaid debts.
A credit history helps a lender to determine whether a potential
borrower has a history of repaying debts in a timely manner.
credit
life insurance
A type of insurance often bought by mortgagors because it
will pay off the mortgage debt if the mortgagor dies while
the policy is in force.
creditor
A person to whom money is owed.
credit
report
A report of an individual's credit history prepared by a
credit bureau and used by a lender in determining a loan
applicant's creditworthiness. See merged credit report.
credit
repository
An organization that gathers, records, updates, and stores
financial and public records information about the payment
records of individuals who are being considered for credit.
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