Glossary

Abstract of Judgement: A summary of the essential provisions of a court judgement. When recorded, an abstract of judgement creates a general lien on all of the real property of the judgement debtor in the county in which it is recorded.

ACCELERATION CLAUSE: This clause in a note and trust deed permits the payee or beneficiary to declare the entire unpaid balance immediately due and payable when a given condition occurs. Such a condition can be the sale of the land. This clause is sometimes called an “alienation clause”.

Acknowledgement: A formal declaration made before a duly authorized officer (usually a notary public) by a person who has executed an instrument that such execution is his or her act and deed.

Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted periodically according to a preselected in- dex. The terms, adjustment schedule and index to be used can vary based on the particular lender.

AD VALOREM: Literally, “according to value.” This term is usually used in reference to real property taxes which are assessed according to value, i.e., ad valorem.

ALL INCLUSIVE TRUST DEED (AlTO/WRAP-AROUND): A junior Deed of Trust securing a promissory note, the face amount of which is the sum of the liability secured by prior Trust Deeds plus the cash or equity advanced by the AITD lender.

American Land Title Association (ALTA): A national association of title insurance companies, abstractors, and agents. The associa- tion adopts standard title policy forms.

AMORTIZATION: Provision for the payment of a debt as to both principal and interest in equal installments over a period of time.

Annual Percentage Rate (APR): An expression of the percentage relationship of the total finance charges to the total amount to be financed, as required under the federal Truth-in-Lending Act.

APPRAISAL: An opinion as to the fair market value of land and the improvements on it.

Agency: A relationship created when one person (the principal) delegates to another (the agent) the right to act on his or her behalf in business transactions.

ASSESSED VALUE: The value placed on land and improvements as a basis for taxation. This is typically accomplished by the county assessor’s office, and the assessed values for real estate taxes are approximately one quarter of market value.

ASSESSMENTS: Special and local levies upon property in the immediate vicinity of improvement. Assessments can be imposed by such entities as flood control districts, street lighting districts and air pollution control districts which serve an area.

ASSIGNEE: One to whom a transfer of interest is made. For example, the assignee of a Deed of Trust or contract.

ASSIGNMENT: The transfer, in writing, of a person’s interest to another person or entity in an asset, such as an assignment of stock, a Deed of Trust or contract.

ASSIGNOR: One who makes an assignment. For example, the assignor of a Deed of Trust or contract.

ASSUMPTION: An agreement by one party to pay an obligation previously owned by another. For example, the assumption of an existing Trust Deed by a new owner may occur when property is sold.

ATTORNEY IN FACT: One who holds a power of attorney from another allowing him to act on behalf of the grantor.

Balloon Payment: The unpaid principal amount of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.

BENEFICIARY: In Trust Deed, the lender is designated as the beneficiary; he obtains the benefit of the security.

BENEFICIARY’S STATEMENT: A report from the lender, usually in writing, setting forth the terms and conditions of a loan already of record, such as amounts still owed, interest rate, monthly payments, etc.

BILL OF SALE: A document that attests to the transfer of ownership of personal property.

BORROWER: One who obtains a loan and owes money to a lender.

Buydown: A financing technique used to reduce the monthly payment for the home buying borrower during the initial years of ownership. Under some buydown plans, a residential developer, builder, or the seller will make subsidy payments (in form the of points) to the lender that “buydown,” or lower, the effective interest rate paid by the home buyer, thus reducing monthly payments for a set period of time.

BUYER: One who purchases or acquires property.

Cap: The maximum which an adjustable rate mortgage may increase,regardless of index changes.

COLLECTION SERVICE: A service performed by a neutral third party in receiving and disbursing loan payment as instructed by the parties concerned.

Clear Title: Title to property which is free from liens, defects of other encumbrances.

Closing: The process of completing a real estate transaction during which the seller delivers title to the buyer in exchange for payment of the purchase price. Called a “settlement” in some areas.

Closing Costs: Expenses, beyond the selling price, such as loan fees, title fees, etc. Paid when documents are executed and/or recorded and the sale is complete. Closing Statement: A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.

Cloud on Title: Any document, claim, unreleased lien or encum- brance, which, if valid, would affect or impair title to a property.

Commission: Compensation due a real estate broker for acting on behalf of the principal

CONDEMNATION: The exercise of the power of eminent domain by which property is taken for public use upon payment of just compensation. Condemnation can also refer to the condemning of unsafe structures.

CONDOMINIUM: A multi-family or other structure in which units are individually owned and in which owners of individual units also own an undivided interest in common areas.

Consideration: A required element in all contracts by which something of value, including a promise, is exchanged for the act or promise of another

CONTINGENT: Dependent upon conditions or events specified but not yet accomplished. Property may be sold contingent upon the seller or buyer meeting a predetermined condition of the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period.

CONVEYANCE: A written document that transfers title to an asset from one person to another. A deed and an assignment.

COUNTY ASSESSOR: One who sets value of property for taxation purposes.

Chain of Title: A chronological list of recorded instruments tracing title to land, from the original owner to the present owner

DEED: A written document which conveys ownership of land from one person to another.

DEED OF TRUST: A document executed by the owner of land by which the land is given as security for the payment of a note or other performance of an obligation. In California and some other states the Deed of Trust is usually used in place of a mortgage.

DEFAULT: Failure to perform a duty or to pay an obligation.

DEFICIENCY JUDGMENT: A personal judgment in a judicial foreclosure action for the remaining amount due after a sale of the security.

DEMAND/BENEFICIARY’S DEMAND: A statement from a lender showing the amount due on a loan.

EARNEST MONEY: An amount of money given as part of the purchase price of property to bind the agreement between buyer and seller.

EASEMENT: A right or interest in the land of another, such as a right to cross over another person’s property to reach yours.

EMINENT DOMAIN: A right or power of a governmental body to take property.

ENCUMBRANCE: A lien affecting the land and improvements, such as a mortgage or trust deed.

EQUITY: Market value of property, less any encumbrance or other liens on it .

ESCROW: According to section 651.033 of the State of Florida State Statutes : “ … any transaction wherein one person, for the purpose of effecting the sale, transfer, encumbering, or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by such person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such third person to the grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter.”

EXCEPTION: An interest in real property which is excluded from the conveyance and remains in the grantor or which had been excluded in a prior conveyance.

Fee Simple: An estate under which the owner owns a complete interest in the property and is entitled to the unrestricted use and enjoyment of the property, including the right to dispose of the property.

Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac): A quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market from depository insti- tutions and Department of Housing and Urban Development (HUD) approved mortgage bankers.

Federal Housing Administration (FHA): A division of the Depart- ment of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans by private lenders. Federal National

Mortgage Association (FNMA, Fannie Mae): A tax paying corporation created by Congress to support the sec- ondary mortgage market. It purchases and sells residential mort- gages insured by FHA or guaranteed by VA as well as conventional home mortgages.

Finance Charge: A total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the cus- tomer, as defined by the federal Truth-in-Lending laws.

First Mortgage: A mortgage on property that is superior in right to any other mortgage. Fixed Rate Loan: A loan on which the same rate of interest is charged for the life of the loan.

Fixture: Personal property which is permanently attached to real property, and, as such, becomes part of the real property.

Florida Land Title Association (FLTA): A statewide association of title insurers and underwritten title companies. The association adopts standard title policy forms.

FIRE INSURANCE: Insurance against loss or damage by fire to specific property.

FORECLOSURE: A proceeding to enforce a lien by the sale of the property in order to satisfy the debt.

GRANTEE: The buyer of a deed.

GRANTOR: The seller of a deed.

IMPOUND ACCOUNT: An account held in trust by the lender in which the borrower is required to place monthly deposits for taxes, insurance and other purposes.

LAND SALE CONTRACT: An agreement to sell and purchase wherein legal title is withheld from the purchaser until such time as the required payments to the seller have been completed.

LEASE OPTION (LEASE WITH OPTION TO PURCHASE): A lease containing an option giving the lessee the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period.

LENDER: One who lends money to borrowers.

LESSEE: The tenant under a lease.

LESSOR: The landlord under a lease.

LEGAL DESCRIPTION: Description of real property, as used in legal documents in contrast to a street address by which the property is commonly known. Legal descriptions usually refer to recorded maps, surveys, or other public documents.

LIEN: A security interest in real or personal property which places the holder in a position prior to the rights of the general creditors of the owner. Examples include trust deeds, mortgages, special assessments, recorded judgments, mechanics’ lien, taxes, etc.

LIS PENDENS: A notice recorded in the official records of a county to indicate that a lawsuit is pending affecting the lands described in the notice.

MARKET VALUE: The price that real property would reasonably be expected to bring were it to be offered for sale with a reasonable sales effort over a reasonable period of time.

METES AND BOUNDS: A term used in describing the boundary lines of land setting forth all the boundary lines together with their terminal points and angles.

MORTGAGE: A written document executed by the owner of land by which the land is given as security for the payment of a debt or performance of an obligation (rarely used in California).

NON AD VALOREM: This term is usually used in reference to real property taxes which are assessed based on factors other than property value. Examples of these assessments include: solid waste, drainage, street lighting. Non-Ad Volorem assessments are paid in advance.

Notarization: The certification by a Notary Public that a person signing a document has been properly identified. Notarization does not certify the content of a document, only validity of signature. Perfecting Title: Process involving the elimination of any adverse claims against a title.

NOTE: Written evidence of a debt by a borrower that includes a promise of payment in accordance with specified terms. A valuable document which must not be lost even when paid in full. In real property transactions, a note is usually secured by a Deed of Trust.

NOTICE OF COMPLETION: A notice which should be recorded to indicate completion of work of improvement to real property. A valid notice of completion limits the time for filing valid Mechanics’ liens.

NOTICE OF DEFAULT: Recorded notice that a default has occurred under a Deed of Trust and/or note.

OFFSET STATEMENT: A statement furnished to an escrow from an owner of land subject to an encumbrance (note) as to the balance due. Not to be confused with a beneficiary’s statement. This can also be provided by a tenant regarding his rights of possession.

OPEN END DEED OF TRUST: A Deed of Trust which secures additional notes for funds that a lender may advance to a trustor, subsequent to the execution of the original loan. PAYEE: One who receives payments. PAYOR: One who makes payments.

PITI Ratio: The principal, interest, tax and insurance payment to income ratio. Used in mortgage lending decisions.

Points: A fee charged by the lender to fund a loan, in addition to and separate from other fees charged. One point equals one per- cent of the amount of the loan.

Principal: The sum of money outstanding upon which interest is payable. Also refers to one who is served by an agent. Private Mortgage Insurance (PMI): Insurance written by a pri- vate mortgage insurance company protecting the mortgage lender against loss occasioned by a mortgage default and foreclosure.

Proration: The method used in dividing charges into that portion which applies only to a party’s ownership up to a particular date.

POWER OF ATTORNEY: A written authorization to an agent to perform specified acts on behalf of his principal. This may be granted as either a general or a limited power.

PRELIMINARY REPORT (also known as a Title Commitment): A report from a title company of the present condition of title made prior to the issuance of a title policy.

PREPAYMENT PENALTY: An agreement to pay a penalty for the payment of a note before it actually becomes due.

PRORATION: The allocation of property taxes, interest, insurance premiums, rental income, etc., between buyer and seller proportionate to time of use.

Qualification: The process of reviewing a prospective borrower’s

QUIT CLAIM DEED: A deed which conveys whatever right, title, or interest the grantor may have in property at the time of conveyance. There is no guarantee implied in a quit claim deed.

REAL PROPERTY: Land or improvements permanently affixed to land.

RECONVEYANCE: The document that is evidence that the Deed of Trust affecting real property has been paid in full and that the lender and the trustee no longer have any interest in the property.

RECORDATION: Filing for record in the office of the county recorder, a very necessary process in dealing with real property.

REQUEST FOR NOTICE OF DEFAULT: A recorded request for notification of a recorded notice of default on a Deed of Trust. RESERVATION: Right reserved by the grantor in conveying property, or a right which had previously been reserved.

RESTRICTIONS: This is often referred to as covenants, conditions, and restrictions (CC&Rs) in regard to a piece of property, setting limitations on its use. RIGHT OF WAY: The right of another to cross over, under or through a parcel of land.

SELLER: One who sells property to another.

SHORT SALE (Short Pay): A short sale is the sale of real property where the fair market sale price is less than the loan balance.

Statement of Information (SI): A confidential information state- ment completed by the buyer, seller and borrower in every transac- tion where a policy or policies of title insurance are requested. Al- lows the title company to competently search documents affecting the property to be insured, documents which may not refer to said property. Allows title companies to differentiate between parties with similar names when searching matters such as liens and court decrees.

SUBJECT TO: Usually referred to as the condition of title that exists at the time of acquisition by the buyer, such as subject to a Deed of Trust or record.

SUBORDINATION AGREEMENT: An agreement by which a prior lien is made inferior to an otherwise junior lien.

TAX COLLECTOR: One who collects the taxes on the property.

TITLE: Evidence of a person’s right to or the extent of his interest in property.

TITLE INSURANCE: Insurance against loss or damage resulting from defects in title to a particular parcel of real property.

Title Plant: The information warehouse of a title company in which it has accumulated and is constantly updating title records of prop- erties in its area which it can use to search title to real property.

TRUST DEED: See Deed of Trust.

TRUSTOR (IN A DEED OF TRUST): The borrower under a Deed of Trust.

Unmarkable Title: Title which contains defects that would allow a purchaser to be released from his obligation to purchase. Vesting: Denotes the manner in which title is held. Examples of common vestings are: Community Property, Joint Tenancy and Ten- ancy in Common.

Veterans Administration (VA): VA has power and authority to guarantee or insure payment of loans made to veterans by private lending institutions. This function is similar to that of FHA. VA also makes direct loans to veterans in non-urban areas where private loan funds are not available.

VENDEE: One who is purchasing property under a land sale contract.

VENDOR: One who is selling property under a land sale contract.

VESTING: The manner in which the owner of real property holds title. For example, John Jones, a single man.

ZONING: Local government regulations relating to the use of property