Amortization
The repayment of all or a specified portion of the principal of the loan in periodic installments made during the term of the loan. Most home mortgage loans made by lenders are fully amortized, with the principal installments calculated in such a way that the borrowers monthly payment of principal and accrued interest remains level over the life of the loan.

Appraisal
An estimate of the worth of a piece of property; especially, an estimate of the market value of a piece of real estate by a competent party having knowledge of real estate prices and markets.

Assumptions
The transfer of liability on an exiting mortgage loan contract from the original borrower to a new owner of the mortgaged property.

Balloon Payment
A method of debt repayment in which the monthly installments are less than would be required for full amortization and the balance is due in a lump sum at maturity.

Bankruptcy
The legal process in which a person declares his inability to pay his debts; any available assets are liquidated and the proceeds distributed among his creditors.

Budget
A plan for future expenditures and investments over a specified period of time, taking into account projected income and management objectives, as well as assets and liabilities, capital and reserve accounts.

Collateral
Something of value pledged by or on behalf of a borrower to secure his loan; if he defaults, the lender's claim to the collateral is exercised to satisfy the debt.

Community Property
The property belonging to married people that was not owned either by the husband or the wife at the time of marriage and was not acquired either by husband or wife during marriage by inheritance, will or gift. It includes all property that is earned or gained by either spouse during marriage. Upon the death of one spouse the surviving spouse takes one half of the net property, and the heirs of the deceased spouse takes the other half, in this respect is similar to tenancy in common.

Condominium
A system of direct ownership of a single unit in a multi-unit structure(s). The individual holds fee simple title to the unit plus an undivided interest in the common areas and elements.

Conforming Mortgage Loan
A mortgage loan that conforms to regulatory limits such as loan-to-value ratio, term and other characteristics.

Conventional Loan
A loan made by a lender without FHA insurance or VA Guaranty; called a Conventional loan because it conforms to accepted standards modified within legal bounds by mutual consent of the borrower and the lender.

Co-signer
An individual or entity that signs a legal document on an equal basis with the signer. On a promissory note, all co-signers are individually and jointly liable for repayment of the full debt.

Credit Rating
A professional estimate of the financial position and integrity of a person or company, based upon past performances.

Credit Union
A cooperative organization chartered by a state government or the federal government for the purpose of collecting savings from members and making loans to members at a low interest rate.

Debtor
One who owes money or something else of value.

Deed in Lieu of Foreclosure
A transfer of title to real property from a delinquent mortgagor to the mortgagee, given to satisfy the balance due on the defaulted loan.

Deed of Trust
A legal document, used in some states, that conveys title to real estate to a disinterested third party, who holds title until the owner of the property has repaid the debt; accomplishes essentially the same purpose as a regular mortgage. Also called a trust indenture or trust deed.

Default
Failure to do what is required by law or by the terms of a contract.

Deficiency Judgement
A legal decision, obtained by a lender when the sale of a foreclosed property does not provide enough money to satisfy the debt, that permits the lender to attempt to collect the debt from the borrower.

Delinquency
Failure to pay an obligation when due.

The Department of Housing and Urban Development (HUD)
The Cabinet department of the federal government responsible for federal housing programs and urban affairs; it governs FHA and GNMA operations.

Depreciation
A loss of utility and hence value from any cause, an effect caused by deterioration and /or obsolescence. Deterioration or physical depreciation is evidenced by wear and tear, decay, dry rot, cracks, incrustation, or structural defects. Obsolescence is devisable into two parts, functional and economic. Functional obsolescence may be due to poor plan, mechanical inadequacy or overadequacy, functional inadequacy or overadequacy due to size or style, age, etc. It is evidence by conditions within the property. Economic obsolescence is caused by changes external to the property such as neighborhood infiltrations by inharmonious groups or property uses, legislation, etc. It is also the actual decline of market value of the improvement to land from time of purchase to time of resale.

Due Date
The date on which a loan repayment is contractually due and after which it is considered late.

Eminent Domain
The right of a government to obtain ownership of private property for public use such as a street or park; compensation is made to the owner.

Equitable Mortgage
Any written instrument that declares the intent to hold property as security for the repayment of a debt; especially, a regular mortgage or deed of trust that is improperly drawn but clearly indicates the intent of the parties.

Equitable Right of Redemption
A defaulted borrower's right to redeem his property, by full payment of the mortgage debt, up to the date of the mortgage foreclosure sale.

Equity
In real estate, ownership interest in a property. On a new mortgage loan, the borrower's down payment represents his equity in the property.

Escrow
A written agreement among three or more persons, under which documents or property being transferred from one person or another are placed with the third person as custodian; the transfer is completed only upon the fulfillment of certain specified conditions.

FHA
A government agency within the Department of Housing and Urban Development that administer many programs for housing loans made under its auspices with private funds, including mortgage insurance for associations, and rent or interest assistance for low-income tenants and mortgagors.

Federal National Mortgage Association (FNMA)
A government-sponsored but privately owned secondary mortgage market corporation that buys and sells FHA, VA, and conventional loans; commonly called Fannie Mae.

Fee Simple Estate
Real estate ownership in which the owner is entitled to all the rights and privileges, and accountable for the responsibilities, incident to his property.

Forbearance Agreement
A verbal or written agreement providing that the association will delay exercising its rights (in the case of a mortgage loan, foreclosure) as long as the borrower performs certain agreed-upon actions.

Foreclosure
Legal action that bars a defaulted mortgagor's right to redeem his property.

Foreclosure By Court Action
A legal procedure in which the association files suit against the defaulting borrower, and the court issues a decree establishing a debt and arranges for public sale of the property by a court officer.

Foreclosure Under Power of Sale
A legal procedure, permissible in some states, in which the association exercises a right, expressed in the loan documents, to take over the property of the defaulting borrower without court action and offer it at public sale to the highest bidder.

Government National Mortgage Association (GNMA)
A government corporation, supervised by the Department of Housing and Urban Development, that provides special assistance for the purchase of certain FHA and VA mortgages, and guarantees securities backed by pools of mortgages loans; commonly called Ginnie Mae.

Grace Period
A specified period after the regular due date of a loan payment during which no late charge or other penalty is assessed.

Guarantor
The individual or entity that quarantees to repay a debt if the borrower defaults.

Hazard Insurance
A form of insurance coverage for real estate that includes protection against loss from fire, certain natural causes, vandalism and malicious mischief.

Home Financing
The providing of funds, secured by a mortgage, for the purchase or construction of a residential structure containing one, two, three or four dwelling units.

Home Improvement Loan
An advance of funds, usually not secured by a mortgage and usually short-term, made to a property owner for the upgrading of his property, such as maintenance and repair, additions and alterations, or replacement of equipment or structural elements.

Homeowner's Insurance
A broad form of coverage for real estate that combines hazard insurance with personal liability protection and other items.

Homestead Estate
A kind of estate ownership in land, permissible in a number of states, that protects the possession and enjoyment of the owner against the claims of creditors and from execution and sale for his general debts, provided that he has a family.

Insurance
A contract whereby the beneficiary is compensated in case of loss to a security property; included are fire and extended coverage, homeowner's policy, flood insurance and other special coverage.

Interest
A payment for the use of money, such as the payment an association makes to a saver for the use of his funds, or the payment a borrower makes to an association for the use of its loan funds.

Joint Tenancy
A type of ownership by two or more parties who share equal rights in and control of property, with the survivor or survivors continuing to hold all such rights on the death of one or more of the tenants.

Judgment Lien
A charge against the real or personal property of the judgement debtor that arises by virtue of a judgment by a state or federal court.

Junior Financing
Additional funds that a mortgagor obtains from a source in order to finance the down payment on the mortgagor's home or closing costs; savings associations often refuse loans to applicants who propose to use junior financing because the application would have little or no equity in the home.

Late Charge
A penalty imposed by the lender, as specified in the debt instrument, for delinquent repayments.

Lease Estate
A kind of real estate possession in which the holder does not have title to the land but rather rents it under a written lease from the owner.

Lender's Loss Payable Clause
A provision in an insurance policy that establishes a lender's interest in real property for insurance purposes; once such endorsement has been added to the policy, any claim drafts are written to the mortgagor and mortgagee as joint payees.

Lien
A claim that one person or organization has upon the property of another as security for the payment of a debt or charge.

Line of Credit
Extent of borrowing capacity; specifically the maximum amount a financial institute is willing to lend to a particular borrower (generally another financial institution or a commercial enterprise) at one time, whether in a lump sum or several separate advances. This amount is established after analysis of the borrower's business operation is updated from time to time.

Loan Repayments
Repayments of outstanding loan principal to the association, whether in the form of regular installments or prepayments; excludes payments of interest, loan fees and similar items of income.

Loan Servicing
All the steps taken to maintain a loan, from the time it is made until the last payment is received and the loan instruments are canceled.

Loan Settlement Statement
A document, prepared for and presented to the borrower at a loan closing, showing all disbursements to be made from the loan proceeds.

Loan-To-Value Ratio
The ratio, usually expressed as a percentage, that the principal amount of a mortgage loan bears to the mortgaged property's appraised value.

Market Value
The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale at a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated. 2. both parties are well informed or well advised, and each acting in what he considers his own best interest. 3. a reasonable time is allowed for exposure in the open market. 4. payment is made in cash or its equivalent. 5. financing, if any, is on terms generally available in the community at the specified date and typical for the property type in its locale. 6. the price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, cost, or credits incurred in the transaction.

Mechanic's Lien
A lien, created by statute in most states, in favor of persons who have performed work or furnished material used in the construction of a building or other improvement; also called a materialmen's lien.

Modification Agreement
Any agreement between the association and borrower that alters permanently one or more of the terms, interest rate, number of years allowed for repayment, monthly payment amount and the like-of an existing mortgage loan.

Mortgage
A legal document by which real property is pledged as security for the repayment of a loan; the pledge ends when the debt is discharged.

Mortgagee
The institution, group or individual that lends money on the security of pledged real estate; commonly called the lender.

Mortgage Life Insurance
Insurance on the life of a borrower that pays off a specified debt it he dies; also called credit life.

Mortgagor
The owner of real estate who pledges his property as security for the repayment of a debt; commonly called the borrower.

Net Income
Gross income less operating expenses and any other expenses, and before payment of earnings to savers and additions to reserves; sometimes referred to as income for the period.

Payor
A person who makes, or is to make, a payment.

Planned Unit Development (PUD)
A type of land development which may be at variance with traditional zoning and lot layout. May be residential, commercial or industrial. Buildings are clustered and/or set on smaller lots than usual. Result is a development with an overall density the same or slightly greater than is typical of conventional developments and zoning, but containing large open park-like areas with buildings concentrated in a few areas. Individual properties are owned in fee with either joint ownership or the open areas or, if local requires, with open areas deeded to the city.

Prepayment Penalty
A penalty sometimes charged by the association for advance payments on a loan.

Private Mortgage Insurance
Insurance offered by a private company that protects an association against loss up to policy limits (customarily 20% to 25% of the loan amount) on a defaulted mortgage loan. Its use usually is limited to loans with a high loan-to-value ratio; the borrower pays the premiums.

Profit and Loss Statement
Financial operations during a given period of time, showing income and its allocation to operating expenses.

Purchase Money Mortgage
A mortgage given concurrently with a conveyance of land, by the buyer to the seller, on the same land, to secure the unpaid balance of the purchase price.

Ouitclaim
A deed by which the owner of real estate conveys to another whatever title or interest he has to a property, but which makes no representation that the property is free from encumbrances except those created by the owner himself.

Real Estate
A parcel of land and any buildings or other objects permanently affixed to it. Same as real property in some states.

Refinancing
The changing of a loan from one financial institution to another or the rewriting of the terms of a loan contract within the same institution.

Regulation Z
The title of the Federal Reserve Board's regulations implementing the Consumer Credit Protection Act for all lenders. (See also Truth-in-Lending).

Release
The discharge of property from a mortgage lien; a written statement that an obligation has been satisfied.

Right of Recission
Under the provisions of truth-in-lending, the borrower's statutory right, on certain kinds of loans, to change his mind and to rescind the transaction during a three-day waiting period.

Seasoned Loan
A loan that has been on the association's books long enough to demonstrate that the borrower's credit is sound.

Secondary Mortgage Market
An informally constituted market that includes all activity in buying, selling and trading mortgages among originators and purchasers of whole loans and interests in blocks of loans.

Service Corporation
A corporation, owned by one or more savings associations, that performs services and engages in certain activities for its owners, such as originating, holding, selling and servicing mortgages; performing appraisal, brokerage, clerical, escrow, research and other services; and acquiring, developing or renovating, and holding real estate for investment purposes.

Servicing Contract
In secondary market transactions, a document that details servicing requirements and legally binds the servicing institution to perform them. Such a contract refers to the seller of mortgage participations, binding it to continue accepting loan payments. (See also Loan Serving).

Single-Family Dwelling
A housing unit designed for ownership and occupancy by one individual or family.

Small Business Administration
A federal government agency that makes, guarantees and purchases participations in loans to wholesale, retail, service and manufacturing business.

Sold Loan
A mortgage loan that has been sold to another institution but still is serviced by the seller.

Strict Foreclosure
A legal proceeding in which the association brings court action against the borrower and the court sets a date by which the borrower must redeem his debt in full or title will pass automatically to the association without public sale.

Supervised Lender
According to the Veterans Administration classification, any lender subject to examination and supervision by a state or federal agency.

Sweat Equity
The investment of labor, in lieu of cash, by the owner-occupant of a property.

Tax Lien
A government claim against real property for unpaid taxes.

Tenancy by the Entirety
A form of ownership by husband wife, recognized in certain states, in which the rights of the deceased spouse automatically pass to the survivor.

Tenancy In Common
A form of ownership in which two or more parties own property, but in which each owns a separate interest; when one owner dies, his share passes to his heirs, not to the remaining owner(s).

Title The ownership right to property including the right to possession, or the legal instrument evidencing that right. See also Abstract of Title.

Title 1
The section of the National Housing Act of 1934 that authorizes the Federal Housing Administration to insure home improvement and mobile home loans.

Title Report
A written statement by a title company of the condition of title to a particular piece of real estate as of a certain date.

Title II
The section of the National Housing Act of 1934 that covers all basic residential mortgage insurance programs of the Federal Housing Administration.

Trustee
The legal title holder and controller of funds in a trust account established for the benefit of another according to a trust agreement.

Truth-in-Lending
The popular name for the Consumer Credit Protection Act of 1968 and its provisions that require lenders to make certain disclosures of financing costs to the borrower.

Underwriting
In mortgage lending, the process of determining the risks inherent in a particular loan and establishing suitable of sound principles and procedures for various kinds of loans.

Valuation
Estimated value of real property.

Variable Rate Mortgage
A type of mortgage under which the interest rate charged may vary according to an index, such as the bank prime rate; the original borrower must be notified of any upward or downward change. An increase in the monthly payment or extension of the mortgage term. The borrower ordinarily has the option to prepay the loan without penalty before the rate becomes effective.

Veterans Administration (VA)
A government agency that aids veterans of the armed forces in obtaining housing; its assistance takes the form of a guarantee to the association on loans with low down payments.

Warranty Deed
A deed in which the seller warrants that the title to the real estate is good and merchantable.

Write-Off
The accounting procedure of removing an amount from the asset category of an association statement and recording it as an expense item, this type of adjustment is necessary when the association takes a loss, as in the sale of real estate owned.