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Compucram glossary for the NMLS exam uploaded to quizlet! NOTE: I will never ever ever update these cards, because I'm lazy. If the definitions change it is YOUR responsibility to know that!

2-1 Buydown

A graduated payment buydown where the payments are subsidized for only two years, usually 2% the first year and 1% the second year.

3/7/3 Rule

A provision of the Truth in Lending Act related to required disclosures and waiting periods. Initial disclosure to be delivered within three business days of applying; earliest to close a loan is the seventh business day after disclosures are provided; a three business-day waiting period imposed after borrower receives redisclosures before a loan can close.

3-2-1 Buydown

A graduated payment buydown where the payments are subsidized for three years, usually 3% the first year, 2% the second year, and 1% the third year.

Abstractor

A person who prepares a summary (or abstract) of public records relating to title to a specific parcel of land.

Accelerate

Making a loan come due faster by having all payments become due immediately.

Acceleration Clause

A contract clause that gives the lender the right to declare the entire loan amount due immediately because of borrower's default, or other reasons as stated in the contract.

Acceptance

1. Agreeing to the terms of an offer to enter into a contract, thereby creating a binding contract. 2. Taking delivery of a deed.

Acknowledgment

When a person who has signed a document formally declares to an authorized official (usually a notary public) that he or she signed voluntarily. The official certifies that the signature is voluntary and genuine.

Acquisition Cost

The purchase price of a property, plus allowable buyer paid closing costs.

Act

A law enacted by a legislative body like the U.S. Congress.

Adjustable Rate Loan

A loan made by savings and loan associations similar to an adjustable rate mortgage. Also called ALM.

Adjustable Rate Mortgage

(ARM) A mortgage that permits the lender to periodically adjust the interest rate to reflect fluctuations in the cost of money.

Advancement

An improvement in one's employment position, given as a reason for changing employers (as opposed to job hopping for no reason).

Advertisements

Any public notification of property being offered for sale, which must follow guidelines of Regulation Z of the Truth In Lending Act.

Advertising

Required notification of foreclosure sale, notifying the public of the date and time of the sale, for three consecutive weeks in a general circulation newspaper in the county.

Affiliated Business Arrangement

A situation where a person in a position to refer settlement services-or an associate of that person-has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1% in a provider of settlement services and who then refers business to that provider or in some way influences the selection of that provider.

Agreement

An agreement between two or more parties to do, or not do, a certain thing. The requirements for an enforceable contract are: capacity, mutual consent, lawful objective, and consideration. In addition, certain contracts must be in writing to be enforceable. See also, Contract.

Alienation

The transfer of ownership or an interest in property from one person to another, by any means.

Alienation Clause

A contract clause that gives the lender certain stated rights when there's a transfer of ownership in property. (Often called a due-on-sale clause.)

Alimony

Money paid to an ex-spouse as part of a divorce settlement. Alimony does not have to be revealed as a source of income if it's not counted to help repay the loan, but must be revealed as a debt obligation.

Alternative Financing

When real estate is financed with terms or financing concessions, other than those typical for conventional loans.

Alternative Financing Tools

Specific financing programs or methods, not typically used in conventional financing, to help get a loan approved.

Amortization

When a loan balance decreases because of periodic installments paid on the principal and interest. Compare to Negative Amortization. See Re-amortization.

Amortization Schedule

A table or chart that shows the periodic payments, interest and principal requirements, and unpaid loan balance for each period of the life of a loan.

Amortize

To calculate payments to pay off a debt by periodic installments, with payments going to pay principal and interest.

Amortized Loan

Loan with payments applied to principal and interest. Compare to Fully Amortized Loan and Partially Amortized Loan.

Annexation

The legal term for attaching or affixing personal property to real property.

Annexer

The person who owned the item as personal property and brought it onto the real property.

Annual Percentage Rate

(APR) Relationship between the cost of borrowing and the total amount financed, represented as a percentage.

Appraisal

An estimate or opinion of the value of a piece of property as of a certain date. Also called valuation.

Appraisal Management Company

A business entity that - for a management fee - administers a network of certified and licensed appraisers to fulfill real estate appraisal assignments on behalf of mortgage lending institutions.

Appurtenances

Rights that go with real property.

APR

(Annual Percentage Rate) Relationship between the cost of borrowing and the total amount financed, represented as a percentage.

Area Median Income

(AMI) Midpoint in the family-income range for a specific statistical area. The figure often is used as a basis to stratify incomes into low, moderate and upper ranges. These figures are adjusted for family size and calculated annually by the U.S. Department of Housing and Urban Development (HUD) for every region in the country.

ARM

(Adjustable Rate Mortgage) A mortgage that permits the lender to periodically adjust the interest rate to reflect fluctuations in the cost of money.

Arm's Length Transaction

A transaction occurring under typical market conditions with each party acting in his or her own best interests.

Assemblage

Combining two or more parcels of land into one larger parcel.

Assessments

Taxes levied only against properties that benefit from a public improvement (e.g., new sewer line).

Assets

Items of value; usually items owned by a borrower. See Liquid Assets.

Assign

1. To transfer a right or interest to another. 2. When a tenant transfers his or her right of possession, or other interest in leased property, to another person for the entire remainder of the lease term. Compare to Sublease.

Assumable

Any loan for which an assumption may be exercised.

Assumption

When one party takes over the responsibility for the loan of another party and the terms of the loan or note remain unchanged. (Usually lender approval is needed. Also, a release is needed or original party remains secondarily liable for the loan.)

Attachments

Things connected to the land, whether natural or man-made.

Attestation

When witnesses sign a legal document to affirm that the parties' signatures are real; the act of witnessing the execution of a legal document (such as a deed or will). Compare to Acknowledgment.

Automated Underwriting

Process where loan applicant information is entered into a computer and an evaluation comes back within minutes advising the lender to accept the loan, or refers the loan application for further review.

Automated Valuation Models

Computer programs that are able to provide a probable value range for properties by performing a statistical analysis of available data. Also referred to as AVMs.

Balance

When there are slightly more homes available than buyers.

Balloon Payment

A final payment at the end of a loan term to pay off the entire remaining balance of principal and interest not covered by payments during the loan term.

Basis Point

A unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument, commonly used for calculating changes in interest rates. The relationship can be summarized as 1% change = 100 basis points.

B-C Credit

Refers to credit condition of people with less-than-perfect credit or serious blemishes on their credit report. Also used to refer to Subprime Loans.

BEACON Score

Credit scoring where a number from 300-900 is assigned to a consumer's credit history. The lower the score, the greater the risk of default. Above 660 is an acceptable risk, 620-660 is a marginal risk, below 620 is a high risk. Another type of credit score is FICO Score.

Beneficiary

One who receives a benefit; refers to the lender in a trust deed.

Bill Consolidation

Borrowing a larger sum of money to pay off many smaller debts.

Bi-Weekly Mortgage

A fixed-rate mortgage, similar to a standard mortgage, but with payments made every two weeks instead of every month, thus making an extra payment each year.

Blanket Mortgage

1. Mortgage that covers more than one parcel of real estate. 2. Mortgage that covers an entire building or development, rather than an individual unit or lot.

Blockbusting

The illegal practice of inducing owners to sell their homes (often at a deflated price) by suggesting that the ethnic or racial composition of the neighborhood is changing, with implication that property values will decline as a result. Also called panic selling and panic peddling.

Board of Governors

A seven-member committee that controls the Federal Reserve System. Also called the Federal Reserve Board, or the Fed.

Bond-Type Securities

Mortgage backed securities issued by Ginnie Mae, which are long-term, pay interest semi-annually, and provide for repayment at a specified date.

Bonuses

Money paid to someone in addition to his or her regular salary and may only be counted as income if consistent.

Boot

Unlike properties added to a deal to balance the value and are taxable as part of an exchange. See Equity Exchange.

Bridge Mortgage

A mortgage that occurs between the termination of one mortgage and the commencement of another. When the next mortgage is taken out, the bridge is repaid.

Building Codes

Rules that set construction standards, requiring builders to use particular methods and materials.

Bundle of Rights

All real property rights conferred with ownership, including, but not limited to, the right of use, the right of enjoyment, and the right of disposal.

Business Cycles

General swings in business activity, resulting in expanding or contracting activity during different phases of the cycle.

Buydown

Additional funds in the form of points paid to a lender at the beginning of a loan to lower the interest rate and monthly payments.

Buyer's Market

A situation in the housing market where buyers have a large selection of properties from which to choose.

Call Provision

Clause that lets lenders demand full payment of a loan immediately. Also referred to as call a note.

Cancellation

Terminating an obligation, such as when a note is cancelled after payment, or when PMI is cancelled after certain conditions are met.

Capital Gain

Profit made from an investment.

Cash Flow

Money available to an individual after subtracting all expenses. See Residual Income.

Cash-Out Mortgage

A mortgage that a borrower gives to lenders so that the borrower can get cash for the equity that has built up in property (e.g., a home equity loan taken out for a non-house purpose, or an investor trying to recoup money invested in fixing up a property).

Certificate of Eligibility

A certificate issued by the Department of Veteran's Affairs to establish status and amount of a veteran's eligibility to qualify for loan guarantee.

Certificate of Reasonable Value

(CRV) A document issued by the VA which states the value of the subject property based on an approved appraisal. The VA loan amount cannot exceed the CRV.

Chain of Title

Chain of deeds passing title for land from owner to owner.

Character

Stability in job and responsibilities such that, even with setbacks, financial obligations will be honored by the borrower.

Child Support

Money paid to the parent or guardian of children as part of a divorce settlement. Child support does not have to be revealed as a source of income if it's not counted to help repay the loan, but it must be revealed as a debt obligation.

Civil Law

The body of law concerned with the rights and liabilities of one individual in relation to another.

Civil Rights

Fundamental rights guaranteed to all persons by the law. The term is primarily used in reference to constitutional and statutory protections against discrimination based on race, religion, sex, or national origin.

Civil Rights Act of 1866

Federal law prohibiting public and private racial discrimination in any property transaction in the U.S.

Civil Rights of 1968

Federal law prohibiting discrimination based on race, color, religion, sex, national origin, disability, or familial status. Also called Title VIII or Federal Fair Housing Act.

Clause

A paragraph or section of a contract or other document that defines or assigns specific rights and duties to the parties involved.

Clear Title

Property for which the seller has clear title, free of mortgages or other liens. See Unencumbered Property.

Clear to Close

All of the conditions necessary to make the loan have been satisfied and the lender gives the final approval to schedule the closing.

Closing

The final stage in a real estate transaction where ownership of real property is transferred from seller to buyer according to the terms and conditions set forth in a sales contract or escrow agreement. See Roundtable Closing and Escrow Closing.

Closing Costs

Expenses incurred in the transfer of real estate in addition to the purchase price; (e.g., the appraisal fee, title insurance premiums, broker's commission, transfer tax, etc.)

Closing Statement

A document that presents detailed accounting for a real estate transaction, listing each party's debits and credits and the amount each will receive or be required to pay at closing. Also called a closing statement or a HUD-1. See Settlement Statement.

Clouds on the Title

Encumbrances or outstanding claims that could affect the owner's title; problems or uncertainties with a title to real property.

Co-Borrower

A person who signs a note or other debt obligation with another party and thus accepts joint obligation to repay the note.

COFI

(Cost of Funds Index) Cost of Funds Index An index that reflects the cost of borrowing money as per the 11th District Federal Home Loan Bank. This index is used by Fannie Mae when purchasing ARM loans.

Collateral

Property pledged as security for a debt. See Hypothecate.

Commercial Banks

Financial institutions that provide a variety of financial services.

Commercial Real Estate Lenders

Lenders who loan money for commercial real estate projects.

Commissions

The compensation paid to someone in lieu of, or in addition to, regular salary. Commissions may be a flat rate or percentage of sale price, but can only be counted as income if they are consistent.

Community Reinvestment Act

(CRA) Federal law emphasizing that regulated financial institutions have a continuing obligation to help meet the credit needs of the local communities in which they operate, especially in low-income neighborhoods.

Co-Mortgagor

A person who signs a mortgage with the primary mortgagor and thus accepts a joint obligation to repay the loan. Also called Co-Borrower or Co-Signer.

Comparables

Other similar properties that have sold recently in a certain area.

Condition

1. A provision in a contract, deed, law, regulation, guideline, etc., that makes the parties' rights and obligations depend on the occurrence, or non-occurrence, of a particular event. Also called a Contingency Clause. 2. A provision of a contract, law, regulation, guideline, etc., that allows, or does not allow, something else to occur based on whether or not certain other events occur or do not occur. 3. Other factors that reflect the general state of something as good or bad; (e.g., economic conditions of an area, property condition, etc.)

Condominium

A property developed for co-ownership, where each co-owner has a separate interest in an individual unit, combined with an undivided interest in common areas of the property. Compare to Cooperative.

Condominium Loan

The FHA-insured loan program for condominiums, available only for FHA qualified, single-family condos. The borrower must meet all FHA qualifying standards and property cost must not exceed the maximum FHA mortgage amounts. Also called Condominium FHA Loan Program. See Section 234(c) FHA Loan.

Confirmation of Sale

A document filed by the court finalizing the sale of property at foreclosure, and after which time the equitable right of redemption is no longer available to the original defaulting borrower.

Conforming Loans

Loans that meet Fannie Mae/Freddie Mac standards and which can be sold on the secondary market. Compare to Nonconforming Loans.

Conformity

Value characteristic that says a particular home achieves its maximum value when it's surrounded by homes similar in style and function. Conformity applies to neighborhoods as well.

Consideration

Anything of value, such as money, services, goods, or promises, given to induce another to enter into a contract. Sometimes called valuable consideration. Consideration for an option is option money.

Construction Mortgage

A temporary loan used to finance the construction of a building on land. Replaced with a takeout loan.

Contingency Clause

A provision in a contract, deed, law, regulation, guideline, etc., that makes the parties' rights and obligations depend on the occurrence, or non-occurrence, of a particular event. See Condition.

Contingent Interest

A term used to describe the lender's share of the appreciation paid on a shared appreciation mortgage (SAM) loan or other participation plan loan.

Contract

An agreement between two or more parties to do, or not do, a certain thing. The requirements for an enforceable contract are: capacity, mutual consent, lawful objective, and consideration. In addition, certain contracts must be in writing to be enforceable.

Contract Escrow

An approach used to ensure that payments are made on an existing mortgage, whereby an escrow account or servicing agreement is set up. Buyer makes payments into the escrow account; escrow agent then pays the existing mortgage and passes the surplus money to seller. Often used for land contracts with existing mortgages.

Contribution

A value theory that says a particular item or feature of a home is only worth what it actually contributes in value to the property.

Contributory Value

The actual amount that a particular item or feature of a property actually adds in value.

Conventional Financing

When real estate is paid for or financed with a conventional loan.

Conventional Loan

Loan not insured or guaranteed by a government entity.

Conventional Mortgage

A loan that is not insured or guaranteed by a government entity.

Conversion Option

A right the borrower has to convert from an adjustable rate mortgage to a fixed-rate mortgage one time during the loan term, provided certain conditions are met.

Convertible

Able to be changed or converted; such as with an ARM loan where the borrower can change from a variable rate to a fixed rate. Often stated in a conversion option clause.

Conveyance

The transfer of title to real property from one person to another by means of a written document, such as a deed.

Cooperative

A building owned by a corporation, where residents are shareholders in the corporation; each shareholder receives a proprietary lease on an individual unit and has the right to use common areas.

Co-Ownership

Any form of ownership where two or more people share title to real property, with each person having an undivided interest in the property.

Co-Signer

A person who signs a note or other debt obligation with another party and thus accepts joint obligation to repay the note. See Co-Borrower and Co-Mortgagor.

Cost Inflation

An increase in the cost of goods or services. Compare to Demand Inflation.

Cost of Funds Index

An index that reflects the cost of borrowing money as per the 11th District Federal Home Loan Bank. This index is used by Fannie Mae when purchasing ARM loans. Also called COFI.

Cost of Money

The interest rate people or businesses pay to use another's money for their own purposes.

Coupon Rate

The interest rate stated in a note. Also called Nominal Rate or Note Rate.

Covenant

1. A contract. 2. A promise. 3. A guarantee, expressed or implied, in a document such as a deed or lease. 4. A restrictive covenant. Typical covenants compel or prevent certain actions by the property owner or uses for the property.

CRA

(Community Reinvestment Act) Federal law emphasizing that regulated financial institutions have a continuing obligation to help meet the credit needs of the local communities in which they operate, especially in low-income neighborhoods

Credit

1. The availability of money; the ability to borrow money. 2. A sum of money to be received. See Rent Credit.

Credit History

A person's record of debt repayment detailing how a person paid credit accounts in the past. Credit history is used as a guide to how likely the borrower is to pay accounts on time and as agreed in the future.

Credit Report

A listing of a borrower's credit history, including amount of debt, record of repayment, job info, address info, etc.

Credit Scoring

A means by which the lender makes certain determinations regarding the creditworthiness of potential borrowers. This involves a lender assigning specified numerical values to different aspects of a borrower. See also BEACON Score.

Credit Unions

Financial institutions that are a type of cooperative organization where members share something in common (e.g., an employer), pool their deposits together, pay members better interest rates, and loan money to fellow members.

Creditor

A person or other entity, such as a bank, who is owed a debt.

CRV

(Certificate of Reasonable Value) A document issued by the VA which states the value of the subject property based on an approved appraisal. The VA loan amount cannot exceed the CRV.

Dealer

A person who holds property for the sole purpose of reselling it.

Debit

A sum of money that is owed.

Debt

Recurring monetary obligation that cannot be cancelled (e.g., monthly bills).

Debt Service Ratio

The relationship of a borrower's total monthly debt obligations, including housing and long-term debts with more than ten payments remaining, to income, expressed as a percentage. See Total Debt Service Ratio.

Debtor

A person or other entity who owes money to another.

Declining Market

A somewhat vague term used generally to describe areas where home prices are going down, due to any number of factors.

Deed in Lieu of Foreclosure

Deed given by borrower to lender to satisfy a debt, avoiding foreclosure. Also called Voluntary Conveyance.

Deed of Trust

An instrument held by a third party as security for the payment of a note. Also called a Trust Deed. Like a mortgage, it creates a voluntary lien on real property to secure repayment of a debt. Parties to a deed of trust are grantor or trustor (borrower), beneficiary (lender), and trustee (neutral third party). Unlike a mortgage, a trust deed has a power of sale, allowing trustee to foreclose non-judicially. Compare to Mortgage.

Deed Restrictions

Limitations on real property use, imposed by a former owner through language included in the deed. Also called restrictive covenants.

Default

Failure to fulfill an obligation, duty, or promise, as when borrower fails to make payments, tenant fails to pay rent, or party fails to perform a contract. Mortgage, note, or other document defines what constitutes default.

Defeasance Clause

1. Used to defeat or cancel a certain right upon the happening of a specific event (e.g., upon final payment, words of grant in a mortgage are void and the mortgage is thereby cancelled and title is re-vested to mortgagor). 2. Used to give a borrower the right to redeem real estate after default on a note by paying the full amount due plus fees and court costs. 3. Used in title theory states, whereby a mortgagee agrees to deed property back to the mortgagor after all contract terms have been performed as agreed.

Defenses

Reasons used to justify certain actions such as non-payment of a note.

Deferment

Permission to delay fulfillment of an obligation (e.g., paying taxes) until a later date.

Deferred Interest

Accrued interest that is not paid by regularly scheduled payments; interest that is accumulated during payment periods but is not paid until a later date. This can be an element of ARMs and may cause negative amortization to occur.

Deficiency Judgment

A court order stating that the debtor owes money to the creditor when the collateral property does not bring enough at foreclosure sale to cover the entire loan amount, accrued interest, and other costs.

Deficit Spending

When the government spends more money than it takes in from tax revenue.

Delayed Exchange

When value in a property is traded for value in another property. Properties must be of like kind, held for use in trade or business, or as investment to qualify for tax deferment. An equity exchange can also be a delayed exchange, with a promise to provide a replacement property. To qualify for tax deferment, the replacement property must be located within 45 days and closed within 180 days of the first exchange. See Equity Exchange.

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