Glossary

Not sure about a certain term or product? Chances are, you’ll find it in the Patriot Bank Glossary.

AB | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |

 

A

Acknowledgment
Formal declaration before a public official (typically a Notary Public) that one has signed a document. Required before recording real estate legal documents, such as a deeds of trust.
Annual Percentage Rate (APR)
The effective rate of interest per year. This rate is typically higher than the note rate because it takes into account closing costs. This is one way to compare loan programs offered by different lenders. Caution : the APR is sometimes computed differently by different lenders and can be misleading.
Appraisal
An opinion or estimate of the value of a property at a given date.
Attorney In Fact
One who is authorized to act for another under a power of attorney which may be general or limited in scope.
Example: John wants to sell his house but has to be out of the country for four months. John gives authorization to Mary to sign the grant deed to sell the property to a buyer. Mary becomes John’s Attorney In Fact.

Back to the top

B

Bankruptcy
The financial inability to pay one’s debts when due. The debtor surrenders his assets to the bankruptcy court. An individual typically files for Chapter 7 (all debts wiped out) or Chapter 13 (establishes a payment plan to pay off debts). A bankruptcy stays on an individual’s credit report for seven years.
Beneficiary
The person who receives or is to receive the benefits resulting from certain acts.
Example : The lender is named as the beneficiary.
Example : John has a life insurance policy for $100,000 with Jane as his beneficiary. Should John die, Jane will receive the benefits in the amount of $100,000.
Bond
1. A debt instrument in the capital markets. The U.S. government, corporations and municipalities use bonds to raise money. Bonds can also be backed by mortgages. The best known bond is the 30-yr. treasury bond issued by the U.S. government.
2. A sum of money given to a court to guarantee against a loss. For example if there is a lien on a property, the owner may remove the lien by posting a bond.
Borrower
One who applies for a loan secured by collateral and is responsible for repaying the loan.
Browser
Short for Web browser, a software application used to locate and display Web pages. The two most popular browsers are Microsoft Internet Explorer and Netscape Navigator.
Bylaws
A set of regulations by which an organization conducts its business.
Example : A condominium association prepares bylaws that state the minimum number of owners to conduct a meeting to decide policies.

Back to the top

C

Capital Gains
When you sell a capital asset at a profit, such as real estate, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain.
Commitment
A written document provided by a lender to agreeing to make a loan on specific terms to a borrower or builder.
Conditional Commitment
A written document provided by a lender agreeing to make a loan provided certain conditions are met prior to closing.
Construction loan
A short term loan to pay for the construction of buildings or homes. These loans typically provide periodic disbursements to the builder as each stage of the building is completed. When construction is completed a take-out or permanent loan is used to pay off the construction loan.
Consideration
Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.
Contingency
The requirement that a particular event occur before a contract is binding. For example: The sale of a home can be contingent upon the buyer obtaining financing.
Credit Report
A report detailing a borrower’s credit and payment history including: revolving and installment accounts; public records such as tax liens and judgments.
Credit Score
A credit score is a snapshot of a person’s credit risk at a particular point in time. It is used by lenders to help determine if a borrower qualifies for a loan. There are three main credit reporting companies that issue these credit scores. Experian calls it the FICO score, Trans Union calls it Empirica, and Equifax calls it the Beacon.

Back to the top

D

Debt Ratio
This is a loan qualifying ratio used by lenders to determine if a borrower qualifies for a loan. The debt (-to-income) ratio is calculated by taking the borrower’s monthly debts, including house payments, credit cards and personal loans, and dividing it by the monthly income.
Default
Failure to meet legal obligations in a contract, such as the failure to make the monthly mortgage payment.
Depreciation
When related to the appraisal of property, depreciation is the decrease in value from any cause. When related to taxation, “book depreciation” is a steady decrease (calculated using mathematical formulas or schedules) in the owners tax basis.

Back to the top

E

Escheat
The reversion of property to the state in the event that the owner dies without leaving a will and has no legal heirs.
Escrow
1. Delivery of a deed by a grantor to a third party for delivery to the grantee upon the occurrence of a conditional event.
2. Calif. Civil Code Sec.1057: “A grant may be deposited by the grantor with a third person, to be delivered on the performance of a condition, and, on delivery by the depositary, it will take effect. While in the possession of the third person, and subject to condition, it is called an escrow.”
Executor (Executrix – feminine for Executor)
A person named in a will to carry out its provisions for the disposition of the estate.

Back to the top

F

Fed
Federal Reserve Bank
Federal Reserve System
The central federal banking system that regulates and provides services to member commercial banks. Also has the responsibility for conducting federal monetary policy.
Fidelity Bond
An assurance, generally purchased by an employer, to cover employees who are entrusted with valuable property or funds.
Example : A landlord employs a clerk who collects rents. To safeguard these funds during the collection process, the landlord purchases a fidelity bond the clerk.
Fiduciary
A person in a position of trust or responsibility with specific duties to act in the best interest of a client. A real estate broker is a fiduciary for his/her clients.
Finance Charge
Interest charged by a lender.
Flood Insurance
An insurance policy that covers property damage due to natural flooding. Flood insurance may be required on properties in a flood zone.
Foreclosure (Repossession)
A legal process in which the right, title and interest of a mortgagor or trustor in real property are terminated by selling the property and applying the proceeds to satisfy liens of creditors.
Framed Page
In HTML, refers to dividing the browser display area into separate sections, each of which is really a different Web page.
Free and clear
A property that has no liens.

Back to the top

G

Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.
Grantor
That party who is the seller or the giver.

Back to the top

H

Home Page
The main page of a web site. This is usually the first page that comes up on the computer screen. Typically, the home page serves as an index or table of contents to other documents available at the site. It is also referred to as the Index page.
HTML
Short for Hyper Text Markup Language, the authoring language used to create documents on the World Wide Web
HUD 1
A closing document required by HUD that outlines the settlement cost of a loan. The closing agent prepares this document and sends it to the buyer upon closing.

Back to the top

I

Inflation
In economics, inflation is an increase in the general level of prices of a given kind. General inflation is a fall in the market value or purchasing power of money within an economy, and is referred to as a rise in the general level of prices.
Interest Only
An interest-only loan program is a loan program that has an interest-only payment option. The loan can be a fixed rate or variable rate program. The interest only monthly payment is the amount of the interest rate times the original loan amount divided by twelve. No principal is paid, and the loan balance does not decrease. You may pay the interest only payment amount or pay the fully amortized payment amount. The interest only payment option is only available in the initial years of the loan term. Conforming loan programs have the interest only term for ten to fifteen years. Jumbo programs vary from three years up to ten years.
ISP
Internet Service Provider, a company that provides access to the Internet. For a monthly fee, the service provider gives you a software package, username, password and access phone number. You can then log on to the Internet and browse the World Wide Web, and send and receive e-mail.

Back to the top

J

Joint and Several Liability
A creditor can demand full repayment from any and all of those who have borrowed. Each borrower is liable for the full debt, not just the prorated share.
Joint Tenancy
Ownership of a property by two or more people, each of whom has an undivided interest with the right of survivorship.
Example: John and Mary own a house in joint tenancy. Each owns half of the entire (undivided) property. If John dies, Mary will own the entire property and vice versa.
Judgement
The decision of a court of law stating that one individual is indebted to another and fixing the amount of indebtedness. Judgements, when recorded, become a lien on real property owned by the defendant.
Judgement Lien
The claim on the property of a debtor resulting from a judgement.

Back to the top

K

Back to the top

L

Legal Description
Legally acceptable identification of real estate by one of the following:

  • the government rectangular survey
  • metes and bounds
  • recorded plat (lot and block number)
Lessee
A person to whom property is rented under a lease. (Tenant)
Lessor
A person who rents property to another under a lease. (Landlord)
Libor
London Interbank Offered Rates. Average London Eurodollar rates. The Libor Index rate is used in many variable loan programs.
Life Estate
An estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party.
Lien
A claim against the property for the payment of a debt, judgment, mortgage or taxes.
Example : Unpaid contractors may file a mechanic’s lien.
Loan Application
A document required by a lender prior to loan approval. The application includes detailed information about the borrower and the property.
Loan to Value Ratio (LTV)
The loan amount divided by the value of the property.

Back to the top

M

Mortgage
A written instrument that creates a lien upon real estate as security for the payment of a specified debt.
Mortgage Banker
Specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them.
Mortgage Broker
Arranges financing for a borrower by placing loans with lenders. Mortgage brokers are paid a fee by the borrower or the lender when a loan closes.
Mortgagee
The lender.
Mortgagor
The borrower.
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Back to the top

N

Net Effective Income
The borrowers gross income minus federal income tax.
Notary Public
One authorized to take acknowledgments of certain types of documents, such as deeds, contracts, and mortgages.
Note
The Note is a promissory note, which is signed with loan documents and states the loan amount, interest rate and loan terms.
Notice of default
A letter sent to the defaulting party as a reminder of the default.

Back to the top

O

Office of Comptroller Currency
The oldest federal financial regulatory body that oversees the nation’s federally chartered banks.
Office of Thrift Supervision
The OTS charters federal thrift institutions and is the primary regulator of all federal and many state-chartered thrift institutions.

Back to the top

P

Permit
A document issued by a government regulatory authority that allows the bearer to take some specific action. An occupancy permit allows the owner of a building to occupy or rent the building.
Phishing
Email phishing, also referred to as brand spoofing or carding, is a variation on “fishing,” the idea being that bait is thrown out with the hopes that while most will ignore the bait, some will be tempted into biting. An example of receiving this kind of spam email is “We have been trying to contact you regarding your loan request. Your loan is approved. Click here to complete your loan application.” Another example is a request for information using a bank’s website header, so it looks like it’s coming from the bank, but is actually a fake.
Plat
A plan or map of a specific land area.
Plat Book
A public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels.
Principal
The outstanding balance on a loan.
Power of Attorney
A written document authorizing a person to act on the behalf of another person. That person does not have to be an attorney. See Attorney-In-Fact.
Prepaid Interest
Prepaid interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest.
Prepayment
Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan.
Prepayment Penalty
Fees paid by the borrower if they pay the loan before its due date.
Prime Rate
The rate offered to a bank’s best customers.
Principal
The outstanding balance on a loan.
Probate
Court process to establish the validity of the will of a deceased person.
Property Tax
A government levy based on the market value (as assessed by the county assessor’s office) of the property.
Public Sale
An auction of property with notice to the general public.
Purchase Agreement
A real property agreement between a buyer and seller specifying the price and terms of the sale.

Back to the top

Q

Back to the top

R

Recession
A recession is usually defined as a fall of a country’s real Gross National Product in two or more successive quarters of a year. A recession may also involve falling prices, which can lead to a depression. In a free market economy, recessions come and go at fairly regular intervals, often five to ten years, in what is known as the business cycle.
Recording
The act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property.
Recision
The cancellation of a contract. When refinancing a mortgage on a principal residence the law gives the homeowner three days to cancel the contract.
Recourse
The right of the holder of a note secured by a mortgage or deed of trust to claim money from the borrower in default in addition to the property pledged as a collateral.
Redlining
The practice of refusing to provide loans or insurance in a certain neighborhood.
Refinancing
Repaying an existing loan from the proceeds of a new loan on the same property.
Regulation Z (Reg Z)
A federal regulation requiring creditors to provide full disclosure of the terms of a loan including the terms of the loan and the annual percentage rate (APR).
Right of survivorship
The right of a surviving joint tenant to acquire the interest of a deceased joint owner.

Back to the top

S

Savings & Loan
Depository institutions that specialize in originating, servicing and holding mortgage loans primarily on owner occupied residential property.
Security
Property that serves as collateral for a debt.
Servicing
The act of billing, collecting payment, filing reports, managing impound accounts and handling defaults on a loan.
Stock Cooperative
A common interest development in which a corporation holds title. Stock and exclusive right to occupancy are given to individual members (stock holders) of the stock cooperative.
Survey
Map made by a licensed surveyor who measures land and charts its boundaries, improvements and relationship to the property surrounding it.

Back to the top

T

Tenancy in Common
Ownership of a property by 2 or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the deceased is inherited by the beneficiary designated on the owner’s will.
Tenancy in Severalty
Ownership of property by one person.
Title
Evidence that the owner of the property is in lawful possession. Evidence of ownership.
Title Insurance
An insurance policy which protects the insured against loss arising from defects in title. Title insurance policies are typically obtained for the buyer and the lender.
Title Report
A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, convenants, restrictions, and any defects.
Title Search
An examination of the public records to determine the ownership and encumbrances affecting the property.
Treasury Bill
Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of three months, six months and one year. Each Treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate). The rate determines the Tbill Index rate, which is used in many variable rate loan programs.
Trust Account
A separate bank account maintained by a broker or escrow company to handle all money collected for clients. A broker may not commingle these funds with his/her own funds.
Trustee
A party who is given legal responsibility to hold property in the best interest of or “for the benefit of” another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.
Truth in Lending
See Regulation Z.

Back to the top

U

Underwriting
The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc.
Undivided Interest
An ownership right to use and possess a property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.
Unrecorded Deed
A document that transfers title from the grantor to the grantee without recording (i.e. providing public notice).
Usury
Charging a rate of interest greater than that permitted by law.

Back to the top

V

Verification of Deposit (VOD)
A document signed by the borrower’s bank or other financial institution verifying the account balance and history.
Verification of Employment
A document signed by the borrower’s employer verifying his/her starting date, job title, salary and probability of continued employment.

Back to the top

W

Waiver
The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege.
Web Portal
Commonly referred to as simply a portal, a Web site or service that offers a broad array of resources and services, such as e-mail, forums, search engines, and on-line shopping malls. The first Web portals were online services, such as AOL, that provided access to the Web, but by now most of the traditional search engines have transformed themselves into Web portals to attract and keep a larger audience.
WYSIWYG
What You See IWhat You Get. Computer software may display data on the computer screen with a format and color scheme that is different when you print the page or when you view it in a Web browser. Software that is WYSIWYG will print and look the same as what you see on the screen in the WYSIWYG.

Back to the top

Z

Back to the top