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- M -


Marketable Title

Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

Market Value

The highest price a willing buyer would pay and a willing seller accept, both being fully informed, and the property exposed for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time (market price).

Market Value Approach

Appraising the value of a property by comparing the price of similar properties (comparables) recently sold. The degree of similarity of the properties and circumstances of the sale are the important characteristics to consider.

Maturity

(1) Termination period of a note. For example: A 30 year mortgage has maturity of 30 years. (2) In sales law, the date a note becomes due.

Mechanic's Lien

A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.

Merger Of Title

A lesser interest in real property being merged (absorbed) into a greater interest. For example: A lessee purchases the property being leased. The interest as a lessee is merged into the interest as an owner, thus ending the leasehold interest.

Metes and Bounds

A form of land description in which boundaries are described by courses, directions, distances and monuments.

Mile

A linear measurement equal to 5280 feet on land and 6076 feet across water (nautical mile).

Mortgage

(1) To hypothecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property. (2) The instrument by which real estate is hypothecated as security for the repayment of a loan.

Mortgage Banker

A company providing mortgage financing with its own funds rather than simply bringing together lender and borrower, as does a mortgage broker. Although the mortgage banker used its own funds, these funds are generally borrowed and the financing is either short term or long term, the mortgages are sold to investors (many times insurance companies) within a short time.

Mortgage Company

A company authorized to service real estate loans, charging a fee for this service.

Mortgagee

The party lending the money and receiving the mortgage. Some states treat the mortgagee as the "legal" owner, entitled to rents from the property. Other states treat the mortgagee as a secured creditor, the mortgagor being the owner. The latter is the more modern and accepted view.

Mortgage Insurance

Insurance written by a private mortgage insurance company (referred to as PIC) protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal Government writes this form of insurance through the FHA and the VA.

Mortgage Life Insurance

A term life insurance policy for the amount of the declining balance of a loan secured by a mortgage or deed of trust. The beneficiary under the policy is the mortgagee. In the event of death (some policies also cover disability) of the insured (mortgagor), the mortgage is paid in full.

Mortgage Servicing

Controlling the necessary duties of a mortgagee, such as collecting payments, releasing the lien upon payment in full, foreclosing if in default, and making sure the taxes are paid, insurance is in force, etc. Servicing may be done by the lender or a company acting for the lender, for a servicing fee.

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- N -


Negative Amortization

A condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases.

Negotiable Instrument

According to the Uniform Negotiable Instruments Act, an instrument is negotiable when it is in writing and signed, containing an unconditional promise or order to pay a certain amount of money, on demand, or at a definite future date, to the bearer, to order, or to a named or certain drawee.

Net Lease

A lease requiring the tenant to pay, in addition to a fixed rental, the expenses of the property leased, such as taxes, insurance, maintenance, etc. In some states the terms net net, net net net, triple net, and other such repetitions are used.

Net Worth

The difference between total assets and liabilities of an individual, corporations, etc.

Non-conforming

Any loan that does not meet standard Fannie Mae/ Freddie Mac guidelines.

Nonexclusive Listing

A listing under which the real estate broker has an exclusive listing as opposed to other agents, but the owner may sell the property without using an agent, and not be liable to pay a commission. Also called an agency agreement.

Nonrecourse Loan

A loan not allowing for a deficiency judgment. The lender's only recourse in the event of default is the security (property) and the borrower is not personally liable.

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.

Notice Of Cessation

A notice stating that work has stopped on a construction project. Done to accelerate the period for filing a mechanic's lien.

Notorious Possession

A requirement for adverse possession. Possession so open (notorious) that the owner is presumed to have notice of it and its extent.

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- O -


Open End Mortgage

A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage.

Origination Fee

The fee that the lender charges to originate the loan, this fee is typically 1 point.

Ownership

Rights to the use, enjoyment, and alienation of property, to the exclusion of others. Concerning real property, absolute rights are rare, being restricted by zoning laws, restrictions, liens, etc.

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- P -


Partial Release

A release of a portion of property covered by a mortgage. A subdivider will obtain a partial release as each lot is sold, upon payment of an agreed upon amount. In areas where the subdivider is not usually the builder, it may be necessary to sell groups of lots to obtain a partial release. In areas where deeds of trust are used instead of mortgages, a "partial reconveyance" is the document used.

Participation Certificates

Mortgage securities, rather than mortgages. The advantage of the certificate is that it is readily marketable or pledgeable.

Partition

(1) Any division of real or personal property between co-owners, resulting in individual ownership of the interests of each. (2) A wall, sometimes moveable, and not load-bearing, used to divide a room or building.

Payment Cap

A maximum amount for a payment under an Adjustable Mortgage Loan, regardless of the increase in the interest rate. If the payment is less than the interest alone, negative amortization is created.

Payoff

The payment in full of an existing loan or other lien.

Payoff Escrow

An escrow, specifically for the purpose of paying off an existing lien. Usually part of an existing escrow, and called a sub escrow.

Perfecting Title

Process involving the elimination of any adverse claims against a title.

Personal Property Loan

A loan which is secured by both real and personal property. The minimum ratio of personal to real property is set by law. The credit of the borrower is a major consideration in making the loan.

PITI

Refers to principal, interest, taxes and insurance,the four major components of a usual monthly mortgage payment.

PITI Ratio

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

Planned (Unit) Development (PUD)

A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels. The lots are generally small, being the exact size of the improvements, or slightly larger.

Point

One percent. When referring to mortgages or deeds of trust, the term is used to describe the percentage of discount rather than interest (for which the word "percent" is used). The points are paid by the seller in FHA and VA insured loans, and by either buyer or seller (or both) in conventional loans.

Points

A fee charged by the lender to fund a loan, in addition to and separate from other fees charged. One point equals one percent of the amount of the loan. Discount points are charged or are received based on the note rate the borrower selects. Additionally a one point origination fee is typically charged by a lender to underwrite a residential loan.

Power of Attorney

An authority by which one person (principal) enables another (attorney in fact) to act for him. (1) General power - Authorizes sale, mortgaging, etc. of all property of the principal. Invalid in some jurisdictions. (2) Special power - Specifies property, buyers, price and terms. How specific it must be varies in each state.

Pre-approval

When purchasing a home, it can be advantageous to get pre-approved for a mortgage.

A pre-approval takes the prequalification process one step further. A loan application must be completed, which is required in order to be prequalified. The mortgage lender will review the following information: income, debt, assets, confirmed monies available for down payment and closing costs. A credit report will be run and the lender will then issue a loan approval letter to the borrower based on their review of the information.

The 'pre-approval letter' can be provided to a Realtor and/or Seller. Typically, Realtors/Sellers prefer to work with people they know are able to obtain sufficient loan funds to purchase the property.

Pre-qualification

A pre-qualification is the process in which the mortgage loan originator reviews the income, debt, assets, credit history and confirmed monies available for down payment and closing costs. From this information, the mortgage representative is able to confirm the amount and type of loan available to the borrower. The borrower receives a pre-qualification which basically provides you with an understanding of your lending capabilities.

Prescriptive Easement

The granting of an easement by a court, based on the presumption that a written easement was given (although none existed), after a period of open and continuous use of land.

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 private mortgage insurance company protecting the mortgage lender against loss occasioned by a mortgage default and foreclosure.

Private Mortgage Insurance

Insurance against a loss by a lender in the event of default by a borrower (mortgagor). The insurance is similar to insurance by a governmental agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.

Property Management

The branch of the real estate business dealing with the management of property. The property may be a rented house or a large office or industrial complex. The duties may range from merely collecting rents to complete management of all maintenance and may also include being leasing agent or sales agent.

Proration

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

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- Q -


Qualification

The process of reviewing a prospective borrower's credit and payment capacity prior to approving a loan.

Quarter Section

One quarter of a section. A quarter section (commonly called a quarter) contains 160 acres.

Quitclaim Deed

A deed operating as a release, intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.

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- R -


Rate Index

An index used to adjust the interest rate of an adjustable mortgage loan. For example: the change in U.S. Treasury securities (T-Bills) with a 1 year maturity. The weekly average yield on said securities, adjusted to a constant maturity of one year, which is the result of weekly sales, may be obtained weekly from the Federal Reserve Statistical Release H.15 (519). This change in interest rates is the "index" for the change in the specific Adjustable Mortgage Loan.

Rate Of Return

The annual percentage of return on investment on income property.

Real Estate

(1) Land and anything permanently affixed to the land. such as buildings, fences, and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property it not attached. The term is generally synonymous with real property, although in some states a fine distinction may be made. (2) May refer to rights in real property as well as the property itself.

Real Estate Settlement Procedures Act (RESPA)

A federal statute requiring disclosure of certain costs in the sale of residential, improved property which is to be financed by a federally insured lender.

Reconveyance

The conveyance to the landowner of the title, held by a trustee under a deed of trust, when the performance of the debt is satisfied.

Recordation

Involves filing for record in the office of the county recorder for the purpose of giving constructive notice of title, claim or interest in real property.

Record Owner

The owner of property as shown by an examination of the public record.

Redemption

The process of canceling a defeasible title to land, such as is created by a mortgage foreclosure or tax sale.

Redemption Period

A time period during which a mortgage, land contract, deed of trust, etc., can be redeemed. Usually set by statute, and after judicial foreclosure.

Refinance

(1) The renewing of an existing loan with the same borrower and lender. (2) A loan on the same property by either the same lender or borrower. (3) The selling of loans by the original lender.

Reinstatement

(1) Payment of a note, mortgage, deed of trust, etc., to bring it from default to good standing. (2) Restoring the previously used entitlement of a veteran to enable the veteran to purchase property under a VA program. (Also called Restoration of Eligibility).

Reinsurance

The transferring of a portion of the liability to other insurers. Example: Insurer A insures for $200,000, A insures for $100,000 and reinsures the "second" $100,000 through B insurer, The "first" $100,000 is called "primary liability."

Renegotiable Rate Mortgage

A real property loan calling for an adjustment in the interest rate at a given time. Example: A loan with a 15 year amortization is adjusted to current interest rates after 2 years. The lender agrees to make the adjusted loan at the new rate as long as the old loan is not in default. The Federal Reserve Board allows the original loan to be treated either as a balloon payment loan or a variable rate loan. However, points must be figured into the APR based on the time or renegotiation (2 years rather than 15).

Reservation

(1) A right created and retained by a grantor. The reservation may be temporary (such as a life estate) or permanent (such as an easement running with the land). (2) Public land reserved for a special purpose, such as an Indian reservation.

Right Of Way

A strip of land which is used as a roadbed, either for a street or railway. The land is set aside as an easement or in fee, either by agreement or condemnation. May also be used to describe the right itself to pass over the land of another.

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