Terms and Definitions

Regions Mortgage is dedicated to providing you will all of the information you may need in considering your new home purchase, refinance or home equity financing. Our Information Center provides you with an important resource to assist you in making the right decision.

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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.
    (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.
Metes and Bounds
    A form of land description in which boundaries are described by courses, directions, distances and monuments.
Monthly Payment

    The monthly payment of principal and interest collected by mortgage lenders.  May also include escrow items for taxes or insurance and thereby called the housing payment.

    (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 Backed Securities (MBS)
    An investment instrument backed by mortgage loans as security. Ownership is evidenced by an undivided interest in a pool of mortgage or trust deeds. Income from the underlying mortgages is used to pay interest and principal on the securities.
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.
    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 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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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.

No Cash-Out Refinance

    Also known as a rate reduction mortgage, a transaction in which the mortgage amount is limited to the sum of the unpaid principal balance of any existing first mortgage(s) and closing costs.
    Any loan that does not meet standard Fannie Mae/ Freddie Mac guidelines.
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.
    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.
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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.

Owner Occupied Purchase

    The purchase of a property for the purpose of the primary residence of the owner.
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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.
    (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.
Payment Shock
    A scenario in which monthly mortgage payments on an adjustable rate mortgage (ARM) rise so high that the borrower may not be able to afford the payments. Lifetime ceilings and annual caps are designed to prevent this type of payment shock.
    The payment in full of an existing loan or other lien.
Payoff Letter
    A statement detailing the unpaid principal balance, accrued interest, outstanding late charges, legal fees, and all other amounts necessary to pay off the lender in full.
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.
    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.
    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.
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.
    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.
    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.
Prepaid Items
    Costs paid at closing for taxes, interest, and insurance.
Prepaid Interest
    Mortgage Interest that is paid in advance of when it is due to obtain tax advantages.
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.
    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.
Principal Reduction
    The reduction in loan balance of money lent, excluding interest
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 Inspection
    The physical review/evaluation of a property to determine its current structural condition, to report any deferred maintenance and/or environmental problems, and to verify leasing status.
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    The process of reviewing a prospective borrower's credit and payment capacity prior to approving a loan.
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.
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 (RE0)
    Property a lender acquires as the result of a foreclosure.
Real Estate Settlement Procedures Act (RESPA)
    Federal law which regulates the settlement practices within the real estate industry. This law requires the provision of Good Faith Estimates of Closing Costs, prohibits kickbacks for referrals of related services and standardizes the closing with a required form and format (HUD-1).
    A person licensed to sell and/or lease real property, acting as an agent for others, and who is a member of a local real estate board affiliated with the National Association of Realtor® (NAR). Relator® is a registered trademark of the NAR.
    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.
    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.
Recordation Fees
    Fees charged by a local government to record the documents of a real estate transaction.
    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.
    (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.

Regulation B

    Federal Reserve regulation prohibiting discrimination against consumer credit applicants, and establishing guidelines for collecting and evaluating credit information.
Regulation Z
    Regulations written by the Federal Reserve Board to implement the Truth-In-Lending Act, requiring full written disclosure of the credit portion of a purchase, including the annual percentage rate.
    (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).
    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."
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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