Morgage Glossary of Common Loan Terms   E Earnest Money A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow company. Easement The right to use the land of another for a specific purpose. Easements may be temporary or permanent. Example: The utility company may need an easement to run electric lines. Eminent Domain The right of the government or a public utility to acquire property for necessary public use by condemnation, with proper compensation to the owner. Encroachment A building, part of a building, or an obstruction (e.g., a fence or wall) that physically intrudes upon or overlaps the property of another. Encumbrance Any interest or right in real property possessed by a stranger to the title, which affects the owner's property value, but does not prevent the owner from transferring title. Encumbrances may affect title, or condition or use of the property. Entitlement VA home loan benefits are known as entitlement and/or eligibility. Equal Credit Opportunity Act (ECOA) A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. Equity The market value of real property, less the amount of any liens. Equity is often expressed as a percentage of the property value. Equity Sharing Joint ownership of a property between the owner/occupant and the owner/investor, that results in tax advantages for both parties. Upon sale of the property the joint owners split profits based on the percentage they own. 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." Escrow Account The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses. Estate The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death. Eviction The lawful expulsion of an occupant from real property. The legal process of eviction is different in each state. Examination of Title The report on the title of a property from the public records or an abstract of the title. Exclusive Listing A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property alone without the payment of a commission. Executor (Executrix?feminine for Executor) A person named in a will to carry out its provisions for the disposition of the estate. F Fair Credit Reporting Act A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record. Fair Market Value The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept. Fannie Mae-Backed Security rates Fannie Mae pools large quantities of mortgages, creates securities with them, and sells them as Fannie Mae-backed securities. The rates on these securities influence mortgage rates very strongly. Farmer's Home Administration (FmHA) An agency, within the U.S. Department of Agriculture, that administers assistance programs for purchasers of homes and farms in small towns and rural areas. Fed Federal Reserve Bank Federal Discount Rate The rate that the New York Fed charges for loans to member banks. Federal Funds Rate The Rate banks charge each other for overnight loans. Federal Home Loan Bank Board (FHLBB) Provides financing to farmers. Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac) Freddie Mac maintains a nationwide secondary market primarily for conventional loans originated by banks, thrift institutions and other HUD-approved lenders. Freddie Mac finances most of its operations through the sale of mortgage Participation Certificates. Federal Housing Administration (FHA) An agency within the U.S. Department of Housing and Urban Development (HUD). FHA offers mortgage insurance programs to protect the lender in the event of default. Because lenders are insured against loss, they can make affordable financing available to borrowers who would not otherwise qualify. Federal National Mortgage Association (FNMA, Fannie Mae) Provides a secondary market for FHA, VA and conventional loans. Fannie Mae issues mortgage-backed securities and guarantees timely payment their principal and interest to investors. 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. Fee Simple (Fee Absolute or Fee Simple Absolute) Absolute ownership of real property; owner is entitled to the entire property with unconditional power of disposition during the owners life and upon his death the property descends to the owner's designated heirs. Fico Fair Isaac Corporation. This credit score is reported on your Experian (formerly TRW) credit report. A FICO score is a snapshot of a person’s credit risk at a particular point in time. 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. Firm Commitment A lender’s agreement to make a loan to a specific borrower on a specific property. This is usually given as a written loan approval from a lender. First Mortgage A mortgage that has priority as a lien over all other mortgages. In the case of a foreclosure the first mortgage will be satisfied before other mortgages. See also second mortgage. Fixture Personal property attached to the land in such a way as to be considered part of the real property. 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. Freddie Mac, Federal Home Loan Mortgage Corporation (FHLMC) A quasi-governmental agency that purchases conventional mortgage loans from insured depository institutions (savings and loans) and HUD-approved mortgage bankers. Forfeiture The loss of money, property, rights, or privileges due to a breach of legal obligation. Front-end Ratio Monthly mortgage payments (PITI, principal, interest, taxes and insurance) divided by your gross monthly income. This comes out to a percentage, and a lender uses this percentage to get an idea of how much of your income will be going towards paying your loan. Most programs require a maximum ratio of 28-33%. A low ratio is better. FSBO For sale by owner. A property for sale that is not listed with a real estate broker. Fully indexed rate A fully indexed rate is the value of an index plus a margin. See adjustable loans. G General Warranty Deed A deed in which the grantor (seller) agrees to the protect the grantee (buyer) against any other claim to title of the property. See also warranty deed. Good Faith Estimate (GFE) The form that lists the settlement charges the borrower must pay at closing. The lender is obligated to provide the borrower this form within three business days of receiving the loan application. Government National Mortgage Association (GNMA, Ginnie Mae) A government corporation which guarantees mortgage-backed securities issued by approved lenders. GNMA mortgage-backed securities are considered by many to be as safe as Treasury securities. Grantee That party in the deed who is the buyer or recipient. Graduated Payment Mortgage (GPM) A trust deed or mortgage requiring increasingly higher payments during the life of the loan. Negative amortization may occur under some circumstances. 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. H Hazard Insurance (Fire Insurance, Homeowners insurance) A type of real estate insurance providing protection against loss due to fire and other risks. Home Equity Conversion Mortgage (HECM) A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. This is commonly known as a reverse mortgage. Home Equity Line of Credit A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property. Home Inspection A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal. Home KeeperSM Fannie Mae's adjustable-rate conventional reverse mortgage, which allows older homeowners to borrow against the value of their homes and receive the proceeds according to the payment option they select. The amount available is based on the number of borrowers and their ages and the adjusted property value. Anyone 62 years or older who either owns his or her own home free and clear or has very low mortgage debt is eligible. 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. Home Warranty Plan Insurance that covers appliances, heating systems, etc. Typically purchased at the time of closing. Homeowners Association An association of homeowners in a particular subdivision, planned unit development (PUD), or condominium organized to manage the common area of the development and to enforce the association rules and regulations. Homestead Status provided to a homeowner's principal residence that protects the home against certain types of judgments. Homestead Exemption A statutory exemption shielding real homestead property against the rights of certain creditors. Regarding taxation: an exemption reducing the assessed value of a principal residence for the purposes of calculating property tax. E.g., John's principal residence is assessed at $100,000 and the homestead exemption is $7,000. His property taxes will be based on $93,000. Housing and Urban Development A U.S. government agency established to implement certain federal housing and community development programs. Housing Code A local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings. 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. Hypothecate To pledge a property as security without having to give up possession of it. Use our detailed glossary to familiarize yourself with many of the terms that will be used through out the process of obtaining a loan. The key to being a successful 'borrower' is by making the best decision based on the information available to you. With that in mind we offer this glossary to help you become a more informed 'borrower'.

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