Mortgage Leads and Mortgage Terms

Term	Definition
A credit mortgages	Mortgages which generally meet the credit underwriting guidelines of Fannie Mae, Freddie Mac, FHA, VA or major jumbo purchasers. Those who have credit ratings or other qualification deficiencies would be rated as B, C or D credit.
AAA tenant	A prime tenant who has the highest credit rating.
abandonment	The intentional relinquishment of claim or title to personal or real property.
abatement (rental)	A reduction or elimination of rent payments for a specified period of time, usually granted by the landlord as an inducement to the tenant to enter into or to renew a lease.
abatement (tax)	A reduction in real property tax granted by a taxing authority as the result of an appeal. In some jurisdictions, tax abatements may also be granted as an inducement for development or to attract or retain job-providing industries.
above par	When a mortgage is sold for more than its face value because it has an above market interest rate. For example, a $100,000 mortgage may be sold for 101.00, or $101,000.
absentee ownership	Ownership of property (usually income producing) by a non-occupant who employs others to manage and maintain the property.
absorption	The level of property units rented or sold after which price concessions must be made for market demand to continue at current levels. Used to determine the feasibility of new residential or commercial construction.
absorption rate	The rate at which vacant space is either leased or sold to users in the market place. Absorption rate is usually expressed in square feet per year or in the case of multifamily housing, number of units per year.
abstract of title	A written history of ownership of a parcel of land, summarizing the material parts of any occurrence affecting title of said land.
abstraction	Method for computing depreciation by comparing the replacement cost of the improvements to the sales price less land value.
ACC	See ANNUAL CONTRIBUTIONS CONTRACT.
accelerated cost recovery system (ACRS)	Part of the Economic Recovery Act of 1981, an accounting method which allows for a shorter depreciation period for real property over traditional depreciation methods.
accelerated depreciation	A method of calculating depreciation in which a larger portion of depreciation is charged in early years than in later years.
accelerated remittance cycle (ARC)	An option available to Freddie Mac's sellers and servicers which allows the lender to decrease the guarantee fee due Freddie Mac in return for shortening the monthly remittance delay by paying principal and interest payments early.
acceleration clause	A common provision of a mortgage which allows the holder to demand the entire outstanding mortgage balance due and payable in the event of a breach of the mortgage contract.
acceptance	An offeree's consent to enter into a contract and be bound by the terms of the offer.
acceptance letter	A document signed by a construction loan borrower stating that all work is complete and of acceptable quality.
access rights	A right to ingress and egress from one's property; may be implied or expressed.
accident	An unplanned, unexpected, and undesigned event which occurs suddenly at a definite place. Also see OCCURRENCE.
accident and health premium	A portion of the amount paid by a borrower for mortgage insurance that ensures the continuance of mortgage payments in the event of a mortgagor's disability or illness.
accommodation party (endorser)	A person who lends his name to guarantee a loan for another by signing a promissory note, bill, or other negotiable instrument; the endorser becomes the guarantor of the loan and is therefore responsible for its repayment.
accommodation paper	A promissory note or other negotiable instrument signed by a third party (accommodation party) guaranteeing the repayment of a loan.
accounts payable	Money owed by a business to suppliers of goods or services. Accounts payable are considered current liabilities on the balance sheet.
accounts receivable	Money owed to a business for goods or services provided to customers. Accounts receivable are classified as current assets on the balance sheet, with a contra account for bad debts on receivables.
Accredited Residential Originator (ARO)	Professional designation awarded by the Mortgage Bankers Association of America, in recognition of excellence in residential mortgage loan origination.
Accredited Residential Underwriter (ARU)	A professional designation awarded by the Mortgage Bankers Association of America, in recognition of excellence in residential underwriting.
accretion	A build up of land by natural forces, such as wind, waves, or the flow of water.
accrual bonds	A bond on which the interest accrues, but is not paid to the investor during period of accrual. Instead, the amount accrued is added to the principal balance and is paid at maturity. Also called accretion bonds or Z-bonds.
accrual basis of accounting	An accounting method under which income and expenses are charged to the periods for which they are applicable, rather than when payment is made or received. In contrast, cash accounting is the method calling for income and expenses to be based on payment being made or received.
accrued interest	Interest earned for the period of time elapsed since interest was last paid.
ACH (Automatic Clearing House)	A computer-based facility for interchange of electronic entries between financial institutions.
acknowledgement	A formal declaration attached to or part of an instrument, made before a duly authorized officer (usually a notary public) by the person who has executed that instrument, the execution being a free act and deed.
acord form	A form utilized by the insurance industry for use between an Agency and a Company for Organization, Research, and Development.
acquisition and development loan (A and D loan)	A loan for the purchase and preparation of raw land for development. Usually a construction loan or land sale is the source of repayment.
acquisition cost	In a HUD/FHA transaction, the price the borrower paid for the property plus any of the following costs
acquisition loan	See LAND ACQUISITION LOAN.
acquittance	A document evidencing payment in full of a debt obligation. One example would be a satisfaction of mortgage.
ACRS	See ACCELERATED COST RECOVERY SYSTEM.
acre	A unit of measure for land, 43,560 square feet.
action to quiet title	A court action to remove any interest or claim in or title to real property; to remove a cloud on title.
act of God	An event which causes damage by nature such as a flood, earthquake, or winds; an occurrence which was not caused by man.
actual cash value	Valuation of damaged property which allows for depreciation.
actual/actual	Remittance to investors which requires the servicer to give the investor actual interest (net of servicing fees) and actual principal collected from borrowers.
A and D loan	See ACQUISITION AND DEVELOPMENT LOAN.
ADA compliance	Compliance with the provisions of the Americans with Disabilities Act which establishes minimum requirements for facilities with public access to accommodate physically handicapped persons.
adaptive re-use	The rehabilitation of old property for a new purpose.
addendum	An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.
additional insured	An individual, business, or organization covered by a policy in addition to the named insured.
add-on interest	The full amount of interest calculated on the original principal for the term of the loan. This interest is added to the original principal, thereby becoming a part of the face amount of the promissory note.
adjustable rate mortgage (ARM)	A mortgage loan or deed of trust which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan. Also called "variable rate mortgages" (VRM).
adjusted basis	The original cost of a property, plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.
adjusted gross income	A person's total income, as reported on the IRS 1040 tax return form, after allowable contributions, deductions and expenses (alimony).
adjusted sales price	IRS term for the sales price of a home minus the costs of the sale. Used to calculate capital gains.
adjustment interval	On an a adjustable rate mortgage (ARM), the interval of time between changes in the interest rate or monthly payment, typically one, three or five years, depending on the index.
adjustment period	The length of time which dictates interest rate adjustments on an adjustable rate mortgage. A six-month ARM would have an adjustment every six months.
adjustment period cap	The amount that the interest rate is allowed to increase or decrease at the time of adjustment of an adjustable rate mortgage. A one year adjustable would have an annual cap, since the adjustment period is every year.
admitted insurer	An insurance company licensed to do business in a certain jurisdiction (i.e., State).
ad valorem taxes	Real estate taxes on the assessed value of property.
advance	In real estate, a partial disbursement of funds under a note. Most often used in connection with construction lending.
advance commitment (conditional)	A written promise to make an investment at some time in the future if specified conditions are met.
adverse possession	The right by which someone occupying a piece of land acquires title against the real owner, if the occupant's possession has been actual, continuous, hostile, visible, and distinct for a statutory period.
affidavit	A sworn statement in writing, usually requiring notarization.
after-acquired property	The property a debtor acquires after the execution of a mortgage or other form of indebtedness that additionally secures the indebtedness. If the mortgage note contains a statement on after-acquired property it is said to have an "after-acquired" clause.
after-tax cash flow	The cash flow remaining after deduction of an allowance for taxes attributable to that income.
agency	Federal or quasi-federal organization involved in mortgage lending, such as Freddie Mac or Ginnie Mae.
agent	One who legally represents another, called a principal, from whom express or implied authority has been derived.
aggregate analysis	An accounting method a servicer uses in conducting an escrow account analysis by computing the sufficiency of escrow account funds by analyzing the account as a whole.
aggregate deductible	A provision whereby the policyholder agrees to self assume the payment of claims incurred up to a specific amount or limit, with the insurer paying all claims after such limit is attached.
aggregate limit of liability	A provision which limits the maximum liability of an insurer for losses in a given time period (usually twelve months). Policy limits are usually expressed in maximums per accident (or occurrence), with an aggregate for all losses in any one year.
agreed amount	An agreement whereby the coinsurance clause is waived if the insured agrees to carry a specific amount of insurance which represent at least 90% to 100% of total values at risk. Also known as "stated amount coinsurance."
agreed amount endorsement	An insurance endorsement used with a policy containing a coinsurance clause. It binds the insurance company to an agreement that the amount of insurance carried under the policy is sufficient to meet the requirements of the coinsurance clause in the policy. Addition of the agreed amount endorsement eliminates the risk of the coinsurance penalty.
agreement for deed	A contract for the sale of property in which transfer of title to the buyer is contingent on the fulfillment of certain conditions.
agreement for sale	A written document in which the purchaser agrees to buy certain real estate or personal property and the seller agrees to sell under stated conditions. Also called a sales contract, binder, or earnest money contract.
AI	See ARTIFICIAL INTELLIGENCE.
AITD	See ALL-INCLUSIVE TRUST DEED.
AHS	See ANNUAL HOUSING SURVEY.
air rights	The ownership of the right to use, control, or occupy the air space over a designated property, without the right to use the land surface.
air space	The space above the surface of land that is owned by the landowner and that may be divided and sold or leased to others.
alienation	The transfer of title to real property from one owner to another.
alienation clause	A type of acceleration clause that demands payment of the entire balance upon sale or other transfer of title; also called a "due-on-sale" clause.
all-cash offer	A proposal to purchase property without any contingency to obtain a loan to finance any portion of the purchase price.
all-inclusive trust deed (AITD)	A refinancing technique involving the creation of a new deed of trust that includes the balance due on the existing note plus new funds advanced; also known as a wraparound mortgage.
allocation method	A method of site valuation in which the appraiser deducts the estimated value of the building from the total sales price of an improved property to arrive at the estimated land value.
allowance for vacancy and income loss	In accounting, an estimated amount reflecting probable vacancy, non-payment of rent by tenants, and any other income loss. These funds are set aside to cover either expected or unanticipated income losses.
ALTA	See AMERICAN LAND TITLE ASSOCIATION.
alternative documentation	Use of bank statements, W-2's, and pay stubs to document an applicant's income and assets instead of verification forms mailed by the lender.
alternative mortgage instrument	A mortgage that differs from the typical mortgage instrument either in the amount of principal, the interest rate, the periodic or monthly payments, or terms for repayment.
AM best rating	An evaluation published by the A.M. Best Company of all life, property, and casualty insurers (U.S. domiciled and U.S. branches of foreign property insurer groups), which are active in the United States. These ratings are often used by agents, brokers, and commercial insurers to determine the suitability, service record, and financial stability of insurance companies.
amenity	A feature that enhances property value. Examples are off-street reserved parking within a condominium community, tennis courts, a swimming pool, or the proximity of public transportation.
American Land Title Association (ALTA)	A national association of title insurance companies, abstractors, and attorneys specializing in real property laws. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.
American National Standards Institute (ANSI)	The organization which authorizes industry standards for information management and electronic interchange communication between companies (computer-to-computer). Headquartered in New York City.
amortization	Repayment of a mortgage debt with periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.
amortization schedule	A table showing the amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made.
amount realized	The amount of money, or fair market value of other property, received in a sale or exchange.
amount to make the project operational (AMPO)	An allowance, ordinarily a percentage of the replacement cost, that can be included in the mortgage insured by HUD/FHA to provide a nonprofit sponsor with working capital during the initial period of operation of a project.
AMPO	See AMOUNT TO MAKE THE PROJECT OPERATIONAL.
anchor tenant	A prime tenant in a shopping center, such as an established department store, which attracts the bulk of customers to the center.
annual contributions contract (ACC)	A contract under which HUD makes payments to public housing agencies to cover debt service payments on public housing projects or to provide rent subsidies and administrative costs under the Section 8 Housing Assistance Payments Program.
annual housing survey (AHS)	A yearly HUD/ Census Bureau study of housing units and trends in the movement of owners and renters.
annual mortgage statement	A report prepared by the lender or servicing agent for the mortgagor, stating the amount of taxes, insurance, and interest that was paid during the year, and the outstanding principal balance.
annual percentage rate (APR)	A term defined in section 106 of the federal Truth in Lending Act (15 USC 1606), which expresses on an annualized basis the charges imposed on the borrower to obtain a loan (defined in the Act as "finance charges"), including interest, discount and other costs.
annuity	Periodic fixed payments to be received for a specified period of time or for life, in consideration for prior lump sum or installment payments made to the other party in the annuity contract.
annuity starting date	The first day of the first period for which an amount is due as payment under an annuity contract.
ANSI	See AMERICAN NATIONAL STANDARDS INSTITUTE.
AOT	See ASSIGNMENT OF TRADE.
apartment	A complete and separate living unit in a building containing at least one other like unit.
apartment hotel	An apartment complex which provides some hotel services, such as a restaurant or cleaning and linen services. Units are furnished and tenants may stay for extended periods.
applicant	A prospective borrower who has completed an application. An application is series of steps, usually including the completion of documents, a lender requires of those seeking a loan.
application fee	Fee charged by a lender at the time of loan application. This fee may include the cost of an appraisal, credit report, lock-in fee or other closing costs which are incurred during the process or the fee may be in addition to other charges.
apportionment	A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents, and other income and expenses. When a property is sold, apportionment is used to distribute or collect funds due from the buyer and seller for income and expenses.
appraisal	An opinion or estimate of value. Also refers to the process by which a value estimate is obtained.
Appraisal Institute	Professional society in Chicago that provides training in valuation of residential and income properties, market analysis, and standards of professional practice. Confers the MA and SRA designations.
appraiser	One qualified by education, training, and experience to estimate the value of real and personal property.
appreciation	An increase in value for any reason, except inflation.
appurtenance	Anything belonging to or attached to land such as a barn, garage, or easement, that is part of the property and is therefore included in a sale or transfer.
APR	See ANNUAL PERCENTAGE RATE.
ARBITRAGE	The simultaneous buying and selling of any securities including mortgages, mortgage-backed securities, or futures contracts in different markets for the purpose of realizing a profit from differences in price.
ARC	SEE ACCELERATED REMITTANCE CYCLE.
architect's inspection certificate	A document, usually issued by an independent architect, verifying that a certain portion of construction on a project has been completed in accordance with approved plans and specifications. This document is often required by construction lenders when advances of funds are to be made at specific stages of construction. Also known as an architect's progress certificate.
ARM	See ADJUSTABLE RATE MORTGAGE.
arm's length transaction	A transaction between a willing buyer and a willing seller with no undue influence imposed on either party and where there is no relationship between the parties except that of the specific transaction.
ARO	See ACCREDITED RESIDENTIAL ORIGINATOR.
arrears	The situation in which mortgage interest and real estate taxes are paid at or after the end of the period for which they are levied. Late payment is also described as being in arrears.
artificial intelligence(AI)	Computer programs or systems that mimic human thought or decision making.
ARU	See ACCREDITED RESIDENTIAL UNDERWRITER.
asbestos	An insulative, fire and heat resistant material commonly used in insulation and roofing.
ask or asking price	The offering or sales price at which a security would be sold by a securities dealer to an investor.
assemblage	The process of acquiring adjacent parcels of land to combine into a single site for development.
assessed valuation	The value that a taxing authority places upon real property that becomes the base for computing local property taxes. May also refer to a levy against property for a special purpose, such as a sewer assessment.
assessment	A value factor assigned to real property and used to determine real property taxes. The process of reaching the assessed valuation. Also, an add-on tax to raise money for a special purpose.
assessment rolls	The public record of taxable property.
assessor	A public official who appraises taxable property to reach its assessed valuation or base on which taxes are calculated.
asset	A property or right owned, tangible or intangible, that has monetary value and is capable of providing future benefits to its owner.
asset turnover ratio	The ratio of sales over total assets used as an indicator of how well the total investment in assets is being used to generate sales.
assignee	The person to whom ownership, rights, or interest in property is transferred.
assignment	The transfer of ownership, rights, or interests in property, as in a mortgage, lease, or deed of trust. Mortgages and other security instruments are regularly assigned from one investor to another and commitments by HUD/FHA to insure mortgages may be assigned by one originating lender to another before insurance.
assignment of lease	A mortgage clause that passes control of leases on an income producing property to the lender. Often a condition to making a loan to ensure, in the case of mortgage default, that any continuing income from the property goes directly to the lender.
assignment of mortgage	A document that evidences the transfer of a mortgage from one party to another.
assignment of rents	A transfer to the mortgagee of the right to collect rents from tenants in the event of default by the property owner.
assignment of trade (AOT)	Loan sale arrangement where the seller assigns the trade with the broker/dealer to the buyer. The buyer of the loans is then responsible for delivery of the mortgage backed securities to the broker/dealer.
assignor	One who transfers to another ownership or interest in property.
assumption	The act of taking over the previous borrower's obligation of a mortgage note. Assumptions may be advantageous if the terms of the mortgage are advantageous and they are not changed by the lender when the mortgage is assumed.
assumption agreement	A written agreement by one party to pay an obligation originally incurred by another.
assumption fee	The amount paid a lender for the paperwork and processing of records necessary to approve and document a new debtor.
assumption of mortgage	A buyer's acceptance of primary liability for payment of an existing note secured by a mortgage or deed of trust. The seller remains secondarily liable, unless specifically released by the lender.
at-risk rules	Internal Revenue Service rules restricting leverage opportunities by limiting a taxpayer's deductible losses to the amount one has "at-risk." One is "at-risk" to the extent of cash contributed and amounts borrowed for which one is responsible for payment from personal assets.
at-the-money	In options trading, the point at which the strike price is equal to the market price of the underlying security.
attachment	The act of taking property by judicial order into the custody of the court as security for payment of a judgment in an impending suit.
attorney-in-fact	The agent who is granted authorization to perform specific acts on behalf of another.
attornment	See LETTER OF ATTORNMENT.
attornment agreement	A letter acknowledging a new owner as a landlord or a new organization as a loan servicer.
audit	The official examination and verification of bookkeeping accounts to prove the accuracy of figures and the adequacy of accounting controls. An audit may be done by public accountants hired for this purpose or by a company's own employees. The latter is called an internal audit.
automated clearing house (ACH)	Electronic drafting system that debits an authorized bank account and electronically transfers funds scheduled for remittance.
automatic program	A VA program that enables eligible single-family lenders to conduct the processing and closing of VA single-family loan applications without VA's prior review.
average life of a mortgage	A statistic used to estimate the yield on mortgages. Most mortgages written for long terms pay off earlier, either voluntarily or by foreclosure after default. For example, 30-year mortgages have traditionally been considered to have approximately a twelve year average life. Investors base impact of discounts or premiums on the yield of a mortgage on the average life, as opposed to the written term.
average rate of return	The return on an investment as calculated by averaging the total cash flows over the years during which the cash flows are received by the investor.
avulsion	An abrupt and extensive erosion of land by a force of water and its subsequent deposit onto the property of another owner.
back-to-back escrow	An escrow set up to facilitate the simultaneous purchase of one property and the sale of another property by the same party.
back-to-back settlement	Transactions involving selling one home and purchasing another on the same day, usually within hours of one another.
back-up	The process of taking all data stored on the computer and copying it onto tapes, or another storage medium, so it can be shipped to another location for safekeeping.
backup offer	A secondary offer to buy property although the first offer has been accepted, useful in case the first offer fails.
balance sheet	A report of the financial position of a business at a specific point in time, showing its assets, liabilities, and owner's equity.
balloon mortgage	A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date, usually at the end of the term.
balloon payment	A scheduled payment on a mortgage that is larger than other, periodic payments, usually the unamortized final payment.
band of investment	An approach to developing a capitalization rate by creating a weighted average rate reflecting the percentage of value represented by each debt and ownership position.
bank holding company	A corporation that owns a controlling interest in one or more banks.
bankruptcy	Court proceedings to relieve the debts of an individual or business unable to pay its creditors. An individual, firm, or corporation who, through a court proceeding, is relieved from the payment of all debts. Bankruptcy may be declared under one of several chapters of the federal bankruptcy code
base mortgage amount	The mortgage amount before financed mortgage insurance or VA funding fee is added.
base rent	The minimum fixed guaranteed rent in a commercial property lease.
base stop	The maximum amount of building operating expenses which will be borne by the landlord prior to passing additional amounts through to the tenant. The base stop is expressed as an absolute dollar amount or dollar per square foot amount.
base year	Similar to "base stop," except that rather than being specified as an absolute amount, the landlord's expenses are limited to the amount incurred in a specified calendar or fiscal year, usually (but not always) the calendar year in which the lease commences.
basic rent	The rent charged in a subsidized housing project and computed on the basis of a maximum subsidy.
basis	The cost of a property, including improvements, refinancing costs, closing costs, and similar costs, less depreciation. Basis is used for tax purposes to calculate any profit or loss realized on the sale of a property.
basis point	One one-hundredth of one percent. Used primarily to describe changes in yield or price on debt instruments, including mortgages and mortgage-backed securities.
basket provision	A stipulation within the regulatory acts governing the investments of insurance companies, savings and loan associations, and mutual savings banks, allowing for a small percentage of total assets to be placed in investments not otherwise permitted by the acts.
bear market	A market characterized by falling prices. A bear market in the mortgage industry may be triggered by rising interest rates.
bedroom community	A suburban residential area where most residents commute to neighboring metropolitan areas to work.
before-tax income	Gross income minus all expenses, except income taxes.
below market interest rate (BMIR)	Describes mortgage insurance programs where the interest rates on the mortgages are below that ordinarily charged for similar conventional financing; used to assist low- and moderate-income families to rent or buy dwelling units.
beneficiary	A person who benefits from a life insurance policy, will, contract, or deed of trust. In the latter case, the lender is the beneficiary.
beneficiary statement	The lender's statement under a deed of trust, detailing the remaining principal balance, monthly payment, and interest rate on the loan. Also called a "bene statement," "offset statement," or "estoppel certificate."
Bernard Rule	Method of appraising corner lots which takes into consideration the value of the lot portions facing each street. Also called the "Baltimore Rule."
betterment	An improvement, replacement or maintenance which results in a higher asset valuation.
bid	The price at which a seller will sell particular securities. In the securities and commodities trade, the highest price offered for a security or commodity at a given time. Also called a quotation or quote.
bid-ask spread	The difference between the highest price offered for securities and the lowest price that will prompt a seller to sell.
bill of sale	A document signed by a seller that certifies a transfer of ownership of personal property.
binder	A preliminary agreement between a buyer and seller which includes the price and terms of the contract. In commercial real estate, a legal agreement issued by the insurer or it's agent to provide evidence of coverage until such time as a full policy(ies) is/are issued.
biweekly mortgage	A mortgage with payments due every two weeks, totalling 26 payments a year.
blanket	The coverage of more than one piece of property under one instrument, such as blanket insurance policy, blanket deed of trust, blanket assignment, or blanket survey.
blanket mortgage	A mortgage that covers more than one parcel of real estate owned by the mortgagor.
blind pool	A securities offering of interests in a property or group of properties that have yet to be acquired.
block	A square or rectangular portion of a city or town enclosed by streets. Often used as part of a subdivision legal description.
blue-sky laws	State laws covering the registration and sale of new securities.
BMIR	See BELOW MARKET INTEREST RATE.
bodily injury liability insurance	Protection against loss arising out of the liability imposed upon the insured by law for damages due to bodily injury, sickness, or disease sustained by third parties. Also see PERSONAL INJURY.
boiler and machinery insurance	Coverage for the loss to boilers and machinery caused by explosion or mechanical breakdown. The policy may cover damage to the boilers, machinery, other property, and business interruption.
BOMA	See BUILDING OWNERS AND MANAGERS ASSOCIATION.
Board of Governors of the Federal Reserve System	Governing body of the Federal Reserve System that regulates all national and state-chartered banks in the Federal Reserve System and sets and regulates monetary policy. Commonly known as "the Fed."
bona fide	A Latin term meaning "in good faith," without fraud.
bond	An obligation written under seal. For example, the obligation may be to make good if a third party defaults (performance bond), or betrays a trust (fidelity bond), or an obligation to pay interest and principal as specified. The latter type of bond is a debt instrument which may be secured by a mortgage or a pool of mortgages.
bond loan	A state-sponsored method of assisting low income borrowers and first time home- owners in the purchase of a home at a reduced interest rate.
bondable net lease	A long-term absolute net lease with a tenant who has a very high credit ceiling. The lease must be noncancellable and must call for a net rental equal to or above the amount of debt service.
book cost	The actual cost of assets purchased or acquired.
book-entry securities	Securities that are kept in computerized record form rather than paper certificate form.
book-entry system	Electronic registration of ownership and interests in securities.
book value	The capitalized cost of an asset, less depreciation taken for accounting purposes, based on the method used for the computing of depreciation over the useful life of the asset. The actual value of an asset after deducting depreciation and all liabilities is the "net book value."
borrower	One who receives funds in the form of a loan with the obligation of repaying the loan in full with interest.
borrower/guarantor full recourse	An agreement wherein the borrower/guarantor has personally agreed to fully repay all amounts owed under a mortgage loan, irrespective of whether the collateral is adequate to retire the debt. This agreement gives the holder of the note, or other negotiable instrument, the right to recover against the borrower/guarantor personally, including any and all assets of the borrower/guarantor.
borrower/guarantor partial recourse	An agreement wherein the borrower/guarantor has personally agreed to repay a set dollar amount, all amounts exceeding a stated dollar amount, or a percentage of the outstanding balance of the mortgage loan. This agreement gives the holder of the note, or other negotiable instrument, the right to recover against the borrower/guarantor personally, including any and all assets of the borrower/guarantor, but only to the extent specified. For example, a borrower/guarantor may agree to pay the first $1 million of a $5 million loan or the top 25% of the loan.
bottom ratio	See DEBT-TO-INCOME RATIO.
bow-tie loan	A variable-rate loan that attempts to smooth the impact of rate increases on borrowers by deferring a portion of high interest rates until maturity. Usually, all interest above a certain rate is deferred to maturity.
breach	Failure to perform under a contract or the violation of a legal obligation.
breakeven point	The figure at which occupancy income is equal to all required expenses and debt service. Used to determine the amount of cash flow necessary to operate a residential or commercial property.
breakpoint	In a retail lease, the point specified in absolute sales dollars or sales dollars per square foot, above which the tenant has agreed to pay percentage rent in addition to base rent. For example, in addition to base rent, a tenant may agree to pay 2% of annual gross sales above $2 million. In this case, $2 million is the breakpoint.
bridge loan	A loan which enables a homebuyer to get financing to make a downpayment and pay closing costs on a new home before selling the present house. Also called "gap financing."
broad form	A term used to describe coverage which extends beyond "standard" peril insurance policies, i.e., fire and extended coverage, named perils, etc.
broad form property damage	An endorsement to a general liability policy which grants expanded coverage to property in the care, custody, or control of the insured, property which is not normally insured if damaged by the insured's negligence.
broker	An individual employed on a fee or commission basis as agent to bring buyers and sellers together and assist in negotiating contracts between them. Also see MORTGAGE BROKER and THIRD-PARTY ORIGINATOR (TPO).
Brokered TPO Transaction	Mortgage for which a third party takes an application, and may process or underwrite the mortgage documents, then assigns the documents to another mortgage lender. After receiving the assigned mortgage documents, the mortgage lender underwrites, funds, and closes the mortgage in its own name.
BSPRA	See BUILDER'S AND SPONSOR'S PROFIT AND RISK ALLOWANCE.
builder-seller sponsor	A project sponsor specifically organized to build or rehabilitate and sell a project immediately upon completion to a private, nonprofit organization, at the certified cost of the project. The nonprofit sponsor buys a total package.
builder's and sponsor's profit and risk allowance (BSPRA)	A credit against the required equity contribution in HUD/FHA insurance programs granted the developer for its services in sponsoring and building the project.
builder's risk insurance	Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the building progresses and terminates at completion.
building code	Regulations based on safety and health standards that govern design, construction, and materials used in construction.
building efficiency	A ratio of net rentable area to gross building area.
Building Owners and Managers Association (BOMA)	The trade association of owners and managers of commercial real estate, who benefit from exchange of information and management techniques.
building permit	Written authorization from a local government for the construction of a new building, or for extensive repairs or improvements on an existing structure.
building residual	A method of real estate appraisal used to determine the value of a building when the land value is known.
built-ins	Permanent, immovable appliances or similar features.
business interruption insurance	Compensation to a business owner or operator for income lost when the business is closed due to fire or any other insured hazard.
bulk servicing sale	Transfer of servicing in a one-time transaction where all loan files and portfolio information are transferred on a specific date or within a short, specified time frame.
bullet loan	Interim financing for leased-up properties often used to repay the construction loan; typically an interest-only loan for two to ten years that cannot be prepaid.
bull market	A market characterized by rising prices. In the mortgage industry, a bull market may be prompted by falling interest rates.
business day	Days on which a bank or market is open for business or trading; usually excludes Saturdays, Sundays, and legal public holidays.
business interruption insurance	Compensation to a business owner or operator for income lost when the business is closed due to fire or any other insured hazard.
but-for test	Proof that federal assistance is required to keep a development project from failing.
buy-down mortgage	A mortgage with a below market interest rate made by a lender in return for an interest rate subsidy in the form of additional discount points paid by the builder, seller or buyer.
buy-sell agreement	An agreement between an interim and permanent lender for the sale and assignment of a mortgage to the permanent lender upon the completion of a building. Often the mortgagor is a party to this agreement on the theory that the mortgagor should have a contractual right to insist that the permanent lender buy the mortgage.
buy-up	Freddie Mac's up-front payment to a loan seller in exchange for a higher guarantee fee.
buyer's market	Economic conditions in which the supply of housing exceeds demand. Sellers may be forced to make substantial price concessions.
ca-call	A "call-on-call" compound option.
CAFMV	See COMMISSIONER'S ADJUSTED FAIR MARKET
call option	A contract granting the right, but not the obligation, to purchase a security at a specified strike price on a particular date.
call provision/option	A provision of a note that allows the lender the right to demand or "call in" the balance of the mortgage obligation. The call can be exercised due to a breach of specified terms or conditions, or at the discretion of the lender (such as when the note rate is lower than the current market rate). In bonds, the issuer's right to redeem the bond before maturity.
CAM expenses	See COMMON AREA MAINTENANCE.
cancellation clause	In a lease or other contract, a provision detailing conditions under which each party may terminate the agreement.
capital	The net worth of a business represented by the amount that its assets exceed liabilities. Money invested to create income.
capital asset	An asset of a permanent or fixed nature to be used in a business or trade and not sold.
capital expenditure	The cost of a capital asset or a property improvement made to add value to or extend the useful life of an existing capital asset.
capital gain or loss	The gain or loss incurred from the sale or disposition of a capital asset.
capital improvement	Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
capital improvement reserves	Reserves that may be required by loan documents to fund the future payment of capital improvement for the property.
capital market	The financial market for buying and selling long-term investments (those with maturities of greater than one year), such as mortgages, Treasury bonds, and certificates of deposit.
capitalization	The conversion of a future net income stream into present value by using a specific desired rate of earnings as a discount rate.
capitalization analysis	The analysis based on the conversion of a future net income stream into present value by using a specific desired rate of earnings as a discount rate.
capitalization rate	The rate of return on net operating income considered acceptable for an investor and used to determine the capitalized value. This rate should provide a return on, as well as a return of, capital. Also known as "cap rate."
capitalized value	The estimated market value of business assets in terms of the present value of anticipated earnings.
capped rate	A rate commitment by a lender which locks in a maximum rate but allows the borrower to relock if market rates decrease. Also referred to as cap and float.
caps (interest)	Consumer safeguards on an adjustable-rate mortgage which limit the amount the interest rate may change per year and over the life of the loan.
caps (payment)	Consumer safeguards on an adjustable-rate mortgage which limit the amount monthly payments may change.
ca-put	A "call-on-put" compound option.
carryback financing	An agreement in which the seller takes back a note for part of the purchase price secured by a junior mortgage, wrap-around mortgage, or contract for deed.
carrying charges	The charges or costs incurred for holding property when it is idle, non- productive, or in interim use, including the opportunity cost of nonproductive use of the property.
cash basis of accounting	An accounting method under which income is reported when actually received and expenses are deducted when paid.
cash equivalent value	A method of calculating the appraised value of a property that considers sales and financing concessions when evaluating comparable properties. There is no standard in the appraisal industry for measuring cash equivalent value, but investors and mortgage insurers sometimes insist that cash equivalency be incorporated in appraised values.
cash flow (after taxes)	Cash received less cash paid out, including income taxes paid.
cash flow (before taxes)	Cash received less cash paid out, before any consideration for income taxes.
cash market	A market where mortgages and/or mortgage-backed securities are bought and sold for immediate delivery and cash payment. Also called spot market.
cash-on-cash return	The rate of return on an investment as measured by cash returned to the investor, based on the investor's cash investment and without regard to income tax savings or the use of borrowed funds.
cash out refinancing	When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding of the existing mortgage being refinanced, and all or a portion of the equity is converted to cash.
cash reserve	Reserves normally kept by the owner of the property to fund any operating shortfall or capital improvements that are required for the property.
cash settlement	The process by which a dollar adjustment rather than a physical instrument is used to satisfy the delivery requirement of a given contract at expiration.
casualty or theft loss	Losses on property arising from fire, storm, theft, or similar sudden and unexpected occurrences.
caveat emptor	Latin for "let the buyer beware." This term signifies that the seller offers goods "as is," with no warranty.
CBA	See CONTROLLED BUSINESS ARRANGEMENT.
CBOE	See CHICAGO BOARD OPTIONS EXCHANGE.
CBOT	See CHICAGO BOARD OF TRADE.
CD	See CERTIFICATE OF DEPOSIT.
CDBG	See COMMUNITY DEVELOPMENT BLOCK GRANT.
CDR	See COLLATERALIZED DEPOSITORY RECEIPT.
central business district (CBD)	The area geographically located within the central business district of a municipality.
census tract	Six digit number designated by HUD to identify a neighborhood. Census tract numbers are entered on compliance reports to monitor a lender's mortgage activity.
CERCLA	Comprehensive Environmental Response, Compensation and Liability Act. See SUPERFUND.
certificate of eligibility (COE)	A document issued by the Veterans Administration which verifies a veteran's eligibility for a VA mortgage guarantee.
certificate of claim	A contingent promise to reimburse an insured mortgagee for certain costs incurred during foreclosure of an insured mortgage, provided the proceeds from the sale of the property are sufficient to cover the lender's claim.
certificate of completion	A document issued by an architect or engineer stating that construction is completed in accordance with the terms, conditions, approved plans, and specifications.
certificate of deposit (CD)	Certificates issued by financial institutions with a stated return or interest rate, and with a set maturity. The bank pays the holder in due course at maturity.
certificates of insurance	A form which evidences policy coverage, limits, etc., which is generally used as proof of insurance. These forms have no legal status and cannot be used in lieu of actual insurance policies.
certificate of occupancy	Written authorization given by a local municipality that allows a newly completed or substantially renovated structure to be inhabited.
certificate of reasonable value (CRV)	A document issued by the Veterans Administration which establishes a maximum value and loan amount for a VA guaranteed mortgage.
certificate of sale	An affidavit issued the buyer of real property at a judicial or tax sale which guarantees the deed of the parcel purchased, pending court confirmation.
certificate of title	A confirmation written by a title attorney or company stating that the title to a parcel of real property is legally vested in the present owner.
certificate of veteran status	FHA form filled out by the Department of Veteran Affairs in order to establish a borrower's eligibility for an FHA Vet Mortgage.
Certified Mortgage Banker (CMB)	A professional designation awarded by the Mortgage Bankers Association of America (MBA) to those in the industry who have demonstrated superior knowledge and skills in the field of real estate finance. Candidates must be employed by MBA member firms and meet various educational, experience, and examination requirements.
Certified Property Manager (CPM)	A professional designation conferred by the Institute of Real Estate Management to recognize experienced members of the property management industry.
chain of title	A chronology of documents which have transferred title to a parcel of real property from the original owner to the present owner.
change order	A document evidencing a change in the original plan of construction by a building owner or general contractor.
Chapter 7	Bankruptcy filing which gives a trustee the power to distribute a debtor's assets to creditors. Also called a "liquidation."
Chapter 11	A reorganization by a business allowing the debtor to maintain operating control of the business while restructuring debts and working out a repayment schedule acceptable to the creditors. Also called "debtor in possession."
Chapter 13	A debt repayment plan where an individual debtor files a budget with the court and agrees to make partial payment to creditors over a three-to-five year period. Also called "wageearner plan."
chart of accounts	For accounting purposes, a numerical designation assigned to each asset, liability, and capital account of a business.
chattel	See PERSONAL PROPERTY.
chattel mortgage	An agreement between a secured party and a debtor creating a security interest in personal property.
cheapest coupon	In the cash or futures market, the specific rate security that can be purchased for the lowest total price and in sufficient quantity to meet the delivery requirements of a particular contract.
Chicago Board of Trade (CBOT)	The exchange where futures and options contracts are traded. Residential mortgage bankers may use futures and options to hedge their inventories of mortgages.
Chicago Board Options Exchange(CBOE)	The largest and most active organized options marketplace.
CHIML	See COMMUNITY HOME IMPROVEMENT MORTGAGE LOAN.
CHUMS	See COMPUTERIZED HOME UNDERWRITING MANAGEMENT SYSTEM.
claims made	Policies written on a "claims made" basis only cover claims presented during the particular year the policy is in force, for incidents which occurred during the same policy year, or for any previous year noted in the "claims made" policy (retroactive date). This form of coverage contrasts with an "occurrence" policy which responds to incidents regardless of when the claim is reported.
Claims Without Conveyance of Title (CWCOT)	HUD program with authorized the payment of claims for insurance benefits without conveying title to the foreclosed property to HUD. Use of the CWCOT program is limited to cases involving deficiency judgments or other situations where HUD either requests or requires a mortgagee to obtain a property appraisal or to use CWCOT.
CLAS	CHUMS Lender Access System.
clear title	Unencumbered title to real property, free of liens or defects. Also, "free and clear."
clearing account	A bank account used by a mortgage servicer for temporary, short-term deposit of mortgage payments collected for transmittal to investors or for deposit in escrow accounts.
clearing house	A third-party participant in settling security trades by acting as a buyer to each seller and a seller to each buyer, ensuring performance.
closed-end mortgage	A mortgage under which the mortgagor is prohibited from borrowing additional funds under the same mortgage.
closed (exclusive) listing	The right of one agent to be the only one, other than the owner, who may sell the property during a period of time.
closed period	The interval of time under a mortgage during which the loan cannot be prepaid.
closing	In real estate, the delivery of a deed, the signing of note, and the disbursement of funds necessary to consummate a sale or loan transaction.
closing costs	The costs which incurred in order to purchase real estate. These may include points, taxes, settlement agent fees and more.
closing statement	A financial disclosure giving an account of all funds received and expected at closing, including escrow deposits for taxes, hazard insurance, and mortgage insurance. All FHA, VA, and most conventionally financed loans use a uniform settlement statement called the "HUD-1."
cloud on title	Any outstanding claim or encumbrance which, if valid, would affect or impair title. It can be removed by a quit-claim deed, release, or court action. Also called a title defect.
cluster zoning	A zoning procedure where there is a prescribed amount of residential or unit density for an entire area. The developer is permitted to concentrate or disperse the density within the area in accordance with flexible site-planning criteria. This differs from a traditional zoning plan that dictates density on a lot-by-lot basis, prescribing the same maximum density for all single structure lots within the zoning district.
CMB	See CERTIFIED MORTGAGE BANKER.
CMO	See COLLATERALIZED MORTGAGE OBLIGATION.
co-borrower	Second or additional person equally responsible for payments on a mortgage. A co-borrower does not have to take title to the property, but usually has to sign the mortgage note.
COE	See CERTIFICATE OF ELIGIBILITY.
COFI	See COST OF FUNDS INDEX.
coinsurance	A type of insurance where the insured agrees to carry a specified proportion of the policy amount to the actual value of the property insured at the time of the loss. Thus, a portion of the property value is self insured. In federal multi-family housing programs, a clause which forces an insured to share in a loss if he/she is underinsured at the time of the loss. For a reduced premium, the insured is obligated to carry an amount of insurance to a specified minimal level, usually prescribed to be a fixed percentage of the value of the insured property. Failure of the insured to insure to that level results in a penalty in payout equal to the amount deficient.
coinsured lender	Under a HUD program, an eligible multi-family lender who is permitted to conduct the processing of multi-family projects from initial application through loan closing.
collateral	Property pledged as security for a debt, for example, mortgaged real estate.
collateral valuation process	The process by which a property's price is determined.
collateralized depository receipt (CDR)	The instrument that is actually delivered in fulfillment of the Chicago Board of Trade GNMA-CDR. Similar to warehouse receipts used for agricultural commodities.
Collateralized Mortgage Obligation (CMO)	Mortgage backed security where payments on the underlying collateral are partitioned to provide for different maturity classes, called tranches. Investors choose to buy one or more tranches, with each tranche representing a different maturity. Investors receive payments of interest or principal prioritized according to tranche.
collection	The servicing procedure followed to bring a delinquent mortgage current and to file the required notices to begin foreclosure when necessary.
collection report	The form used by a mortgage servicer in reporting collection from mortgagors, including payments in full, repayment of advances, tax and insurance funds for foreclosed mortgages, and any other items not remitted as regular installment payments.
color of title	An act that indicates good title, but in fact contains some defect.
combined loan-to-value	The principal balance of all mortgages on the property (including second and third trusts) divided by the value of the property.
commencement of term	In retail leasing, where a lease becomes effective when signed but rent payments do not begin until occupancy or opening of business.
commercial paper	Short-term, negotiable, unsecured notes of highly reputable business firms.
commercial real estate	Office buildings, shopping centers, apartment buildings and other property which is utilized for the production of income rather than as residences. If residential real estate has more than four units it is considered commercial real estate.
commercially reasonable	Fair, proper, just, or suitable under generally accepted business (commercial) standards or circumstances.
commingling	Combining funds (such as escrows) into one account that should be accounted for and deposited into separate accounts.
commission	An agent's compensation for negotiating a real estate or loan transaction, often expressed as a percentage of the selling price.
Commissioner's Adjusted Fair Market Value (CAFMV)	HUD's estimate of the fair market value of a property in foreclosure. Mortgagees must bid the CAFMV at the foreclosure sale to reserve the option to retain or convey the property to HUD.
commitment	An agreement, often in writing, between a lender and a borrower, to loan money at a future date, subject to specified conditions. In secondary marketing, an agreement, in writing, between a lender and an investor to buy and sell mortgages under specific terms.
commitment (builder)	An agreement by a lender to provide long-term financing to a builder, secured by an existing proposed building. The commitment usually provides for the substitution of a to-be-approved owner/occupant at a higher loan amount than committed to the builder.
commitment fee	Any fee paid by a potential borrower to a potential lender for the lender's promise to loan money at a specified date in the future. The lender may or may not expect to fund the commitment. In secondary marketing, a fee paid by the loan seller to the investor in return for the investor's promise to purchase a loan or package of loans at a future date.
common area	An area owned by the owners or tenants of a complex or subdivision, for the common use of residents.
common area maintenance expenses (CAM Expenses)	Expenses associated with the mainte nance of the common areas.
community apartment project	Multiple ownership of an apartment in which each owner is a tenant-in-common.
community association	A group composed of property owners that serves to protect and maintain a neighborhood or commonly owned properties.
Community Development Block Grant (CDBG)	Under Title 1 of the Housing and Community Development Act of 1974, eight former categorical grant and loan programs were replaced by a system of unified block grants under which communities of over 50,000 people are entitled to receive funding, while other communities may apply for discretionary funding. Its purpose is to encourage more broadly conceived community development projects and expand housing opportunities for low- and moderate-income persons.
Community Home Improvement Mortgage Loan (CHIML)	One of Fannie Mae's primary tools for neighborhood and community revitalization, the CHIML is designed for the low- to moderate-income homebuyer or homeowner who wishes to purchase or refinance a home that needs modest, rather than substantial, repairs.
community property	In some states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
Community Reinvestment Act (CRA)	Federal legislation which requires every financial institution to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
community shopping center	A shopping center with a gross leasable area of 100,000 to 300,000 square feet and classified between the smaller neighborhood center and the larger regional center.
co-mortgagor	A second borrower who signs a mortgage loan with a mortgagor. The co-mortgagor's income, assets and debts are combined with the mortgagor's for underwriting and ratio analysis purposes. The co-mortgagor's name must appear on the FHA Certificate of Commitment and the mortgage or deed of trust. For full guarantee under the VA's program, the co-mortgagor must be either a spouse or another eligible veteran.
comparables	Properties used for comparative purposes in the appraisal process that have similar characteristics to the subject property. Also called "comps."
compensating balance	A non-interest paying bank deposit maintained by the borrower that induces the bank to make credit available to the borrower on more favorable terms than would otherwise be available.
compensating factor	A positive characteristic of a mortgage applicant which may offset a negative factor.
completion bond	A bond furnished by a contractor to guarantee completion of construction.
compliance inspection report	A report given a lender by a designated compliance inspector indicating whether construction or repairs conform to conditions established by prior inspection.
component depreciation	A method of depreciation involving the separation of the cost of various elements of a building (such as roofing, plumbing, and mechanical components) to take advantage of the shorter useful lives of such elements, and thereby, increase the depreciation deductions in the early years of a project.
component financing	A method to achieve maximum financing by splitting a real estate parcel into separate fee and leasehold interests, and financing each component separately. Also called "split financing."
compound interest	Interest computed on both the original principal and accrued interest.
compound options	Options on options. The buyer is required to pay a fee for the right to buy an additional option at a later date, at a given strike price.
Comprehensive Environmental Response, Compensation and Liability Act	See SUPERFUND.
comprehensive general liability insurance	A policy which covers a variety of general liability exposures, including premises, property, and operations, products liability, owner's and contractor's protective, contractual liability, elevator liability, and employer's liability.
Comps	See COMPARABLES.
Comptroller of the Currency	Chief regulator of national banks, appointed by the President for a five year term.
Computerized Home Underwriting Management System (CHUMS)	HUD's automated system that tracks the application for mortgage insurance from the initial appraiser request through to loan closing and MIC issuance.
computerized loan origination(CLO)	An electronic system that furnishes subscribers with the latest data on available loan programs at a variety of lending institutions. Some CLOs offer mortgage information services and can prequalify buyers, process loan applications, underwrite loans, and even make a commitment of funds.
concessions	A discount or other inducement given by a landlord or seller to a prospective tenant or buyer to induce them to sign a lease or purchase property.
condemnation	The taking of private property for public use under the right of eminent domain with just compensation paid the owner and others with an interest in the condemned property.
conditional commitment	An agreement to lend money to a borrower that has yet to be identified, but is still subject to the approval of the lender. During HUD/FHA mortgage insurance processing, it indicates the satisfactory completion of technical processing involving the estimated cost of the project, the "as-is" value of the site, a detailed estimate of operating expenses and taxes, supportable costs, the financial and credit capacity of sponsors, financial requirements, and mortgage amounts.
conditional commitment requirements	A form reproduced locally by HUD/FHA offices and varying in content depending on local conditions. It lists the most common conditions imposed on conditional commitments, giving each a number. Only the number of the condition is entered on the commitment itself, and the list is attached. Also see VC sheet.
conditional prepayment rate (CPR)	A monthly prediction of the number of current outstanding mortgages in a pool that will prepay.
conditional right to refinance	A provision of a balloon mortgage which, at the time of the scheduled balloon payment, allows the borrower to covert to a fixed rate for a fixed period which will fully amortize the mortgage.
conditional sales contract	A contract for the sale of a property in which transfer of title to the buyer is contingent on fulfillment of certain conditions.
conditions and restrictions	Limitations on the use of land and resulting penalties for failure to comply. Commonly used by land subdividers on newly plotted areas.
condominium	A form of property ownership whereby the purchaser receives title to a unit in a multiunit structure and a proportionate interest in common areas.
condominium association fee	A fee paid by the homeowner to the association which governs a condominium complex for his/her part of the maintenance and management of the project.
condominium conversion	The process of changing rental units into a condominium form of ownership.
condominium declarations	The basic condominium documents that must be registered by the originating property owner prior to the conveyance of the first unit sold. The declaration thoroughly describes the entire condominium entity, including each unit and all common areas, and specifies essential elements of ownership that permanently govern its operation. Also known as a "master deed."
conduit	An entity which issues mortgage-backed securities backed by mortgages which were originated by other lenders.
confirmation of sale	Court approval of the sale of property by an administrator, executor, guardian, conservator, or commissioner in a foreclosure sale.
conforming mortgage loan	A mortgage loan which meets all requirements (size, type, and age) to be eligible for purchase or securitization by federal agencies.
consideration	Something of value offered and accepted in exchange for a promise, without which a contract is unenforceable.
constant	Percentage of the original loan paid in equal annual payments that provides principal reduction and interest payments over the life of the loan. For example, a $1 million loan with a 10.8% constant requires a $108,000 annual payment.
constant payment	Periodic payment of a fixed amount that includes interest and principal. As the loan amount reduces, the portion of the payment applied to the principal increases. Standard home mortgages are constant payment loans.
construction contract	An agreement between a general contractor and an owner/developer stating the specific duties the general contractor will perform according to blueprints and specifications at a stipulated price and terms of payment.
construction costs	All costs incurred in the completion of a construction project, including land, labor, overhead, and builder's profit.
construction loan	A short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as work progresses.
construction loan agreement	A written agreement between a lender and a builder and/or borrower which details the specific terms and conditions of a construction loan, including the schedule of payments.
construction loan draw	A partial disbursement of the construction loan based on the schedule of payments in the loan agreement. Also called "takedown."
constructive notice	Notice attempted indirectly by newspaper or public record, or similar device, whether received or not, which satisfies the legal requirements for notification.
consumer credit reporting agency	An organization that collects information about a consumer's credit history. Information is collected from national repositories and public records.
consummate	To bring to completion.
contiguous	Adjoining.
contingency	A clause in a contract that requires the completion of a certain act or the occurrence of a certain event.
contingency reserve	A reserve account in which funds are held until certain specified conditions are satisfied.
contingent interest	An equity-sharing provision appended to a loan in which the lender receives a percentage of annual gross or net project income exceeding a certain base amount, in addition to fixed interest.
contract	An agreement between two or more parties which creates an obligation to do or not to do a particular thing.
contract of sale	A contract between a purchaser and seller of real property to convey title after certain conditions have been met and payments have been made.
contract rent	Actual rent as specified in a rental or lease agreement, as opposed to actual market or economic rent.
contractor	A person or company who agrees to do work and/or furnish materials for a contracted price. Subcontractors are often hired by the contractor to perform specialized or technical labor.
contribution	A cash or other concession by the seller of a property in order to induce a purchaser to buy that property.
controlled business arrangement (CBA)	Business relationship in which a provider of settlement services receives a referral from an affiliated company in another settlement service business. Real estate brokerage and mortgage lenders that are commonly owned, controlled, or franchised and refer settlement service business to each other are typical examples of such CBAs.
conventional financing	Mortgage financing which is not insured or guaranteed by a government agency.
convergence	Movement of the price of a futures contract toward the price of the underlying cash commodity. As the contract nears expiration, the futures price and the cash price converge.
conversion feature	A feature of a mortgage which allows the conversion to another interest rate, mortgage term, or type of mortgage instrument.
convertible mortgage	A type of adjustable-rate mortgage that may be converted to a fixed-rate mortgage at specified intervals during a pre- determined time period. In income property lending, a mortgage in which lender-provided funds convert to equity ownership after a predetermined period of time.
convertible standby commitment	A Fannie Mae mortgage purchase that may be converted to the same yield offered in the most recent Free Market Auction.
convey	The act of transferring title to real property from one party to another.
conveyance	The document, such as a deed, lease, or mortgage, used to effect a transfer.
cooling-off period	A period of time, provided by law or by contract, during which a party to a contract can legally back out of a contract.
Co-op	See COOPERATIVE.
cooperation agreement	Arrangement between a local public housing agency (PHA) and local government under which the government gives tax-exempt status to the PHA and its property, and agrees to provide such municipal services as police and fire protection, trash removal, etc. In exchange, the PHA agrees to make payments in lieu of taxes (PILOT), usually 10 percent of rents collected, excluding utilities and maintenance.
cooperative	In real estate, a form of multiple ownership in which a corporation or business trust entity holds title to a property, (usually an apartment complex) and grants occupancy rights to shareholder tenants through proprietary leases. Also called a "co-op."
core capital	One of the components of risk-based capital guidelines which includes common stockholders equity, retained earnings, noncumulative preferred stock, and minority interests in equity accounts of consolidated subsidiaries.
corporate resolutions	The affirmative and formal action by the board of directors of a corporation approving a transaction, activity, or decision.
corporation	A business entity owned by a group of owners, called stockholders. A corporation is considered an artificial person under law.
correlation	The final step in the appraisal process where the appraiser considers three estimates of value derived from cost, income, and market data approaches. The correlation process weighs the influence of each method in relation to the specific property type and final estimate of value.
correspondent	A specialized type of mortgage banker whose function is limited to the origination of mortgage loans which are sold to other mortgage bankers or investment bankers under a specific commitment.
co-signer	One who agrees to assume a debt obligation if the principal borrower defaults on mortgage payments. A co-signer assumes only personal liability and has no ownership interest in the property; his or her income and obligations are used in the underwriting process to reinforce the credit of the principal borrower.
cost approach to value	A valuation approach in which the value of a property is determined by computing the replacement value of improvements, depreciation, and the value of the land.
cost certification	An itemization of all construction costs and other building and material costs for verification. Generally required in HUD/FHA multifamily insurance programs.
cost-of-carry	The difference between the yield on an instrument and the cost of funds to finance it.
cost of funds index (COFI)	Index used to determine interest rate changes for adjustable rate mortgages. It is based on the cost of funds of the 11th District of the Federal Home Loan Bank.
cost overrun	The amount of money required or expended over and above budgeted cost, including such items as labor, interest, materials, and land.
cost-plus contract	A construction contract in which the contract price is equal to the cost of construction plus a profit allowance to the builder, as opposed to a fixed price contract.
cost-plus-fee agreement	An agreement under which the contractor (in an owner-contractor agreement) or the architect (in an owner- architect agreement) is reimbursed for direct and indirect costs and, in addition, is paid a fee for services. The fee is usually a stated sum or percentage of costs.
coupon rate	Annual interest rate on a debt. The coupon rate on a mortgage is the contract rate stated in the mortgage note. The coupon rate on a mortgage security is the rate stated on the face of the security, not the rate of the mortgages in the pool backing the security.
covenant	A legally enforceable promise or restriction in a mortgage. For example, the borrower may covenant to keep the property in good repair and adequately insured against fire and other casualties. A breach of covenant in a mortgage usually creates a default as defined by the mortgage, and can be the basis for foreclosure.
coverage	The percentage of mortgage pipeline that has investor commitments or is hedged.
CPM	See CERTIFIED PROPERTY MANAGER.
CRA	See COMMUNITY REINVESTMENT ACT.
cramdown	Court ordered reduction of a loan balance.
credit	Financial status-ability of borrowers to meet the terms of their obligations.
credit life	Declining term life insurance taken out by a borrower as an added source of funds for the repayment of a loan.
credit rating	A rating given to a person or company that establishes creditworthiness based upon present financial condition, experience, and past credit history.
credit report	A report run by an independent credit agency which verifies certain information concerning an applicant's credit standing.
critical path method	A technique used in construction which employs diagramming the interconnected tasks and activities involved in a project.
cross-defaulting clause	A clause in some mortgage agreements that states a default by the borrower on one mortgage loan also triggers a default on the other loan stated in the clause.
cross hedge	A hedge of an asset or liability with an instrument of different characteristics.
CRV	See CERTIFICATE OF REASONABLE VALUE.
cubage (cubit feet)	An appraisal method using the cost approach. The front or width of the building is multiplied by the depth of the building and by the height, figured from the basement floor to the outer surfaces of the walls and roof. The total cubic measurement is then multiplied by a cost per factor to obtain the appraisal figure.
curable depreciation	See DEFERRED MAINTENANCE.
current asset ratio	The ratio of current assets to current liabilities.
current assets	Assets that can be turned into cash within a year, such as accounts receivable or marketable securities.
current market position	The amount of money a firm would gain or lose if it were to meet loan guarantees and mandatory commitments at current market prices.
current ratio	The ratio of current assets to current liabilities.
current yield	The ratio of interest to the actual face value of the investment instrument.
custodial accounts	Bank accounts for the deposit of funds belonging to others.
custodian	Usually a commercial bank which holds for safekeeping mortgages and related documents backing a mortgage-backed security. Custodians may be required to examine and certify documents.
custody	Responsibility for a property, as when the mortgagee turns a foreclosed property over to VA. A specialized VA term, custody may, but does not necessarily, include the legal right to physical possession of the property.
cut-off date	The date up to which loan collections are included in remittances to investors.
CWCOT	See CLAIMS WITHOUT CONVEYANCE OF TITLE.
cycle (economic)	A period of time such as when the economy is growing or when it is in a recession.
daily price limits	The maximum number of points a contract is allowed to rise above or fall below the previous day's settlement price, at which point all trading stops for the day.
date-down title insurance endorsement	An instrument, provided by the title company, indicating that no liens have been placed on the property since its original issuance of the title insurance policy, or since any prior date-down endorsement.
DCF	See DISCOUNTED CASH-FLOW ANALYSIS.
DE	See DIRECT ENDORSEMENT.
dealer	An investment banker or firm in the business of buying and selling mortgage-backed securities not as an agent, but as a principal. Unlike brokers, dealers hold inventories of securities.
debenture	An interest-bearing bond issued against the general credit of a corporation or government organization, with no specific pledge of assets.
debris removal	A property policy extension of coverage which grants coverage for the expense of removing debris caused by damage to property by an insured peril. Property should be defined as both insured and uninsured.
debt capital	Money loaned at an agreed interest rate for a fixed term of years; distinguished from equity capital which is money invested by owners (shareholders) for use in business operations.
debt coverage ratio	A ratio of effective annual net income to annual principal and interest payments. Also called debt service coverage.
debt/equity ratio	The proportion of capital borrowed to the amount of capital invested out-of-pocket or obtained through the sale of common stock. Also called "leverage ratio."
debt service	A borrower's periodic mortgage payments comprised of principal and/or interest on the unpaid mortgage balance.
debt service constant	A factor that, when multiplied by the original loan amount, yields the annual debt service payment (principal plus interest) required to amortize a loan.
debt service coverage ratio	A ratio of effective annual net operating income to annual principal and/or interest payments. Also called "debt service coverage."
debt-to-income ratio	Relationship of a borrower's monthly payment obligation on long-term debts divided by gross monthly income, expressed as a percentage. Also called the "bottom ratio."
declining balance depreciation	A method of depreciation by which each year's depreciation is a percentage of the reduced basis of the asset. In general, the declining balance rate may be 200, 150, or 125 percent of straight-line depreciation.
decree of foreclosure and sale	In a judicial foreclosure, the court decree of judgment that establishes the amount of the mortgage debt and orders the property sold to satisfy the debt.
dedication	The granting of land by the owner for some public use and its acceptance for such use by authorized public officials.
deed	The document by which title to real property is transferred or conveyed from one party to another.
deed-in-lieu	A deed given by a borrower/mortgagor to a lender/mortgagee to satisfy a debt and avoid foreclosure.
deed of reconveyance	The transfer of a legal title from the trustee to the trustor (the borrower) after the trust deed is paid in full.
deed of trust	A type of security instrument in which the borrower conveys title to real property to a third party (trustee) to be held in trust as security for the lender, with the provision that the trustee shall reconvey the title upon the payment of the debt, and, conversely, will sell the land and pay the debt in the event of a default by the borrower. Also see MORTGAGE.
deed restriction	A condition placed in a deed limiting or restricting the use of the real property.
default	The non-payment of a mortgage or other loan in accordance with the terms as specified in the note.
default interest rate	The interest rate stipulated by certain mortgage documents which is triggered by a breach or nonperformance of the terms of a note, the covenants of a mortgage, or the terms of other loan documents.
default letter	A letter sent to the borrower indicating that a breach or nonperformance of the terms of a note, the covenants of a mortgage, or the terms of other loan documents has occurred. This letter also advises the borrower of the rights of the lender under the note/mortgage and requires that the default be cured.
default ratio	The occupancy level at which the effective gross income from an income-producing property is insufficient to pay operating expenses and debt service, thus creating the risk of default. The ratio is calculated by dividing the effective gross income into operating expenses plus debt service.
defeasance	A provision in a mortgage which allows the debtor to reclaim property that has been foreclosed, if certain conditions are met.
defect of record	An encumbrance on a title that is made a part of the public record. Some recorded defects are judgments, mortgages, other liens, or easements.
deferred maintenance	Postponed, infrequent, or inadequate maintenance practices on a building or property, often resulting in physical depreciation and loss of value. Deferred maintenance can be an indicator of inadequate cash flow or lack of pride in the property. Also called "curable depreciation."
deficiency	The difference between the balance outstanding on a loan and proceeds from the sale of the loan collateral.
deficiency judgment	A court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan.
delay	In mortgage securities, the time elapsed from receipt of mortgage payments from borrowers to remittance of pass-through cash flows to investors.
delegated underwriting	The delegation of underwriting authority from an investor or agency to the lender.
delinquency	Failure of a borrower to make timely payments specified under a loan agreement.
delinquency ratio	The ratio of number of past due loans to total number of loans serviced.
delivery	In mortgage banking, the physical transfer of loan documents to an investor or agent in conformance with the commitment.
delivery date	The contracted date when the actual payment of funds and delivery of mortgage-backed securities occurs.
delivery month	The calendar month during which a given contract expires and delivery can be made; also called expiration month.
delta	The unit change in the price of an option (the premium) for a unit change in the price of the underlying security.
demand deposit	Demand deposits go into a demand deposit account, which is similar to a checking account. The demand deposit funds are liquid and may be withdrawn at anytime without prior notice.
demand letter	Correspondence sent to the borrower indicating that unless the loan is made current within a certain time frame, the lender can, by virtue of a default, declare the entire principal balance outstanding as well as all interest due under the note to be due and payable.
demand note/mortgage	A note or mortgage that the lender can call due at any time and without prior notice.
demographics	See DEMOGRAPHY.
demography	The study of the characteristics of human populations such as size, growth, density, distribution, and vital statistics.
demolition clause	Coverage extended to cover the cost of demolishing property damaged by an insured peril. Policies may be extended to cover the cost of demolishing undamaged property made necessary by a bylaw, court order, etc.
density	The ratio between total land area and the number of residential or commercial structures placed upon it. Local ordinances usually regulate density.Department of Housing and Urban Development
HUD	A governmental entity responsible for the implementation and administration of housing and urban development programs. HUD was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency.
Department of Veterans Affairs (VA)	A cabinet-level agency of the federal government. The Servicemen's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the VA Home Loan Guaranty program, which encourages mortgage lenders to offer long-term, low down payment financing to eligible veterans by partially guaranteeing the lender against loss upon foreclosure.
deposit	A sum of money given to (1) bind a sale of real estate, or (2) assure payment or an advance of funds in the processing of a loan. Also called earnest money.
deposit receipt	A form used to acknowledge the acceptance of the earnest money that binds an offer to purchase real property.
depreciable asset	Tangible personal property or real property used in business or held for the production of income with a determinable useful life of more than one year.
depreciable basis	The capital amount on which depreciation deductions are calculated.
depreciation	A decline in value of a building or other real estate improvement, resulting from age, physical wear, and economic or functional obsolescence. This figure is deducted annually from net income.
depreciation allowance	The accounting charge made to allow for the fact that an asset may become economically obsolete before complete physical deterioration. The purpose is to write off the original cost by distributing it over the estimated useful life of the asset. It appears in the profit and loss statement and the balance sheet.
derivatives	Investments whose returns derive from the change in value of other securities or indexes, such as bonds, interest rates or stocks.
developer	A person or entity who prepares raw land for building sites or rehabilitates existing buildings.
development loan	A short-term loan advanced before a construction loan, used by developers to acquire land and install basic utilities such as roads, sewers, and water supply systems.
development process	The process through which development projects are conceived, initiated, analyzed, financed, designed, built, and managed.
development rights	The rights a landholder sells to improve a property or enhance the use of said property.
differential	In a mortgage-backed security, the difference between the MBS security rate and the coupon rates of the underlying mortgages. The issuer retains the differential to pay for servicing costs and the guarantee.
direct costs	Labor and materials costs of construction, excluding overhead.
direct endorsement (DE)	A HUD program that enables an eligible single-family lender to conduct the processing and closing of FHA single-family loan applications without HUD's prior review.
directors and officers liability insurance (D & O liability insurance)	Insurance that protects both a corporation and its key employees. The standard D & O policy usually includes corporate reimbursement, which covers expenses insured by the directors and officers for legal costs and judgments indemnified by the corporation, and personal coverage, which protects individual officers and directors against claims not indemnified.
direct payment	Method of payment wherein a check or other form of consideration is delivered directly to the investor's or servicer's place of business.
disappearing deductible	A deductible that disappears as the loss gets larger, i.e., a $500 deductible will not apply to losses over $10,000.
disbursements	Actual payment of monies. Used to describe construction loan draws.
disclosure	Information relevant to specific transactions that is required by law.
discount	In loan originations, a discount refers to an amount withheld from loan proceeds by a lender. In secondary market sales, a discount is the amount by which the sale price of a note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upward, either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower, and the rate or terms of the note.
discount point	Amount payable to the lending institution by the borrower or seller to increase the lender's effective yield. One point is equal to one percent of the loan.
discount rate	The rate of return used to convert expected future cash flows into present dollar value equivalent.
discounted cash-flow analysis (DCF)	Method of applying an appropriate discount to cash to be received in the future to arrive at the present value of those future earnings.
disintermediation	The flow of funds out of banks and savings institutions into short term investments on which interest rates are higher.
dispossess	To obtain physical possession of property by due process of law.
distressed property	Term that denotes property in trouble due to one of several reasons, such as
divest	To release an interest one has in property.
dividend	A stockholder's share of profits of a corporation. An insurance dividend is not a true dividend but a return of premium. Dividends from a savings and loan association, credit union passbook account, or certificate are interest, and are not considered dividends.
documentary stamp	A mark "stamped" onto a deed certifying the amount of transfer tax paid.
document custodian	Financial institution that contracts with a lender to maintain custody of certain mortgage documents in the lender's or investor's behalf.
D & O liability insurance	See DIRECTORS AND OFFICERS LIABILITY INSURANCE.
dollar roll	Repurchase agreement in which a security is sold with an agreement that a substantially similar security will be repurchased at a later date at a given price.
dominant estate	When an owner of property is given certain rights to use another's property.
dower	The rights a widow has to her husband's real property at his death.
down payment	A portion of the sales price paid a seller by a buyer to close a sales transaction, with the understanding that the balance will be paid at settlement. Also, the difference between the sale price of real estate and the mortgage amount.
draw	Disbursement of a portion of the loan proceeds, usually at a predetermined point in the construction or rehabilitation schedule, to pay for work already completed. The balance of the proceeds is retained until the next scheduled draw or until completion of the construction or rehabilitation work to protect the lender against the contractor's failure to complete the work as scheduled.
dry funding	Any advance of new funds to a mortgage banker for funding or purchasing mortgage loans where the collateral package is in the possession of the collateral agent and is free of lien or bailment.
due date	Date which the borrower must pay the interest and/or the principal and interest due on his or her mortgage, as stated in the note, as well as any escrow payment.
due-diligence review	An examination by a purchaser of a servicing portfolio. Generally the reviewer will look at credit quality and underwriting of the loan collateral underlying the servicing rights; correctness and completeness of the loan documents; the seller's servicing practices and methodologies; and the accuracy of the portfolio offering document. As used here, a re-underwriting of the loan in line with borrower's request to determine the feasibility of the request by lender.
due-on-encumbrance	A provision appearing in a mortgage providing for the acceleration of a loan upon the placement of additional mortgage liens on collateral already pledged/mortgaged to a lender.
due-on-sale	A clause in a mortgage stating that if the mortgagor sells, transfers, or in any way encumbers the property, then the mortgagee has the right to implement an acceleration clause making the balance of the obligation due.
duplex	A single structure designed with two separate housing units.
duration	An estimate of the volatility or sensitivity of the market price of a bond to changes in interest rates; it measures the weighted average time until cash flow repayment.
duress	Compulsion, pressure, or coercion under protest.
dwelling unit	Living quarters occupied, or intended for occupancy, by a household.
early occupancy	Situation in which a buyer is permitted to take possession of real property before closing.
earnest money	A deposit made to bind the conditions of a sale of real estate.
easement	A right to the limited use or enjoyment of land held by another, including, for example, an interest in land to enable sewer or other utility lines to be laid, or to allow access to a property.
ECOA	See EQUAL CREDIT OPPORTUNITY ACT.
economic depreciation	The loss of the value of real estate due to changes outside the particular property affected, e.g., a decline in the neighborhood or change in zoning.
economic development	A general term indicating projects designed to strengthen an area's economy and employment base.
economic life	The estimated period of time during which a property can be used by its owner to produce income.
economic or commercial real estate weakness	An area exhibiting poor occupancies, low rents, plant or military base closings, or low sales and appraised values.
economic rent	The rent that a property would bring if offered in the open market. Same as market rent; often differs from the contract rent.
economic value	The condition of the property based on its earning potential.
EDI	See ELECTRONIC DATA INTERCHANGE.
effective age	For purposes of appraisal, the physical age given to a building based on its present condition, which may differ from its actual age.
effective gross income	Stabilized income after vacancy and bad debt allowances that a property is expected to generate.
effective gross income (personal)	Normal annual income, principally salary, that is regular, significant, and stable.
effective gross income (property)	The stabilized income (after vacancy and bad debt allowances) that a property is expected to generate.
effective interest rate	The actual rate of return to the investor, considering commitment fees, loan points, or other fees. Also called yield.
effective rent	The rental income generated by a lease computed over the life of the lease and expressed as an annual dollar amount or annual dollar amount per square foot. This figure is typically computed as the aggregate rent to be paid under the lease net of any abated rent and allowances, divided by the term of the lease. However, there has been a trend toward computing effective rent more realistically by using a time-value-of-money calculation. In this latter approach, sometimes called the "equivalent level rent calculation," a market discount rate is applied to all cash flows from the lease to obtain a present value which is then reduced by the cost of any concessions or inducements paid to put the lease in place. The resultant net value is then converted to the equivalent level payment stream which would produce an equivalent net present value at that discount rate.
effective yield	The annual return expressed as the face interest rate divided by the amount invested, used when a mortgage or other debt instrument is bought at a discount or premium.
egress	To go out. This term is used with the word ingress (to go in) to describe the right of access to land.
EIS	See ENVIRONMENTAL IMPACT STATEMENT.
electronic data interchange (EDI)	Intercompany electronic exchange (between computers) of business documents in standard formats using the American National Standards Institute (ANSI) Accredited Standards Committee's (ASC) data standards.
Ellwood technique	An advanced method of developing a capitalization rate based on the proportion of an investment represented by debt and equity.
eminent domain	The right of government bodies, public utilities, and public service corporations to take private property for public use (e.g., schools and roads) upon payment of its fair market value.
Employee Retirement Income Security Act (ERISA)	Adopted in 1974, the Act affects many aspects of pension and profit-sharing plans, and regulates the investments such plans can make and the conduct of their fiduciaries.
encroachment	An improvement that illegally violates another's property or right to use that property.
encumbrance	Anything that affects or limits the fee simple title to property, such as mortgages, leases, easements, or restrictions.
end loan	The final mortgage loan to the ultimate purchaser of a property, as opposed to a construction loan or other form of interim financing.
endorsement	A signature on a negotiable instrument by which title to property mentioned therein is assigned and transferred. Also, a notation added to an instrument after execution to change or clarify its contents. In insurance, coverage may be restricted or enlarged by endorsing a policy. In FHA loans, a notation placed on the note by the FHA indicating that the loan is insured under the National Housing Act.
engineer's report	A report rendered by an engineer stating the physical condition of property that has been inspected, with a summation or recommendation thereof.
enterprise zone	A depressed neighborhood, usually in an urban area, in which businesses are given tax incentives and are not subject to some government regulations. These advantages are designed to attract new businesses into the zone.
environmental impact statement (EIS)	A document required by many federal, state, and local environmental land use laws, containing an analysis of the impact that a proposed change may have on the environment of a specific geographic region. It examines a wide variety of physical, social, and economic conditions that would be affected by the proposed development. The analysis covers effects that cannot be avoided, alternatives to the proposed change, short-term versus long-term uses and long-term productivity, irreversible commitments of resources, and the benefits to be derived from the proposed change.
environmental impairment insurance	A special form of insurance designed to protect an insured against claims for liability and clean up costs related to pollution. Coverage may be granted for gradual and sudden and accidental pollution, and is always written on a claims made form.
Environmental Protection Agency (EPA)	The agency responsible for enforcing environmental liability.
E & O Insurance	See ERRORS AND OMISSION INSURANCE.
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. Also called "Regulation B."
equitable mortgage	An instrument that, because of a technical defect, is not actually a mortgage, but because the intention of the parties is to create a mortgage, the instrument will be enforced by a court of equity.
equity	The net value of an asset. In the case of real estate, it would be the difference between the present value of the property and the mortgage amount on that property.
equity capital	Money invested by shareholders who are owners and who receive a share of profits.
equity of redemption	The common law right to redeem property following default on a mortgage by paying the unpaid debt plus interest and costs prior to the foreclosure sale. In some states, the mortgagor has a statutory right to redeem property after a foreclosure sale.
equity participation	The right of a lender to a share in the gross profits, net profits, or net proceeds in the event of sale or refinance of a property on which the lender has made a loan. Also known as an "equity kicker."
equivalent level rent calculation	See EFFECTIVE RENT.
ERISA	See EMPLOYEE RETIREMENT INCOME SECURITY ACT.
errors and omissions insurance(E & O insurance)	Liability insurance coverage for errors, mistakes, and negligence in the usual activities of a mortgage banker. Fraudulent behavior is not included.
escalation clause	A clause providing upward adjustments of rent payments to cover specified contingencies. Also, a provision in a lease to provide for increases in property tax and operating expenses.
escape clause	A clause that allows a tenant to cancel a lease in situations that would not necessarily justify lease cancellation.
escheat	Property taken into state ownership in the absence of the original owner, or upon the owners death in that state, without heirs.
escrow	An item of value, money, or documents, deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. In some parts of the country, escrows of taxes and insurance premiums are called impounds or reserves.
escrow account	The segregated trust account in w