Glossary of Terms
A - D, E - H, I - L, M - P, Q - T, U - Z

Management Agreement - a contract between the owner of property and someone who agrees to manage it. Margin - A constant (fixed) amount over an index that determines a lender’s yield on an adjustable rate loan. The interest rate of an adjustable rate loan is determined by adding a margin to an index. The size of the margin is typically a function of the index used and the credit worthiness of the borrower. Typical margins on a Prime Rate based loan would be 0.0 to 5.0 so that if the Prime Rate were 8.25% and the margin were 2.0 (typical for an "average" borrower), the interest rate would be 10.25% (8.25 + 2.0). (See definition of "index" above.).

Marketable Title - a title free from defect.

Master Lease - a controlling lease.

Maturity - The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable

Maximum Financing - A loan amount within 5 percent of the highest loan-to-value ratio allowed for a property.

Mechanic’s Lien - a lien given by law upon a building or other improvement upon land as security for the payment of labor and materials furnished for improvement.

Merged Credit Report - A report that draws information from the Big Three credit-reporting companies: Equifax, Experian, and Trans Union Corp.

Minimum Payment - the minimum amount that must be paid monthly on an account. On the HELOC product, the minimum payment is interest only during the draw period. On the Fixed Rate Second products, the minimum payment is principal and interest.

Monthly Mortgage Insurance (MI) Payment - portion of monthly payment that covers the cost of Private Mortgage Insurance.

Monthly Payment (P&I) - this is the monthly mortgage payment on a home loan, this includes principal and interest, but excludes any amounts that are applied to taxes and insurance.

Monthly Principal & Interest (P&I) Payment - portion of monthly payment that covers the principal and interest due on the loan.

Monthly Taxes & Insurance (T&I) Payment - portion of monthly payment that funds the escrow or impound account for taxes and insurance.

Mortgage - A lien against real property given by a borrower to a lender as security for money borrowed.

Mortgage (Open-End) - A mortgage that allows additional money to be borrowed (up to the original loan amount) without refinancing the loan or paying additional financing charges .

Mortgage Balance - see Principal Balance.

Mortgage Insurance Premium (MIP) - The payment made by a borrower of FHA insured mortgages to provide a reserve that protects lenders against losses from very high loan-to-value loans.

Mortgage Loan - A loan which is secured by a mortgage lien filed against real property.

Mortgage-Interest Deduction - The tax write-off that the Internal Revenue Service allows most owners to claim for annual interest payments made on real estate loans. mortgagee

Mortgagee - The entity to whom the mortgage is given; i.e., the lender.

Mortgagor - The entity who gives the mortgage; i.e., the borrower.

Multi-Dwelling Property - A property that contains individual units for several households but carries only one mortgage.

Needs-Based Pricing - A seller\’s asking price that is based on factors such as the required funds to pay off the mortgage, the cost of remodeling or the purchase of another house.

Negative Amortization - Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called \"deferred interest.\" The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

Negotiation - The process of bargaining that precedes an agreement.

Net Cash Flow - Investment property that generates income after expenses such as principal, interest, taxes and insurance are subtracted

Net Operating Income (NOI) - From income producing property, the gross income minus the total of all expenses except for debt service. Cash flow is defined as NOI minus the total of all debt service payments.

No Cash-Out Refinance - The amount of the new mortgage covers the remaining balance of the first loan, closing costs, any liens and cash no more than 1 percent of the principal on the new loan.

No Income Verification Loan (NIV) - A type of loan generally limited to the self-employed that is underwritten based on the borrower’s written representation of their annual income as stated on the loan application. No tax returns, operating statements or other verification of the income is required. Debt ratios are computed based on the stated income. The primary intent of these programs is to allow owners of small businesses to use their actual cash flows rather than the net incomes normally reported in tax filings. Higher interest rates on these products compensate lenders for their higher risks. (See definition of "debt ratio" above.)

Non-Assumption Clause - A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.

Non-conforming Loan - A loan not meeting the underwriting requirements of Fannie Mae and Freddie Mac. I.e., the vast majority of loans.

Non-Qualifying - buyer is not required to qualify through traditional bank financing requirements

Non-Recurring Closing Costs - Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a home inspection

Note - A written promise to repay a certain sum of money on specified terms.

Note Broker - An individual who acts as an intermediary between a holder of an existing note and a prospective purchaser of the note.

Notice of Default - A lender\’s initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed.

Obligee - The person in whose favor an obligation is entered into.

Obligor - The person who binds himself or herself to another.

Option - the right to purchase or lease a property upon specified terms within a specified period of time

Ordinances - municipal rules governing the use of land

Origination Fee - A fee paid to either a broker or a lender for originating a loan. It may be the only compensation for their work in arranging and/or processing the loan or it may be only a portion of the compensation. Not every loan has an origination fee.

Originator - An individual who works with a borrower to start a loan. Usually an employee of a financial institution, an employee of a broker or an independent contractor affiliated with several brokers, the originator determines the type of loan a borrower probably qualifies for, helps complete an accurate application, gathers documents necessary to get an approval and acts as an intermediary between the borrower and the underwriter.

Penalty - Money one will pay for breaking a law or violating part or all of the terms of a contract.

PITI - The shorthand way of stating the most usual elements of a residential mortgage payment which may consist not only of the Principal and Interest (PI) but the property taxes (T) and hazard insurance (I) as well. In the case where all four elements are part of the payment, the lender escrows the T and I and pays them on behalf of the borrower when they come due. Some loans are written such that the payment to the lender consists only of the P and I in which case the borrower pays the taxes and insurance directly.

Planned Unit Development (PUD) - A highly designed residential project that features relatively dense clusters of houses, which are usually surrounded by areas of commonly owned open space maintained by a nonprofit community association.

Portfolio Loan - A non-conforming loan that is held by the original lender rather than being sold on the secondary market.

Prepayment Penalty - fee charged for paying off a loan within a relatively short period of time after the loan has closed, provision is currently found only in non-conforming products, time period during which it applies is usually one to three years

Principal Balance - outstanding dollar amount owed on a loan exclusive of accrued interest

Principal, Interest, Taxes, Insurance (PITI) - monthly payments required by an amortizing loan that includes escrow deposits for taxes and insurance in addition to the principal and interest

Private Mortgage Insurance (PMI) - insurance premium paid by a borrower to protect lenders against losses from loans with loan-to-value ratios higher than 80%, default insurance for lenders

Pro Forma - refers to the presentation of data, such as a balance of income statement, where certain amounts are hypothetical. For example, a pro forma balance sheet might show a debt issue that has been proposed but has not been consummated.

Probate - The process of establishing the validity of a will before a duly authorized court or person. Once validity is confirmed, the probate court then administers the sale of property as directed by the will or as authorized by the court to settle any financial obligations

Promissory Note - promise to pay a specified sum to a specified person under specified terms

Purchase Money Mortgage - a mortgage which secures a note written on a loan used in the purchase of real estate

Purchase Subject to Mortgage - a purchase in which a buyer agrees to make the monthly mortgage payments on an existing mortgage and the original borrower remains liable if the purchaser fails to make the payments as agreed.

Purchase-Money Mortgage (PMM) - A mortgage obtained by a borrower as partial payment for a property.

Glossary of Terms
A - D, E - H, I - L, M - P, Q - T, U - Z