You are hereGlossary M – P

Glossary M – P

 maker:  any person, company, or legal entity who signs a check and or note upon which to borrow money. 

management agreement:  an arrangement between an owner of a property and a party who agrees to manage it.  Fees are negotiated as well as services between the parties. 

management fee:  the charge which a professional property management company and the owner agree to services. 

manufactured home:  a structure built in a factory which upon completion is shipped to and placed on the homesite.  Mobile and pre-fab homes fall under this description. 

margin:  as it relates to an adjustable rate mortgage(ARM) this word is the amount(usually expressed as a percentage)  which is added to the required index(such as the LIBOR, etc.) to establish the new interest rate on each adjustment date as per the loan agreement and limitations stated within that document. 

marginal land or property:  property that is barely profitable and has poor income potential. 

marketable title:  title so free from defects that there is no question as to the ownership. 

market absorption rate:  most times related to new housing this is the rate at which a market can absorb additional supply without causing over saturation and a severe price distortion. 

market analysis:  supply and demand analysis which is area specific and analyzes specific properties  to determine future trends not only in price but also characteristic. 

market approach to value:  estimate of value based on the actual sales prices of comparable properties as determined by a professional appraiser. 

market area:  regional area from which one can expect the greatest demand for a specific product or service. 

market conditions:  the factors that at a particular point in time will affect the sale or purchase price of a house or property. 

market data approach:  analysis of the available real estate data to put a value on real estate values. 

market delineation:  process of defining the geographic extent of demand for a specific real estate property. 

market price:  the actual open market price paid in a transaction where real estate is sold or exchanged. 

market rent:  the amount of rent that would be generated by a comparable unit in a competitive real estate rental market. 

market risk:  uncertainty with regards to the value of real estate due to market, political, and other conditions that have a direct impact on peoples perception of value. 

market segmentation:  defining the socio-economic characteristics of the demand for a specific property. 

market study:  analysis of real estate activities which include demand, price, location, amenities and current trends. 

market value:  the price that a willing buyer and a willing seller, both given full information, and neither under pressure to act, would agree upon.  Also known as Fair Market Value. 

Master Association:  the homeowners’ association which encompasses multiple smaller associations from within a large condominium or planned unit development(PUD) project covering specific areas within that project.  In reality it’s a second-level association that handles matters affecting the entire development while the smaller associations handle matters which affect their specific portion of the development. 

master deed:  deed filed by the developer or converter of a condominium for the purpose of recording all the individual units within that complex. 

master mortgage loan:  the remaining debt on an original purchase loan for a property that has been taken co-op.  Each owner is indebted for their portion of this loan which is independent from the debt he or she may have incurred to buy their share. 

master-planned community:  large scale, mixed use real estate project that follows a long term, comprehensive plan.  Master-planned communities typically include different price ranges of residential neighborhoods with some commercial properties designed to serve the residents' needs.  Apartments, condominiums, low income housing, stores, restaurants, office space, malls and green areas are likely to be included.  Normally not limited to one developer the neighborhoods can take on the characteristics of the individual builder.  The term "master-planned" has become somewhat overused recently but a true master-planned communities require a multi-year commitment from the developers. 

material defect:  any specific problem in a property which could affect the property’s value or salability. 

material fact:  information about a property that could affect its salability and might change an individual’s decision to purchase. 

maturity:  the due date for which the principal balance plus accrued interest or earnings if there are any accrued becomes payable on a loan, bond, or other financial instrument. 

maximum financing:  a mortgage amount that is within 5% of the highest loan-to-value (LTV) allowed for a specific product. 

mechanic's lien:  legal claim placed on real estate by someone who is owed money for having provided labor, services or supplies for the purpose of improving it. A typical lien claimant is a general contractor, subcontractors and suppliers of building materials.  A damaged party has the right to sue and potentially force sale. 

merged credit report:  credit information from all three bureaus, Equifax, Experian, and Trans Union, combined into a single report 

merger of title:  the forming of two or more parcels of property under one title. 

metes and bounds:  land description method using distance(metes) and angles and compass directions(bounds), which start and end at the same point. 

mineral rights:  ownership rights to the oil, gas, minerals or other resources in a property. 

minimum payment:  the minimum amount that you must pay, on the agreed upon date for a home loan or line of credit.  Some loans were written to be "interest only."  In other plans, the minimum payment may include principal and interest (amortized). 

minority:  any group or member of a group, that can be identified either by race, color, religion, sex, disability, or national origin or by any other characteristic (such as familial status) on the basis of which discrimination is prohibited by a federal, state, or local fair housing law. 

minority interest:  that which represents ownership of less than 50%. 

misrepresentation:  an untrue statement or concealment, of material fact or facts with the intention of inducing action of another. 

mobile home:  a type of manufactured home, that is transported to the home site using wheels attached to the structure and basically comes under the auspices of the Department of Motor Vehicles.  Once the mobile home is put on a permanent foundation and the wheels and axles are removed, the property can be inspected, normally by the county, and can have a Certification of permanent foundation.  At that point it becomes real property. 

modification:  change in original terms of an agreement. 

modified annual percentage rate:  seldom used but this is an index of loan cost based on the standard APR but has an adjustment for the time the borrower expects to hold the loan. 

modular housing:  any housing unit constructed from components that are prefabricated in a factory and erected on the housing site. 

monthly association dues:  monthly payments paid to a homeowners’ association which uses the dues for maintenance and repair of that housing unit and communal areas. 

monthly fixed installment:  the portion of the monthly payment which is used to satisfy the accrued balance so it is the principal and interest that are applied to the balance.  If you have an option arm, many times that monthly fixed installment does not  include any principal reduction and might actually increase the remaining balance. 

monthly payment mortgage:  mortgage that has a monthly repayment schedule.  That payment, unless it is an interest only loan, will include the payment for reduction of the principal as well as satisfying the accruing interest.  Most loans will also include impounds. 

monument:    fixed point or object marking a boundary or position. 

mortgage:  a legal document providing security for the repayment of a loan, registered against the property, which includes stated rights and remedies in the event of default. Lenders will evaluate a potential borrowers credit worthiness, financial worth, and loan position and parameters in coming to a decision on whether to do a mortgage or not. 

mortgage acceleration clause:  a mortgage provision which gives the lender the right to demand repayment of the entire balance of a loan under certain situations such as default, sale of the property, change of title or refinancing of the loan. 

mortgage amortization:  the repayment of a loan on a scheduled basis.  As payments are made or as the loan is amortized, the balance of the loan is reduced by an increasing amount each payment.  Interest is the vast majority of each payment in the early years of a loan but as the repayment term shortens, more and more goes towards reducing the balance. 

mortgage banker:  originates mortgage loans, loaning you their funds and closing the loan in their name with the servicing and ownership ultimately going elsewhere such as Fannie Mae, investors other banks. 

mortgage bonds:  bonds which are collateralized by real estate.  There are two types.  First are senior mortgages which will have a first claim on assets and then the junior mortgages which carry a subordinate lien position. 

mortgage broker:  individual or company that brings borrowers and lenders together for the purpose of loan origination. 

mortgage commitment:  a written document which states the willingness of a lender to give a mortgage to a mortgagor(borrower).  Included in this document will be the time period the mortgagor has to respond and the interest rate to be charged. 

mortgage correspondent:  an agent of a lender. 

mortgage credit certificate:  qualified taxpayers who receive a mortgage credit certificate from a state or local government body to purchase, rehabilitate, or improve their main homes may claim a credit against income taxes for a percentage  of their home mortgage interest.  That percentage is dictated by the government and can range from ten to fifty percent.  Can be more limitations depending on the program. 

mortgage discount:  one time charge assessed by a bank or other lender at the close of escrow of buying a property.  It is normally used to reduce the effective interest rate of that loan.  One discount point is one percent of the initial loan amount. 

mortgagee:  the lender in a mortgage agreement. 

Mortgage Guarantee Insurance Company(MGIC):  a Milwaukee, Wisconsin Company established in 1957 to provide private mortgage insurance(PMI) to mortgage lenders providing mortgages for borrowers who don’t have at least 20% down.  MGIC indemnifies the mortgage lending company should the borrower go into foreclosure because of a default. 

mortgage insurance:  insurance on certain loans that protects the lender from a potential default by the borrower.  Conventional loans which the borrower has less than 20% equity in will normally require private mortgage insurance(PMI)

mortgage insurance premium(MIP):  the amount paid by a mortgagor for mortgage insurance.  Normally it is paid to a government agency such as FHA or to a private mortgage insurance company. 

mortgage lien:  an instrument which secures a funded loan to the purchased property. 

mortgage life insurance:  a specific insurance that will pay off a mortgage should the borrower expire while the debt is outstanding.  

mortgage loan:  loan which utilizes real estate as security or collateral to provide for repayment should a default occur on the terms of that loan.  

mortgage note:  a legal instrument which obligates a borrower to repay a loan at a specified interest rate during a specific time for a predetermined amount.  The real estate is secured by a deed of trust or other security instrument. 

mortgagor:  a borrower in a mortgage loan transaction. 

mortgage pool:  group of mortgages packaged for resale to a group of investors on the secondary market. 

mortgage REIT:  type of Real Estate Investment Trust(REIT) that does not physically own the subject property or properties but provides construction or permanent mortgage loans for major projects. 

mortgage related closing costs:  fees generally associated with a loan.  They will vary but some of them are loan origination fee, loan discount points, appraisal fee, credit report fee, assumption fee, prepaid interest and escrow accounts.  Those are just some of the fees and there may be more charged. 

mortgage relief:  acquired release from a mortgage debt. 

mortgage risk rating:  the perceived  risk for a mortgagee in granting a mortgage loan. 

mortgage servicing:  monitoring and administering a mortgage loan after it has been made.  Functions can include collecting monthly payments, keeping records, tax and insurance records and foreclosure notices. 

mortgagor:  borrower in a mortgage agreement. 

multifamily mortgage:  a residential mortgage on a dwelling that’s designed to house more than four families. 

Multiple Listing Service (MLS):  service by which a number of real estate firms share information about homes that are for sale.  The member ship usually provides a computer service that provides Realtors® with detailed listings of most homes currently on the market. 

mutual savings bank:  a state chartered bank which is actually owned by the depositors and is operated for their benefit.  These banks often hold a large portion of their assets in home mortgage loans. 

negative amortization:  a loan which has a balance increases when the minimum payment is made each month.  The payment is lower than the accruing interest which causes the balance to get larger. 

net proceeds:  the amount of money or assets from the sale or disposal of real property minus all relevant costs. 

no bid:  decision by the Veterans Administration(VA) when a loan goes into default which it has guaranteed.  That is to pay the lender the guarantee instead of acquiring the property in foreclosure. 

no cash-out refinance:  the refinance of an existing loan whereupon the new loan will cover the previous balance of any loan or loans, closing costs, and liens but minimizes the actual cash received by the borrower.  Sometimes referred to as a rate and term refinance. 

no documentation loan:  loan type where income is not verified typically granted in cases of large down payments or large equity.  Not really available these days. 

nominal loan rate:  the loan rate stated on the face of a loan note.  this is different from the effective interest rate.  In the case points are charged, the effective rate will be higher. 

non-assumption clause:  statement in a mortgage contract forbidding somebody from assuming that mortgage without prior approval of the lender.  Outside of government loans, most loans are non-assumable. 

non-conforming loan:  any loan which doesn’t meet the qualifications to be purchased by Fannie Mae or Freddie Mac.  Most of the time it is because the loan exceeds the limits set forth by Fannie or Freddie. 

non-recourse:  lacking personal liability. 

nonrecurring closing costs:  one-time-only  fees for a loan such as loan points, credit report, title insurance, etc. 

notarize:  a Notary Public verifies the genuineness of a signature. 

Notary Public:  a public officer who has earned the right to authenticate a document and validates it by use of an official seal. 

note:  a written legal document of credit attesting to a debt and promise to pay.  That obligates the borrower to repay a mortgage loan at a stated interest rate and during a specified period of time.  Often referred to as the promissory note. 

note rate:  the interest rate which is specified on a mortgage note. 

notice of default:  the initial step taken by a lender when a mortgage goes into arrears and the attempts to reconcile the issue out of court have failed.  Normally written, it will give the borrowers the terms necessary to remedy the default and timing to resolve before the foreclosure proceeds. 

notice of pendency:  also referred to as a lis pendens, Latin for “suit pending.”  The recorded notice of the filing of the suit, may affect title to a certain piece of property depending on the outcome. 

notorious possession:  an open and active occupancy of a real property which acknowledges the fact that the borrower is in possession.  Notorious possession is one of the important tests when finding for or against a claim of property under adverse possession which is to acquire land by unauthorized but lengthy occupancy. 

novation:  an act which if allowed by the lender, allows the substitution of a subsequent borrower in place of the original borrower, who is then released from liability of that loan. 

nuisance:  something that interferes with the use of property by being irritating, offensive, obstructive or dangerous.  Nuisances include a wide range of conditions, everything from a chemical plant's noxious odors to a neighbor's dog barking. Lawsuits may be brought to abate (remove or reduce) a nuisance.  

obligatory:  legal requirement of a debtor to pay a debt and the legal right of  a creditor, oblige, to demand satisfaction of that debt.   

obligee:  the person to whom a debt is owed. 

obligor:  the party responsible for paying a debt or obligation. 

off balance-sheet financing:  financing from sources other than debt and equity offerings such as joint ventures. 

open-end loan:  loan where a borrower can add to the principal without renegotiating the terms of the loan.  Additional sums borrowed under the terms of an open-end loan will have the same terms as the original loan. 

open-end mortgage:  mortgage or trust deed that can be increased by the mortgagor. 

open mortgage:  mortgage that is overdue and therefore open to foreclosure. 

ordinance:  law enacted by local authorities to govern the activities of people or things. 

origination:  the fee charged by loan originators for doing the loan.  It is normally expressed an a percentage of the loan amount and is above any beyond the interest rate charged. 

origination process:  the process by which a loan is funded including the due diligence process. 

owner financing:  a sales transaction whereupon the seller provides either part or all of the financing. 

owner of record:  the party or parties who based on public records owns a property. 

package mortgage:  mortgage which is based on both the real estate and the personal property of a durable type rolled into a single mortgage. 

paper title:  document of title to a property which might not in fact be valid. 

partial release:  a release of part of a property from a mortgage. 

participation or participating mortgage:  agreement between a mortgagee and mortgagor that allows the lender to have a percentage ownership in the subject property and allows the mortgagor to share in the profits or income. 

payment cap:  a maximum limit on the allowed increase of a mortgage payment when an adjustable rate mortgage(ARM) comes out of its fixed period which protects the consumer from huge rate increases. 

payment change date:  the date when a payment changes as per the terms of a note with regards to an adjustable rate mortgage(ARM).  Normally the payment changes the month immediately after the adjustment date. 

per diem interest:  the interest cost per day when a property is closing escrow and the loan is not closing on the first of the month. 

perfecting title:  process of removing a cloud on title. 

periodic payment cap:  a limit on the amount a payment can increase or decrease during any one particular period.  This is found on adjustable rate mortgages(ARM’s). 

permanent mortgage:  a mortgage which is for an extended period of time like 30 years. 

piggyback loan:  a loan in which there are multiple lenders in the forming of a single mortgage.  A typical example would be a construction loan with the permanent feature. 

PITI:  principal, interest, taxes and insurance. 

PITI reserves:  an amount of money a potential borrower must show they will have on hand after the closing of a purchase and paying the down payment, reserves and prepaids. 

plot:  a parcel of land or small lot. 

plot plan:  scale diagram showing proposed or existing uses of a plot of land and its proximity. 

plottage:  the combining of two or more contiguous land parcels to make a larger, more useful and valuable piece of land. 

points:  a one time fee paid to help lenders make a mortgage loan at a specific interest rate.  One point equals one percent of the amount of the loan principal. 

portfolio:  holdings of investment assets. 

portfolio diversification:  choosing alternative investment vehicles which have different levels of risk and return on investment. 

portfolio lender:  this is a lender which makes loans with its own funds and retains the loans on its company books and does not sell it on the secondary market. 

possession:  the actual control or custody of property. 

possessory action:  litigation undertaken to obtain or maintain possession of real property. 

power of attorney (POA):  a legal document which is written authorization by a person to allow another person to act for him on his behalf.  The limit of power can vary depending on how it is written. 

power of sale:  provision in a mortgage agreement that grants the lender(trustee) the right to sell the property upon default. 

pre-approval:  the process of determining how much money a prospective homebuyer or refinance candidate will be able to borrow prior to doing a formal application for a loan.  Pre-approvals will include credit worthiness and verification of assets and income and other explainations which might be required. 

pre-approval letter:  a letter which is generated by a lender who having done their due diligence confirm in writing the amount of money that person is eligible to borrow. 

prearranged refinancing agreement:  formal or informal arrangement between a borrower and lender that states the lender agrees to offer special terms(such as a reduction in costs) for a future refinancing of a mortgage as an inducement for that borrower to enter into the original mortgage transaction. 

pre-closing:  prior to actual closing, all the information is available in order to insure that the appropriate parties properly execute all documents especially used in a complicated transaction. 

preforeclosure sale:  often times known as a short sale, this procedure allows the mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor. 

prepaid expenses:  taxes, insurance and assessments paid in advance of their due dates.  These are included at closing. 

prepaid interest:  interest which is paid in advance of its due date.  This is typically paid by a borrower at closing to cover accrued interest on a new loan which covers the closing date thru the first payment date. 

prepayment:  any amount paid for part or all of a loan balance prior to the due date.  Full payment of a mortgage as a result of the sale of a property is an example. 

prepayment clause:  clause in a mortgage that gives the borrower the privilege of paying off the mortgage before it matures. 

prepayment penalty:  fee paid to the lending institution for paying a loan prior to the scheduled maturity date. 

prequalification:  the process of determining how much money a prospective homebuyer will be eligible to borrow prior to putting in an offer.  Is not an offer to lend and is not as detailed as a preapproval.   

primary residence:  the location where a person will live most of the time. 

primary mortgage market:  lenders who originate loans and makes funds available directly to the borrowers. 

prime rate:  the interest or discount rate charged by a commercial bank to its largest and strongest customers.  Not a direct correlation to mortgage rates. 

principal:  the amount of money borrowed and still owed to the lender not including interest. 

principal balance:  outstanding amount of principal which is owed on a mortgage. 

private mortgage insurance(PMI):  insurance policy required on some loans to protect the lender from possible default by the borrower.  Normally conventional loans with less than 20% equity will require it as well as all FHA loans. 

privity:  mutual interest in the same property or rights established by law or contract. 

processing fee:  a fee charged by most lenders which pays for the coordination of a borrowers loan.  The person who handles the processing is referred to as a processor and in many cases gets involved in working with the borrower to help the progress of the loan. 

professional appraiser:  expert in real estate with a background in real estate appraisal and is educated in creating appraisals and values.  Often belongs to an appraisal organization or association. 

progress payments:  payments made to a contractor as various stages of construction are completed. 

property:  ownership rights that a party has in lands or goods which excludes all others. 

property insurance:  insurance which provides protection against losses which might occur as a result of damage or destruction of property or contents within the insured property. 

property taxes:  annual taxes paid on real property.  Taxes are based on the assessed value of the real property. Each taxing authority multiplies the assessed value by the annual tax rate. 

 prorate:  the allocation of expenses to be paid by the buyer and seller at time of closing. 

proration of taxes:  proportionate division of accumulated taxes at the time of closing. 

purchase agreement:  document which outlines the purchase price and all the conditions of the transaction. 

purchase and sale agreement:  a contract which is signed by the buyer and seller which outlines the terms and conditions under which a property will be sold.  Some of the items included are description of property, price offered, down payment, deposit, terms of finance, estimated closing date and any other items specific to this transaction. 

purchase-money mortgage(PMM):  partial payment for a property which is a mortgage that is basically seller financing instead of cash for the purchase price of the real estate.