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call option
A provision in the mortgage that gives the
mortgagee the right to call the mortgage due
and payable at the end of a specified period
for whatever reason.
cap
A provision of an adjustable-rate mortgage
(ARM) that limits how much the interest rate
or mortgage payments may increase or
decrease. See lifetime payment cap, periodic
payment cap, and periodic rate cap.
capital
(1) Money used to create income, either as
an investment in a business or an income
property. (2) The money or property
comprising the wealth owned or used by a
person or business enterprise. (3) The
accumulated wealth of a person or business.
(4) The net worth of a business represented
by the amount by which its assets exceed
liabilities.
capital expenditure
The cost of an improvement made to extend
the useful life of a property or to add to
its value.
capital improvement
Any structure or component erected as a
permanent improvement to real property that
adds to its value and useful life.
cash-out refinance
A refinance transaction in which the amount
of money received from the new loan exceeds
the total of the money needed to repay the
existing first mortgage, closing costs,
points, and the amount required to satisfy
any outstanding subordinate mortgage liens.
In other words, a refinance transaction in
which the borrower receives additional cash
that can be used for any purpose.
certificate of deposit
A document written by a bank or other
financial institution that is evidence of a
deposit, with the issuer’s promise to return
the deposit plus earnings at a specified
interest rate within a specified time
period.
certificate of deposit index
An index that is used to determine interest
rate changes for certain ARM plans. It
represents the weekly average of secondary
market interest rates on six-month
negotiable certificates of deposit. See
adjustable-rate mortgage (ARM).
Certificate of Eligibility
A document issued by the federal government
certifying a veteran’s eligibility for a
Department of Veterans Affairs (VA)
mortgage.
Certificate of Reasonable Value (CRV)
A document issued by the Department of
Veterans Affairs (VA) that establishes the
maximum value and loan amount for a VA
mortgage.
certificate of title
A statement provided by an abstract company,
title company, or attorney stating that the
title to real estate is legally held by the
current owner.
chain of title
The history of all of the documents that
transfer title to a parcel of real property,
starting with the earliest existing document
and ending with the most recent.
change frequency
The frequency (in months) of payment and/or
interest rate changes in an adjustable-rate
mortgage (ARM).
chattel
Another name for personal property.
clear title
A title that is free of liens or legal
questions as to ownership of the property.
closing
A meeting at which a sale of a property is
finalized by the buyer signing the mortgage
documents and paying closing costs. Also
called "settlement."
closing cost item
A fee or amount that a home buyer must pay
at closing for a single service, tax, or
product. Closing costs are made up of
individual closing cost items such as
origination fees and attorney's fees. Many
closing cost items are included as numbered
items on the HUD-1 statement.
closing costs
Expenses (over and above the price of the
property) incurred by buyers and sellers in
transferring ownership of a property.
Closing costs normally include an
origination fee, an attorney's fee, taxes,
an amount placed in escrow, and charges for
obtaining title insurance and a survey.
Closing costs percentage will vary according
to the area of the country; lenders or
realtors® often provide estimates of closing
costs to prospective homebuyers.
closing statement
See HUD-1 statement.
cloud on title
Any conditions revealed by a title search
that adversely affect the title to real
estate. Usually clouds on title cannot be
removed except by a quitclaim deed, release,
or court action.
coinsurance
A sharing of insurance risk between the
insurer and the insured. Coinsurance depends
on the relationship between the amount of
the policy and a specified percentage of the
actual value of the property insured at the
time of the loss.
coinsurance clause
A provision in a hazard insurance policy
that states the amount of coverage that must
be maintained -- as a percentage of the
total value of the property -- for the
insured to collect the full amount of a
loss.
collateral
An asset (such as a car or a home) that
guarantees the repayment of a loan. The
borrower risks losing the asset if the loan
is not repaid according to the terms of the
loan contract.
collection
The efforts used to bring a delinquent
mortgage current and to file the necessary
notices to proceed with foreclosure when
necessary.
co-maker
A person who signs a promissory note along
with the borrower. A co-maker's signature
guarantees that the loan will be repaid,
because the borrower and the co-maker are
equally responsible for the repayment. See
endorser.
commission
The fee charged by a broker or agent for
negotiating a real estate or loan
transaction. A commission is generally a
percentage of the price of the property or
loan.
commitment letter
A formal offer by a lender stating the terms
under which it agrees to lend money to a
home buyer. Also known as a "loan
commitment."
common area assessments
Levies against individual unit owners in a
condominium or planned unit development (PUD)
project for additional capital to defray
homeowners' association costs and expenses
and to repair, replace, maintain, improve,
or operate the common areas of the project.
common areas
Those portions of a building, land, and
amenities owned (or managed) by a planned
unit development (PUD) or condominium
project's homeowners' association (or a
cooperative project's cooperative
corporation) that are used by all of the
unit owners, who share in the common
expenses of their operation and maintenance.
Common areas include swimming pools, tennis
courts, and other recreational facilities,
as well as common corridors of buildings,
parking areas, means of ingress and egress,
etc.
common law
An unwritten body of law based on general
custom in England and used to an extent in
the United States.
Community Home Improvement
Mortgage Loan®
An alternative financing option that allows
low- and moderate-income home buyers to
obtain 95 percent financing for the purchase
and improvement of a home in need of modest
repairs. The repair work can account for as
much as 30 percent of the appraised value.
Community Land Trust Mortgage
Loan
An alternative financing option that enables
low- and moderate-income home buyers to
purchase housing that has been improved by a
nonprofit Community Land Trust and to lease
the land on which the property stands.
community property
In some western and southwestern 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 Seconds®
An alternative financing option for low- and
moderate-income households under which an
investor purchases a first mortgage that has
a subsidized second mortgage behind it. The
second mortgage may be issued by a state,
county, or local housing agency, foundation,
or nonprofit organization. Payment on the
second mortgage is often deferred and
carries a very low interest rate (or no
interest rate at all). Part of the debt may
be forgiven incrementally for each year the
buyer remains in the home.
comparables
An abbreviation for "comparable properties";
used for comparative purposes in the
appraisal process. Comparables are
properties like the property under
consideration; they have reasonably the same
size, location, and amenities and have
recently been sold. Comparables help the
appraiser determine the approximate fair
market value of the subject property.
compound interest
Interest paid on the original principal
balance and on the accrued and unpaid
interest.
condemnation
The determination that a building is not fit
for use or is dangerous and must be
destroyed; the taking of private property
for a public purpose through an exercise of
the right of eminent domain.
condominium
A real estate project in which each unit
owner has title to a unit in a building, an
undivided interest in the common areas of
the project, and sometimes the exclusive use
of certain limited common areas.
condominium conversion
Changing the ownership of an existing
building (usually a rental project) to the
condominium form of ownership.
condominium hotel
A condominium project that has rental or
registration desks, short-term occupancy,
food and telephone services, and daily
cleaning services and that is operated as a
commercial hotel even though the units are
individually owned.
construction loan
A short-term, interim loan for financing the
cost of construction. The lender makes
payments to the builder at periodic
intervals as the work progresses.
consumer reporting agency (or
bureau)
An organization that prepares reports that
are used by lenders to determine a potential
borrower's credit history. The agency
obtains data for these reports from a credit
repository as well as from other sources.
contingency
A condition that must be met before a
contract is legally binding. For example,
home purchasers often include a contingency
that specifies that the contract is not
binding until the purchaser obtains a
satisfactory home inspection report from a
qualified home inspector.
contract
An oral or written agreement to do or not to
do a certain thing.
conventional mortgage
A mortgage that is not insured or guaranteed
by the federal government. Contrast with
government mortgage.
convertibility clause
A provision in some adjustable-rate
mortgages (ARMs) that allows the borrower to
change the ARM to a fixed-rate mortgage at
specified timeframes after loan origination.
convertible ARM
An adjustable-rate mortgage (ARM) that can
be converted to a fixed-rate mortgage under
specified conditions.
cooperative (co-op)
A type of multiple ownership in which the
residents of a multiunit housing complex own
shares in the cooperative corporation that
owns the property, giving each resident the
right to occupy a specific apartment or
unit.
cooperative corporation
A business trust entity that holds title to
a cooperative project and grants occupancy
rights to particular apartments or units to
shareholders through proprietary leases or
similar arrangements.
cooperative mortgages
Mortgages related to a cooperative project.
This usually refers to the multifamily
mortgage covering the entire project but
occasionally describes the share loans on
the individual units.
cooperative project
A residential or mixed-use building wherein
a corporation or trust holds title to the
property and sells shares of stock
representing the value of a single apartment
unit to individuals who, in turn, receive a
proprietary lease as evidence of title.
corporate relocation
Arrangements under which an employer moves
an employee to another area as part of the
employer's normal course of business or
under which it transfers a substantial part
or all of its operations and employees to
another area because it is relocating its
headquarters or expanding its office
capacity.
cost of funds index (COFI)
An index that is used to determine interest
rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the
weighted-average cost of savings,
borrowings, and advances of the 11th
District members of the Federal Home Loan
Bank of San Francisco. See adjustable-rate
mortgage (ARM).
covenant
A clause in a mortgage that obligates or
restricts the borrower and that, if
violated, can result in foreclosure.
credit
An agreement in which a borrower receives
something of value in exchange for a promise
to repay the lender at a later date.
credit history
A record of an individual's open and fully
repaid debts. A credit history helps a
lender to determine whether a potential
borrower has a history of repaying debts in
a timely manner.
credit life insurance
A type of insurance often bought by
mortgagors because it will pay off the
mortgage debt if the mortgagor dies while
the policy is in force.
creditor
A person to whom money is owed.
credit report
A report of an individual's credit history
prepared by a credit bureau and used by a
lender in determining a loan applicant's
creditworthiness. See merged credit report.
credit repository
An organization that gathers, records,
updates, and stores financial and public
records information about the payment
records of individuals who are being
considered for credit.