acceleration clause
A clause in a mortgage which allows
the lender to demand payment of the
outstanding loan balance. The most
common reason for accelerating a
loan is if the borrower defaults on
the loan or transfers title to
another individual without informing
the lender.
adjustable-rate mortgage
(ARM)
A mortgage in which the interest
changes periodically, according to
corresponding fluctuations in an
index. ARM mortgages may begin as
fixed mortgages for a short period
of time and them become adjustable.
adjustment date
The date the interest rate
changes on an adjustable-rate (ARM)
mortgage.
amortization
The loan payment consists of a
portion which will be applied to pay
the accruing interest on a loan,
with the remainder being applied to
the principal. Over time, the
interest portion decreases as the
loan balance decreases, and the
amount applied to principal
increases so that the loan is paid
off (amortized) in the specified
time.
amortization schedule
A table which shows how much of each
payment will be applied toward
principal and how much toward
interest over the life of the loan.
This may also show the corresponding
loan balance until it reaches zero.
annual percentage rate (APR)
This is not the note rate on your
loan. It is a value created
according to a government formula
that reflects the true annual cost
of borrowing. The APR percentage
will always be higher than the
actual rate of your mortgage.
application
(1003)
The form used to apply for a
mortgage loan, containing
information about a borrower's
income, savings, assets, debts, and
more.
appraisal
A professional estimate for the
value of a property. Appraisals are
based on the condition of the
property, as well as square footage
and comparable sales of similar
homes.
appraised value
An opinion of a property's fair
market value, based on an
appraiser's knowledge, experience,
and analysis of the property. For
nearly all purchase loans, the
purchase price is considered the
appraised value.
appraiser
An individual qualified by
education, training, and experience
to estimate the value of real
property and personal property.
appreciation
The increase in the value of a
property due to changes in market
conditions, inflation, improvements
and/or other causes.
assessed value
The valuation placed on property by
a public tax assessor for purposes
of taxation.
assessment
The placing of a value on property
for the purpose of taxation.
assessor
A public official who establishes
the value of a property for taxation
purposes.
asset
Any Item of value owned by an
individual. Assets that can be
quickly converted into cash are
considered "liquid assets". These
include bank accounts, stocks,
bonds, mutual funds, and so on.
Other assets such as: real estate,
personal property, and debts owed to
an individual by others are not
considered "liquid assets".
assignment
When ownership of your mortgage is
transferred from one lender or
investor to another, it is called an
assignment.
assumable mortgage
A mortgage that can be assumed by
the buyer when a home is sold. The
borrower must "qualify" in order to
assume the loan.
assumption
The term applied when a
buyer assumes the seller's mortgage.
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balloon mortgage
A mortgage loan that requires the
remaining principal balance be paid
at a specific point in time. For
example, a loan may be amortized as
if it would be paid over a thirty
year period, but requires that at
the end of the tenth year the entire
remaining balance must be paid. At
that time, the owner will generally
sell the property or refinance into
a new mortgage.
balloon payment
The final lump sum payment that is
due at the termination of a balloon
mortgage.
bankruptcy
By filing in federal bankruptcy
court, an individual or individuals
can restructure or relieve
themselves of debts and liabilities.
Bankruptcies are of various types,
but the most common for an
individual seem to be a "Chapter 7
No Asset" bankruptcy which relieves
the borrower of most types of debts.
A borrower cannot usually qualify
for an "A" paper loan for a period
of twelve months after the
bankruptcy has been discharged and
requires the re-establishment of an
ability to repay debt.
bill of sale
A written document that transfers
title to personal property. For
example, when selling an automobile
to acquire funds which will be used
as a source of down payment or for
closing costs, the lender will
usually require the bill of sale (in
addition to other items) to help
document this source of funds.
biweekly mortgage
A mortgage in which you make
payments every two weeks instead of
once a month. The result is that
instead of making twelve monthly
payments during the year, you make
thirteen. The extra payment goes
directly to the principal,
substantially reducing the interest
paid on a mortgage and the time it
takes to pay off the mortgage.
broker
Broker has several meanings in
different situations. Most Realtors
are "agents" who work under a
"broker." Some agents may be brokers
as well. In the mortgage industry,
broker usually refers to a company
or individual that does not lend
money, but broker loans to larger
lenders or investors. A broker is
anyone who acts as an agent,
bringing two parties together for
any type of transaction and earns a
fee for doing so.
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cap
Adjustable Rate Mortgages have
fluctuating interest rates, but
those fluctuations are usually
limited to a certain amount. Those
limitations may apply to how much
the loan may adjust over a six month
period, an annual period, and over
the life of the loan, and are
referred to as "caps."
cash-out refinance
When a borrower refinances his
mortgage at a higher amount than the
current loan balance with the
intention of pulling out money for
personal use, it is referred to as a
"cash out refinance."
Certificate of Eligibility
A document issued by the Veterans
Administration that certifies a
veteran's eligibility for a VA loan.
clear title
A title that is free of liens or
legal questions as to ownership of
the property.
closing
This has different meanings in
different states. In some states a
real estate transaction is not
consider "closed" until the
documents record at the local
recorders office. In others, the
"closing" is a meeting where all of
the documents are signed and money
changes hands.
closing costs
Closing costs are separated into
what are called "non-recurring
closing costs" and "pre-paid items."
Non-recurring closing costs are any
items which are paid just once as a
result of buying the property or
obtaining a loan. "Pre-paids" are
items which recur over time, such as
property taxes and homeowners
insurance. A lender makes an attempt
to estimate the amount of
non-recurring closing costs and
prepaid items on the Good Faith
Estimate which they must issue to
the borrower within three days of
receiving a home loan application.
co-borrower
IAn additional individual who is
both obligated on the loan and is on
title to the property.
collateral
In a home loan, the property is the
collateral. The borrower risks
losing the property if the loan is
not repaid according to the terms of
the mortgage or deed of trust.
collection
When a borrower falls behind, the
lender contacts them in an effort to
bring the loan current. The loan
goes to "collection." As part of the
collection effort, the lender must
mail and record certain documents in
case they are eventually required to
foreclose on the property.
commission
Most salespeople earn commissions
for the work that they do and there
are many sales professionals
involved in each transaction,
including Realtors, loan officers,
title representatives, attorneys,
escrow representative, and
representatives for pest companies,
home warranty companies, home
inspection companies, insurance
agents, and more. The commissions
are paid out of the charges paid by
the seller or buyer in the purchase
transaction. Realtors generally earn
the largest commissions, followed by
lenders, then the others.
common law
An unwritten body of law based on
general custom in England and used
to an extent in some states.
In some states, especially the
southwest, property acquired by a
married couple during their marriage
is considered to be owned jointly,
except under special circumstances.
comparable sales
Recent sales of similar properties
in nearby areas and used to help
determine the market value of a
property. Also referred to as
"comps."
condominium
A type of ownership in real property
where all of the owners own the
property, common areas and buildings
together, with the exception of the
interior of the unit to which they
have title. Often mistakenly
referred to as a type of
construction or development, it
actually refers to the type of
ownership.
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.
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
Refers to home loans other than
government loans (VA and FHA).
convertible ARM
An adjustable-rate mortgage that
allows the borrower to change the
ARM to a fixed-rate mortgage within
a specific time.
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
repayment of debt. Credit histories
are reviewed my mortgage lenders as
one of the underwriting criteria in
determining credit risk.
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.
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debt
An amount owed to another.
deed
The legal document conveying title
to a property.
deed-in-lieu
Short for "deed in lieu of
foreclosure," this conveys title to
the lender when the borrower is in
default and wants to avoid
foreclosure. The lender may or may
not cease foreclosure activities if
a borrower asks to provide a
deed-in-lieu. Regardless of whether
the lender accepts the deed-in-lieu,
the avoidance and non-repayment of
debt will most likely show on a
credit history. What a deed-in-lieu
may prevent is having the documents
preparatory to a foreclosure being
recorded and become a matter of
public record.
deed of trust
Some states, like California , do
not record mortgages. Instead, they
record a deed of trust which is
essentially the same thing.
default
Failure to make the mortgage payment
within a specified period of time.
For first mortgages or first trust
deeds, if a payment has still not
been made within 30 days of the due
date, the loan is considered to be
in default.
delinquency
Failure to make mortgage payments
when mortgage payments are due. For
most mortgages, payments are due on
the first day of the month. Even
though they may not charge a "late
fee" for a number of days, the
payment is still considered to be
late and the loan delinquent. When a
loan payment is more than 30 days
late, most lenders report the late
payment to one or more credit
bureaus.
deposit
A sum of money given in advance of a
larger amount being expected in the
future. Often called in real estate
as an "earnest money deposit."
depreciation
A decline in the value of property;
the opposite of appreciation.
Depreciation is also an accounting
term which shows the declining
monetary value of an asset and is
used as an expense to reduce taxable
income. Since this is not a true
expense where money is actually
paid, lenders will add back
depreciation expense for
self-employed borrowers and count it
as income.
down payment
The part of the purchase price of a
property that the buyer pays in cash
and does not finance with a
mortgage.
due-on-sale provision
A provision in a mortgage that
allows the lender to demand
repayment in full if the borrower
sells the property that serves as
security for the mortgage.
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earnest money deposit
A deposit made by the potential home
buyer to show that he or she is
serious about buying the house.
equity
A homeowner's financial interest in
a property. Equity is the difference
between the fair market value of the
property and the amount still owed
on its mortgage and other liens.
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 earnest money deposit
is put into escrow until delivered
to the seller when the transaction
is closed.
escrow account
Once you close your purchase
transaction, you may have an escrow
account or impound account with your
lender. This means the amount you
pay each month includes an amount
above what would be required if you
were only paying your principal and
interest. The extra money is held in
your impound account (escrow
account) for the payment of items
like property taxes and homeowner's
insurance when they come due. The
lender pays them with your money
instead of you paying them yourself.
estate
The ownership interest of an
individual in real property. The sum
total of all the real property and
personal property owned by an
individual at time of death.
eviction
The lawful expulsion of an occupant
from real property.
eviction crew
Workers who accompany the sheriff on
behalf of the lender to assist in
the eviction of an occupant from
real property. The eviction crew are
the workers who will actually move
the occupants belongings from the
home to the
street/yard//driveway/sidewalk and
then change the locks to keep the
previous occupant from retunring to
the home.
examination of title
The report on the title of a
property from the public records or
an abstract of the title.
exclusive listing
A written contract that gives a
licensed real estate agent the
exclusive right to sell a property
for a specified time.
executor
A person named in a will to
administer an estate. The court will
appoint an administrator if no
executor is named. "Executrix" is
the feminine form.
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Fair Credit Reporting Act
A consumer protection law that
regulates the disclosure of consumer
credit reports by consumer/credit
reporting agencies and establishes
procedures for correcting mistakes
on one's credit record.
fair market value
The highest price that a buyer,
willing but not compelled to buy,
would pay, and the lowest a seller,
willing but not compelled to sell,
would accept.
Fannie Mae (FNMA)
The Federal National Mortgage
Association, which is a
congressionally chartered,
shareholder-owned company that is
the nation's largest supplier of
home mortgage funds. For a
discussion of the roles of Fannie
Mae, Freddie Mac (FHLMC), and Ginnie
Mae (GNMA), see the Library.
An income-based community lending
model, under which mortgage insurers
and Fannie Mae offer flexible
underwriting guidelines to increase
a low- or moderate-income family's
buying power and to decrease the
total amount of cash needed to
purchase a home. Borrowers who
participate in this model are
required to attend pre-purchase
home-buyer education sessions.
Federal Housing
Administration (FHA)
An agency of the U.S. Department of
Housing and Urban Development (HUD).
Its main activity is the insuring of
residential mortgage loans made by
private lenders. The FHA sets
standards for construction and
underwriting but does not lend money
or plan or construct housing.
fee simple
The greatest possible interest a
person can have in real estate.
fee simple estate
An unconditional, unlimited estate
of inheritance that represents the
greatest estate and most extensive
interest in land that can be
enjoyed. It is of perpetual
duration. When the real estate is in
a condominium project, the unit
owner is the exclusive owner only of
the air space within his or her
portion of the building (the unit)
and is an owner in common with
respect to the land and other common
portions of the property.
FHA mortgage
A mortgage that is insured by the
Federal Housing Administration
(FHA). Along with VA loans, an FHA
loan will often be referred to as a
government loan.
firm commitment
A lender's agreement to make a loan
to a specific borrower on a specific
property.
first mortgage
The mortgage that is in first place
among any loans recorded against a
property. Usually refers to the date
in which loans are recorded, but
there are exceptions.
fixed-rate mortgage
A mortgage in which the interest
rate does not change during the
entire term of the loan.
fixture
Personal property that becomes real
property when attached in a
permanent manner to real estate.
flood insurance
Insurance that compensates for
physical property damage resulting
from flooding. It is required for
properties located in federally
designated flood areas.
foreclosure
The legal process by which a
borrower in default under a mortgage
is deprived of his or her interest
in the mortgaged property. This
usually involves a forced sale of
the property at public auction with
the proceeds of the sale being
applied to the mortgage debt.
401(k)/403(b)
An employer-sponsored investment
plan that allows individuals to set
aside tax-deferred income for
retirement or emergency purposes.
401(k) plans are provided by
employers that are private
corporations. 403(b) plans are
provided by employers that are not
for profit organizations.
401(k)/403(b) loan
Some administrators of 401(k)/403(b)
plans allow for loans against the
monies you have accumulated in these
plans. Loans against 401K plans are
an acceptable source of down payment
for most types of loans.
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government loan (mortgage)
A mortgage that is insured by the
Federal Housing Administration (FHA)
or guaranteed by the Department of
Veterans Affairs (VA) or the Rural
Housing Service (RHS). Mortgages
that are not government loans are
classified as conventional loans.
Government National Mortgage
Association (Ginnie Mae)
A government-owned corporation
within the U.S. Department of
Housing and Urban Development (HUD).
Created by Congress on September 1,
1968 , GNMA performs the same role
as Fannie Mae and Freddie Mac in
providing funds to lenders for
making home loans. The difference is
that Ginnie Mae provides funds for
government loans (FHA and VA)
grantee
The person to whom an interest in
real property is conveyed.
grantor
The person conveying an interest in
real property.
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hazard insurance
Insurance coverage that in the event
of physical damage to a property
from fire, wind, vandalism, or other
hazards.
Home Equity Conversion
Mortgage (HECM)
Usually referred to as a reverse
annuity mortgage, what makes this
type of mortgage unique is that
instead of making payments to a
lender, the lender makes payments to
you. It enables older home owners to
convert the equity they have in
their homes into cash, usually in
the form of monthly payments. Unlike
traditional home equity loans, a
borrower does not qualify on the
basis of income but on the value of
his or her home. In addition, the
loan does not have to be repaid
until the borrower no longer
occupies the property.
home equity line of credit
A mortgage loan, usually in second
position, that allows the borrower
to obtain cash drawn against the
equity of his home, up to a
predetermined amount.
home inspection
A thorough inspection by a
professional that evaluates the
structural and mechanical condition
of a property. A satisfactory home
inspection is often included as a
contingency by the purchaser.
homeowners' association
A nonprofit association that manages
the common areas of a planned unit
development (PUD) or condominium
project. In a condominium project,
it has no ownership interest in the
common elements. In a PUD project,
it holds title to the common
elements.
homeowner's insurance
An insurance policy that combines
personal liability insurance and
hazard insurance coverage for a
dwelling and its contents.
homeowner's warranty
A type of insurance often purchased
by homebuyers that will cover
repairs to certain items, such as
heating or air conditioning, should
they break down within the coverage
period. The buyer often requests the
seller to pay for this coverage as a
condition of the sale, but either
party can pay.
HUD median income
Median family income for a
particular county or metropolitan
statistical area (MSA), as estimated
by the Department of Housing and
Urban Development (HUD).
HUD-1 settlement statement
A document that provides an itemized
listing of the funds that were paid
at closing. Items that appear on the
statement include real estate
commissions, loan fees, points, and
initial escrow (impound) amounts.
Each type of expense goes on a
specific numbered line on the sheet.
The totals at the bottom of the
HUD-1 statement define the seller's
net proceeds and the buyer's net
payment at closing. It is called a
HUD1 because the form is printed by
the Department of Housing and Urban
Development (HUD). The HUD1
statement is also known as the
"closing statement" or "settlement
sheet."
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Improvement
Privately owned structure (building,
fence, etc.) on a site to enhance
the value of the property.
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joint tenancy
A form of ownership or taking title
to property which means each party
owns the whole property and that
ownership is not separate. In the
event of the death of one party, the
survivor owns the property in its
entirety.
judgment
A decision made by a court of law.
In judgments that require the
repayment of a debt, the court may
place a lien against the debtor's
real property as collateral for the
judgment's creditor.
judicial foreclosure
A type of foreclosure proceeding
used in some states that is handled
as a civil lawsuit and conducted
entirely under the auspices of a
court. Other states use non-judicial
foreclosure.
jumbo loan
A loan that exceeds Fannie Mae's and
Freddie Mac's loan limits, currently
at $227,150. Also called a
nonconforming loan. Freddie Mac and
Fannie Mae loans are referred to as
conforming loans.
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late charge
The penalty a borrower must pay when
a payment is made a stated number of
days. On a first trust deed or
mortgage, this is usually fifteen
days.
lease
A written agreement between the
property owner and a tenant that
stipulates the payment and
conditions under which the tenant
may possess the real estate for a
specified period of time.
leasehold estate
A way of holding title to a property
wherein the mortgagor does not
actually own the property but rather
has a recorded long-term lease on
it.
lease
option
An alternative financing option that
allows home buyers to lease a home
with an option to buy. Each month's
rent payment may consist of not only
the rent, but an additional amount
which can be applied toward the down
payment on an already specified
price.
legal description
A property description, recognized
by law, that is sufficient to locate
and identify the property without
oral testimony.
lender
A term which can refer to the
institution making the loan or to
the individual representing the
firm. For example, loan officers are
often referred to as "lenders."
liabilities
A person's financial obligations.
Liabilities include long-term and
short-term debt, as well as any
other amounts that are owed to
others.
liability insurance
Insurance coverage that offers
protection against claims alleging
that a property owner's negligence
or inappropriate action resulted in
bodily injury or property damage to
another party. It is usually part of
a homeowner's insurance policy.
lien
A legal claim against a property
that must be paid off when the
property is sold. A mortgage or
first trust deed is considered a
lien.
life cap
For an adjustable-rate mortgage
(ARM), a limit on the amount that
the enterest rate can increase or
decrease over the life of the
mortgage.
line of credit
An agreement by a commercial bank or
other financial institution to
extend credit up to a certain amount
for a certain time to a specified
borrower.
liquid asset
A cash asset or an asset that is
easily converted into cash.
loan
A sum of borrowed money (principal)
that is generally repaid with
interest.
loan officer
Also referred to by a variety of
other terms, such as lender, loan
representative, loan "rep," account
executive, and others. The loan
officer serves several functions and
has various responsibilities: they
solicit loans, they are the
representative of the lending
institution, and they represent the
borrower to the lending institution.
loan origination
How a lender refers to the process
of obtaining new loans.
loan servicing
After you obtain a loan, the company
you make the payments to is
"servicing" your loan. They process
payments, send statements, manage
the escrow/impound account, provide
collection efforts on delinquent
loans, ensure that insurance and
property taxes are made on the
property, handle pay-offs and
assumptions, and provide a variety
of other services.
loan-to-value (LTV)
The percentage relationship between
the amount of the loan and the
appraised value or sales price
(whichever is lower).
lock-in
An agreement in which the lender
guarantees a specified interest rate
for a certain amount of time at a
certain cost.
lock-in period
The time period during which the
lender has guaranteed an interest
rate to a borrower.
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margin
The difference between the interest
rate and the index on an adjustable
rate mortgage. The margin remains
stable over the life of the loan. It
is the index which moves up and
down.
maturity
The date on which the principal
balance of a loan, bond, or other
financial instrument becomes due and
payable.
merged credit report
A credit report which reports the
raw data pulled from two or more of
the major credit repositories.
Contrast with a Residential Mortgage
Credit Report (RMCR) or a standard
factual credit report.
modification
Occasionally, a lender will agree to
modify the terms of your mortgage
without requiring you t refinance.
If any changes are made, it is
called a modification.
mortgage
A legal document that pledges a
property to the lender as security
for payment of a debt. Instead of
mortgages, some states use First
Trust Deeds.
mortgage banker
For a more complete discussion of
mortgage banker, see "Types of
Lenders." A mortgage banker is
generally assumed to originate and
fund their own loans, which are then
sold on the secondary market,
usually to Fannie Mae, Freddie Mac,
or Ginnie Mae. However, firms rather
loosely apply this term to
themselves, whether they are true
mortgage bankers or simply mortgage
brokers or correspondents.
mortgage broker
A mortgage company that originates
loans, then places those loans with
a variety of other lending
institutions with whom they usually
have pre-established relationships.
mortgagee
The lender in a mortgage agreement.
mortgage insurance (MI)
Insurance that covers the lender
against some of the losses incurred
as a result of a default on a home
loan. Often mistakenly referred to
as PMI, which is actually the name
of one of the larger mortgage
insurers. Mortgage insurance is
usually required in one form or
another on all loans that have a
loan-to-value higher than eighty
percent. Mortgages above 80% LTV
that call themselves "No MI" are
usually a made at a higher interest
rate. Instead of the borrower paying
the mortgage insurance premiums
directly, they pay a higher interest
rate to the lender, which then pays
the mortgage insurance themselves.
Also, FHA loans and certain
first-time homebuyer programs
require mortgage insurance
regardless of the loan-to-value.
mortgage insurance premium
(MIP)
The amount paid by a mortgagor for
mortgage insurance, either to a
government agency such as the
Federal Housing Administration (FHA)
or to a private mortgage insurance
(MI) company.
mortgage life and disability
insurance
A type of term life insurance often
bought by borrowers. The amount of
coverage decreases as the principal
balance declines. Some policies also
cover the borrower in the event of
disability. In the event that the
borrower dies while the policy is in
force, the debt is automatically
satisfied by insurance proceeds. In
the case of disability insurance,
the insurance will make the mortgage
payment for a specified amount of
time during the disability. Be
careful to read the terms of
coverage, however, because often the
coverage does not start immediately
upon the disability, but after a
specified period, sometime
forty-five days.
mortgagor
The borrower in a mortgage
agreement.
multidwelling units
Properties that provide separate
housing units for more than one
family, although they secure only a
single mortgage.
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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.
no cash-out refinance
A refinance transaction which is not
intended to put cash in the hand of
the borrower. Instead, the new
balance is caculated to cover the
balance due on the current loan and
any costs associated with obtaining
the new mortgage. Often referred to
as a "rate and term refinance."
no-cost loan
Many lenders offer loans that you
can obtain at "no cost." You should
inquire whether this means there are
no "lender" costs associated with
the loan, or if it also covers the
other costs you would normally have
in a purchase or refinance
transactions, such as title
insurance, escrow fees, settlement
fees, appraisal, recording fees,
notary fees, and others. These are
fees and costs which may be
associated with buying a home or
obtaining a loan, but not charged
directly by the lender. Keep in mind
that, like a "no-point" loan, the
interest rate will be higher than if
you obtain a loan that has costs
associated with it.
note
A legal document that obligates a
borrower to repay a mortgage loan at
a stated interest rate during a
specified period of time.
note rate
The interest rate stated on a
mortgage note.
notice of default
A formal written notice to a
borrower that a default has occurred
and that legal action may be taken.
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original principal balance
The total amount of
principal owed on a mortgage before
any payments are made.
origination fee
On a government loan the
loan origination fee is one percent
of the loan amount, but additional
points may be charged which are
called "discount points." One point
equals one percent of the loan
amount. On a conventional loan, the
loan origination fee refers to the
total number of points a borrower
pays.
owner financing
A property purchase
transaction in which the property
seller provides all or part of the
financing.
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partial payment
A payment that is not
sufficient to cover the scheduled
monthly payment on a mortgage loan.
Normally, a lender will not accept a
partial payment, but in times of
hardship you can make this request
of the loan servicing collection
department.
payment change date
The date when a new monthly
payment amount takes effect on an
adjustable-rate mortgage (ARM) or a
graduated-payment mortgage (GPM).
Generally, the payment change date
occurs in the month immediately
after the interest rate adjustment
date.
periodic payment cap
For an adjustable-rate
mortgage where the interest rate and
the minimum payment amount fluctuate
independently of one another, this
is a limit on the amount that
payments can increase or decrease
during any one adjustment period.
periodic rate cap
For an adjustable-rate
mortgage, a limit on the amount that
the interest rate can increase or
decrease during any one adjustment
period, regardless of how high or
low the index might be.
personal property
Any property that is not
real property.
PITI
This stands for principal,
interest, taxes and insurance. If
you have an "impounded" loan, then
your monthly payment to the lender
includes all of these and probably
includes mortgage insurance as well.
If you do not have an impounded
account, then the lender still
calculates this amount and uses it
as part of determining your
debt-to-income ratio.
PITI reserves
A cash amount that a
borrower must have on hand after
making a down payment and paying all
closing costs for the purchase of a
home. The principal, interest,
taxes, and insurance (PITI) reserves
must equal the amount that the
borrower would have to pay for PITI
for a predefined number of months.
planned unit development (PUD)
A type of ownership
where individuals actually own the
building or unit they live in, but
common areas are owned jointly with
the other members of the development
or association. Contrast with
condominium, where an individual
actually owns the airspace of his
unit, but the buildings and common
areas are owned jointly with the
others in the development or
association.
point
A point is 1 percent of
the amount of the mortgage.
power of attorney
A legal document that
authorizes another person to act on
one's behalf. A power of attorney
can grant complete authority or can
be limited to certain acts and/or
certain periods of time.
pre-approval
A loosely used term
which is generally taken to mean
that a borrower has completed a loan
application and provided debt,
income, and savings documentation
which an underwriter has reviewed
and approved. A pre-approval is
usually done at a certain loan
amount and making assumptions about
what the interest rate will actually
be at the time the loan is actually
made, as well as estimates for the
amount that will be paid for
property taxes, insurance and
others. A pre-approval applies only
to the borrower. Once a property is
chosen, it must also meet the
underwriting guidelines of the
lender. Contrast with
pre-qualification
prepayment
Any amount paid to
reduce the principal balance of a
loan before the due date. Payment in
full on a mortgage that may result
from a sale of the property, the
owner's decision to pay off the loan
in full, or a foreclosure. In each
case, prepayment means payment
occurs before the loan has been
fully amortized.
prepayment penalty
A fee that may be
charged to a borrower who pays off a
loan before it is due.
pre-qualification
This usually refers to the
loan officer's written opinion of
the ability of a borrower to qualify
for a home loan, after the loan
officer has made inquiries about
debt, income, and savings. The
information provided to the loan
officer may have been presented
verbally or in the form of
documentation, and the loan officer
may or may not have reviewed a
credit report on the borrower.
prime rate
The interest rate that
banks charge to their preferred
customers. Changes in the prime rate
are widely publicized in the news
media and are used as the indexes in
some adjustable rate mortgages,
especially home equity lines of
credit. Changes in the prime rate do
not directly affect other types of
mortgages, but the same factors that
influence the prime rate also affect
the interest rates of mortgage
loans.
principal
The amount borrowed or
remaining unpaid. The part of the
monthly payment that reduces the
remaining balance of a mortgage.
principal balance
The outstanding balance
of principal on a mortgage. The
principal balance does not include
interest or any other charges. See
remaining balance.
principal, interest, taxes,
and insurance (PITI)
The four components of
a monthly mortgage payment on
impounded loans. Principal refers to
the part of the monthly payment that
reduces the remaining balance of the
mortgage. Interest is the fee
charged for borrowing money. Taxes
and insurance refer to the amounts
that are paid into an escrow account
each month for property taxes and
mortgage and hazard insurance.
private mortgage insurance
(MI)
Mortgage insurance that
is provided by a private mortgage
insurance company to protect lenders
against loss if a borrower defaults.
Most lenders generally require MI
for a loan with a loan-to-value
(LTV) percentage in excess of 80
percent.
promissory note
A written promise to
repay a specified amount over a
specified period of time.
public auction
A meeting in an announced
public location to sell property to
repay a mortgage that is in default.
purchase agreement
A written contract signed
by the buyer and seller stating the
terms and conditions under which a
property will be sold.
purchase money transaction
The acquisition of
property through the payment of
money or its equivalent.
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qualifying ratios
Calculations that are used in
determining whether a borrower can
qualify for a mortgage. There are
two ratios. The "top" or "front"
ratio is a calculation of the
borrower's monthly housing costs
(principle, taxes, insurance,
mortgage insurance, homeowner's
association fees) as a percentage of
monthly income. The "back" or
"bottom" ratio includes housing
costs as will as all other monthly
debt.
quitclaim deed
A deed that transfers without
warranty whatever interest or title
a grantor may have at the time the
conveyance is made.
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rate lock
A commitment issued by a lender to a
borrower or other mortgage
originator guaranteeing a specified
interest rate for a specified period
of time at a specific cost.
real estate agent
A person licensed to negotiate and
transact the sale of real estate.
Real Estate Settlement
Procedures Act (RESPA)
A consumer protection law that
requires lenders to give borrowers
advance notice of closing costs.
real property
Land and appurtenances, including
anything of a permanent nature such
as structures, trees, minerals, and
the interest, benefits, and inherent
rights thereof.
Realtor ®
A real estate agent, broker or an
associate who holds active
membership in a local real estate
board that is affiliated with the
National Association of Realtors.
recorder
The public official who keeps
records of transactions that affect
real property in the area. Sometimes
known as a "Registrar of Deeds" or "
County Clerk ."
recording
The noting in the registrar's office
of the details of a properly
executed legal document, such as a
deed, a mortgage note, a
satisfaction of mortgage, or an
extension of mortgage, thereby
making it a part of the public
record.
refinance transaction
The process of paying off one loan
with the proceeds from a new loan
using the same property as security.
remaining balance
The amount of principal that has not
yet been repaid. See principal
balance.
remaining term
The original amortization term minus
the number of payments that have
been applied.
rent loss insurance
Insurance that protects a landlord
against loss of rent or rental value
due to fire or other casualty that
renders the leased premises
unavailable for use and as a result
of which the tenant is excused from
paying rent.
repayment plan
An arrangement made to repay
delinquent installments or
advances.
replacement reserve fund
A fund set aside for replacement of
common property in a condominium,
PUD, or cooperative project --
particularly that which has a short
life expectancy, such as carpeting,
furniture, etc.
revolving debt
A credit arrangement, such as a
credit card, that allows a customer
to borrow against a preapproved line
of credit when purchasing goods and
services. The borrower is billed for
the amount that is actually borrowed
plus any interest due.
right of first refusal
A provision in an agreement that
requires the owner of a property to
give another party the first
opportunity to purchase or lease the
property before he or she offers it
for sale or lease to others.
right of ingress or egress
The right to enter or leave
designated premises.
right of survivorship
In joint tenancy, the right of
survivors to acquire the interest of
a deceased joint tenant.
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sale-buyback
A technique in
which a seller deeds property to a
buyer for a consideration and the
buyer simultaneously sells the
property back to the seller using a
land contract or similar agreement.
sale-leaseback
A technique in which a seller deeds
property to a buyer for a
consideration, and the buyer
simultaneously leases the property
back to the seller.
second
mortgage
A mortgage that has a lien position
subordinate to the first mortgage.
secondary market
The buying and selling of existing
mortgages, usually as part of a
"pool" of mortgages.
secured loan
A loan that is backed by
collateral.
security
The property that will be pledged as
collateral for a loan.
seller carry-back
An agreement in which the owner of a
property provides financing, often
in combination with an assumable
mortgage.
servicer
An organization that collects
principal and interest payments from
borrowers and manages borrowers'
escrow accounts. The servicer often
services mortgages that have been
purchased by an investor in the
secondary mortgage market.
servicing
The collection of mortgage payments
from borrowers and related
responsibilities of a loan servicer.
settlement statement
See HUD1 Settlement Statement
sheriffs sale
Public Auction of a borrower's
assets seized in a Foreclosure order
obtained from a court, and carried
out by a sheriff or other court
officer. Assets pledged as loan
collateral and secured by
attachments, liens, or mortgages may
be sold at auction.
subdivision
A housing development that is
created by dividing a tract of land
into individual lots for sale or
lease.
subordinate financing
Any mortgage or other lien that has
a priority that is lower than that
of the first mortgage.
survey
A drawing or map showing the precise
legal boundaries of a property, the
location of improvements, easements,
rights of way, encroachments, and
other physical features.
sweat equity
Contribution to the construction or
rehabilitation of a property in the
form of labor or services rather
than cash.
top
tenancy in common
As opposed to joint tenancy, when
there are two or more individuals on
title to a piece of property, this
type of ownership does not pass
ownership to the others in the event
of death.
third-party origination
A process by which a lender uses
another party to completely or
partially originate, process,
underwrite, close, fund, or package
the mortgages it plans to deliver to
the secondary mortgage market.
title
A legal document evidencing a
person's right to or ownership of a
property.
title company
A company that specializes in
examining and insuring titles to
real estate.
title insurance
Insurance that protects the lender
(lender's policy) or the buyer
(owner's policy) against loss
arising from disputes over ownership
of a property.
title search
A check of the title records to
ensure that the seller is the legal
owner of the property and that there
are no liens or other claims
outstanding.
transfer of ownership
Any means by which the ownership of
a property changes hands. Lenders
consider all of the following
situations to be a transfer of
ownership: the purchase of a
property "subject to" the mortgage,
the assumption of the mortgage debt
by the property purchaser, and any
exchange of possession of the
property under a land sales contract
or any other land trust device.
transfer tax
State or local tax payable when
title passes from one owner to
another.
Treasury index
An index that is used to determine
interest rate changes for certain
adjustable-rate mortgage (ARM)
plans. It is based on the results of
auctions that the U.S. Treasury
holds for its Treasury bills and
securities or is derived from the
U.S. Treasury's daily yield curve,
which is based on the closing market
bid yields on actively traded
Treasury securities in the
over-the-counter market.
Truth-in-Lending
A federal law that requires lenders
to fully disclose, in writing, the
terms and conditions of a mortgage,
including the annual percentage rate
(APR) and other charges.
two-step mortgage
An adjustable-rate mortgage (ARM)
that has one interest rate for the
first five or seven years of its
mortgage term and a different
interest rate for the remainder of
the amortization term.
two- to four-family property
A property that consists of a
structure that provides living space
(dwelling units) for two to four
families, although ownership of the
structure is evidenced by a single
deed.
trustee
A fiduciary who holds or controls
property for the benefit of
another.
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VA mortgage
A mortgage that is guaranteed by the
Department of Veterans Affairs
(VA).
vested
Having the right to use a portion of
a fund such as an individual
retirement fund. For example,
individuals who are 100 percent
vested can withdraw all of the funds
that are set aside for them in a
retirement fund. However, taxes may
be due on any funds that are
actually withdrawn.
Veterans Administration (VA)
An agency of the federal government
that guarantees residential
mortgages made to eligible veterans
of the military services. The
guarantee protects the lender
against loss and thus encourages
lenders to make mortgages to
veterans
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Zoning ordinance
Regulating the use of property by
municipality
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341 meeting
A meeting of
creditors at which the debtor is
questioned under oath by creditors,
a trustee, examiner, or the United
States trustee about his/her
financial affairs.
Adversary Proceeding
A lawsuit
arising in or related to a
bankruptcy case that is commenced by
filing a complaint with the court.
Avoidable Transfers
The
debtor in possession or the trustee,
as the case may be, has what are
called "avoiding" powers. Such
powers may be used to undo a
transfer of money or property made
during a certain period of time
prior to the filing of the
bankruptcy petition. By avoiding a
particular transfer of property, the
debtor in possession can cancel the
transaction and force the return or
"disgorgement" of the payments or
property, which then are available
to pay all creditors. Generally, the
power to avoid transfers is
effective against transfers made
within 90 days prior to the filing
of the petition. However, transfers
to insiders (i.e., relatives,
general partners, and directors or
officers of the debtor) made up to a
year prior to filing can be avoided.
11 U.S.C. §§ 101(31), 101(54), 547,
548. In addition, under 11 U.S.C. §
544, the trustee is given the
authority to avoid transfers under
applicable state law, which often
provides for longer time periods.
Avoiding powers are used, for
example, to prevent unfair
prepetition payments to one creditor
at the expense of all other
creditors.
assume
An agreement to
continue performing duties under a
contract or lease.
automatic stay
An injunction
that automatically stops lawsuits,
foreclosure, garnishments, and all
collection activity against the
debtor the moment a bankruptcy
petition is filed.
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bankruptcy
A legal procedure
for dealing with debt problems of
individuals and businesses;
specifically, a case filed under one
of the chapters of title 11 of the
United States Code (the Bankruptcy
Code). Top
Bankruptcy Administrator
An
officer of the judiciary serving in
the judicial districts of Alabama
and North Carolina who, like the
United States trustee, is
responsible for supervising the
administration of bankruptcy cases,
estates, and trustees, monitoring
plans and disclosure statements,
monitoring creditors' committees,
monitoring fee applications, and
performing other statutory duties.
Bankruptcy Code
The informal
name for title 11 of the United
States Code (11 U.S.C. §§ 101 -
1330), the federal bankruptcy law.
bankruptcy court
The
bankruptcy judges in regular active
service in each district; a unit of
the district court.
bankruptcy estate
All legal
or equitable interests of the debtor
in property at the time of the
bankruptcy filing. (The estate
includes all property in which the
debtor has an interest, even if it
is owned or held by another person.)
bankruptcy judge
A judicial
officer of the United States
district court who is the court
official with decision-making power
over federal bankruptcy cases.
bankruptcy mill
A business
not authorized to practice law that
provides bankruptcy counseling and
prepares bankruptcy petitions.
bankruptcy petition
A formal
request for the protection of the
federal bankruptcy laws. (There is
an official form for bankruptcy
petitions.)
bankruptcy trustee
A private
individual or corporation appointed
in all chapter 7, chapter 12, and
chapter 13 cases to represent the
interests of the bankruptcy estate
and the debtor's creditors.
business bankruptcy
A
bankruptcy case in which the debtor
is a business or an individual
involved in business and the debts
are for business purposes.
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cash collateral Section 363
defines "cash collateral" as cash,
negotiable instruments, documents of
title, securities, deposit accounts,
or other cash equivalents, whenever
acquired, in which the estate and an
entity other than the estate have an
interest. It includes the proceeds,
products, offspring, rents, or
profits of property and the fees,
charges, accounts or payments for
the use or occupancy of rooms and
other public facilities in hotels,
motels, or other lodging properties
subject to a creditor's security
interest.
chapter 7
The chapter of the
Bankruptcy Code providing for
"liquidation," i.e., the sale of a
debtor's nonexempt property and the
distribution of the proceeds to
creditors. Top
chapter 7 trustee
A person
appointed in a chapter 7 case to
represent the interests of the
bankruptcy estate and the unsecured
creditors. (The trustee's
responsibilities include reviewing
the debtor's petition and schedules,
liquidating the property of the
estate, and making distributions to
creditors. The trustee may also
bring actions against creditors or
the debtor to recover property of
the bankruptcy estate.)
chapter 11
A reorganization
bankruptcy, usually involving a
corporation or partnership. (A
chapter 11 debtor usually proposes a
plan of reorganization to keep its
business alive and pay creditors
over time. People in business or
individuals can also seek relief in
chapter 11.)
chapter 12
The chapter of the
Bankruptcy Code providing for
adjustment of debts of a "family
farmer," as that term is defined in
the Code.
chapter 13
The chapter of the
Bankruptcy Code providing for
adjustment of debts of an individual
with regular income. (Chapter 13
allows a debtor to keep property and
pay debts over time, usually three
to five years.)
chapter 13 trustee
A person
appointed to administer a chapter 13
case. (A chapter 13 trustee's
responsibilities are similar to
those of a chapter 7 trustee;
however, a chapter 13 trustee has
the additional responsibilities of
overseeing the debtor's plan,
receiving payments from debtors, and
disbursing plan payments to
creditors.)
claim
A creditor's assertion
of a right to payment from a debtor
or the debtor's property.
complaint
The first or
initiatory document in a lawsuit
that notifies the court and the
defendant of the grounds claimed by
the plaintiff for an award of money
or other relief against the
defendant.
confirmation
Approval of a
plan of reorganization by a
bankruptcy judge.
consumer bankruptcy
A
bankruptcy case filed to reduce or
eliminate debts that are primarily
consumer debts.
consumer debts
Debts incurred
for personal, as opposed to
business, needs.
contingent claim
A claim that
may be owed by the debtor under
certain circumstances, for example,
where the debtor is a cosigner on
another person's loan and that
person fails to pay.
cramdown
The action by which
the court may order a plan approved
over the negative vote of a class of
dissenting creditors.
creditor A person to whom or
business to which the debtor owes
money or that claims to be owed
money by the debtor.
Creditors' Committees
Creditors' committees can play a
major role in chapter 11 cases. The
United States trustee, a federal
employee to be distinguished from a
private case trustee or panel
trustee, appoints the committee,
which ordinarily consists of
unsecured creditors who hold the
seven largest unsecured claims
against the debtor. 11 U.S.C. §
1102. The committee may consult with
the debtor in possession on the
administration of the case,
investigate the conduct of the
debtor and the operation of the
business, and participate in the
formulation of a plan. 11 U.S.C. §
1103. A creditors' committee may,
with the court's approval, hire an
attorney or other professionals to
assist in the performance of the
committee's duties. A creditors'
committee can be an important
safeguard to the proper management
of the business by the debtor in
possession.
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debtor
A person who has filed
a petition for relief under the
bankruptcy laws. Top
debtor in possession
The term
refers to a debtor that keeps
possession and control of its assets
while undergoing a reorganization
under chapter 11, without the
appointment of a case trustee. A
debtor will remain a debtor in
possession until the debtor's plan
of reorganization is confirmed, the
debtor's case is dismissed or
converted to chapter 7, or a chapter
11 trustee is appointed. The
appointment or election of a trustee
occurs only in a small number of
cases. Generally, the debtor, as
"debtor in possession," operates the
business and performs many of the
functions that a trustee performs in
cases under other chapters.
defendant
An individual (or
business) against whom a lawsuit is
filed.
discharge
A release of a
debtor from personal liability for
certain dischargeable debts. (A
discharge releases a debtor from
personal liability for certain debts
known as dischargeable debts
(defined below) and prevents the
creditors owed those debts from
taking any action against the debtor
or the debtor's property to collect
the debts. The discharge also
prohibits creditors from
communicating with the debtor
regarding the debt, including
telephone calls, letters, and
personal contact.)
dischargeable debt
A debt for
which the Bankruptcy Code allows the
debtor's personal liability to be
eliminated.
disclosure statement
A
written document prepared by the
chapter 11 debtor or other plan
proponent that is designed to
provide "adequate information" to
creditors to enable them to evaluate
the chapter 11 plan of
reorganization.
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equity
The value of a
debtor's interest in property that
remains after liens and other
creditors' interests are considered.
(Example: If a house valued at
$60,000 is subject to a $30,000
mortgage, there is $30,000 of
equity.) Top
Examiner
The appointment of
an examiner in a chapter 11 case is
rare. The role of an examiner is
generally more limited than that of
a trustee. The examiner is
authorized to perform the
investigatory functions of the
trustee and is required to file a
statement of any investigation
conducted. If ordered to do so by
the court, however, an examiner may
carry out any other duties of a
trustee that the court orders the
debtor in possession not to perform.
11 U.S.C. § 1106. Each court has the
authority to determine the duties of
an examiner in each particular case.
In some cases, the examiner may file
a plan of reorganization, negotiate
or help the parties negotiate, or
review the debtor's schedules to
determine whether some of the claims
are improperly categorized.
Sometimes, the examiner may be
directed to determine if objections
to any proofs of claim should be
filed or whether causes of action
have sufficient merit so that
further legal action should be
taken. An examiner may not serve as
a trustee.
executory contract or lease
Generally includes contracts or
leases under which both parties to
the agreement have duties remaining
to be performed. (If a contract or
lease is executory, a debtor may
assume it or reject it.)
exempt
A description of any
property that a debtor may prevent
creditors from recovering.
exemption
Property that the
Bankruptcy Code or applicable state
law permits a debtor to keep from
creditors.
exempt property
Property or
value in property that a debtor is
allowed to retain, free from the
claims of creditors who do not have
liens.
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face sheet filing
A
bankruptcy case filed either without
schedules or with incomplete
schedules listing few creditors and
debts. (Face sheet filings are often
made for the purpose of delaying an
eviction or foreclosure.) family
farmer An individual, individual and
spouse, corporation, or partnership
engaged in a farming operation who
meet certain debt limits and other
statutory criteria for filing a
petition under chapter 12. Top
fraudulent transfer
A
transfer of a debtor's property made
with intent to defraud or for which
the debtor receives less than the
transferred property's value.
fresh start
The
characterization of a debtor's
status after bankruptcy, i.e., free
of most debts. (Giving debtors a
fresh start is one purpose of the
Bankruptcy Code.)
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homestead
The way the various
exemption acts refer to your
principal residence whether it be a
house, apartment, condo or other
real property.Top
Back to Top
insider (of individual debtor)
Any relative of the debtor
or of a general partner of the
debtor; partnership in which the
debtor is a general partner; general
partner of the debtor; or
corporation of which the debtor is a
director, officer, or person in
control. Top
impaired claims
Claims which
will have their contractual rights
modified or which will be paid less
than the full value under a Chapter
11 reorganization.
insider (of corporate debtor)
A director, officer, or person in
control of the debtor; a partnership
in which the debtor is a general
partner; a general partner of the
debtor; or a relative of a general
partner, director, officer, or
person in control of the debtor.
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joint administration
A
court-approved mechanism under which
two or more cases can be
administered together. (Assuming no
conflicts of interest, these
separate businesses or individuals
can pool their resources, hire the
same professionals, etc.) Top
joint petition
One bankruptcy
petition filed by a husband and wife
together.
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lien
A charge upon specific
property designed to secure payment
of a debt or performance of an
obligation. Top
liquidation
A sale of a
debtor's property with the proceeds
to be used for the benefit of
creditors.
liquidated claim
A creditor's
claim for a fixed amount of money.
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motion to lift the automatic stay
A request by a creditor to allow the
creditor to take an action against a
debtor or the debtor's property that
would otherwise be prohibited by the
automatic stay. Top
movant
The party in a lawsuit
or other legal proceeding who makes
a motion (application for a court
order or judgment).
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no-asset case
A chapter 7
case where there are no assets
available to satisfy any portion of
the creditors' unsecured claims. Top
nondischargeable debt
A debt
that cannot be eliminated in
bankruptcy.
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objection to discharge
A
trustee's or creditor's objection to
the debtor's being released from
personal liability for certain
dischargeable debts. Top
objection to exemptions
A
trustee's or creditor's objection to
a debtor's attempt to claim certain
property as exempt, i.e., not liable
for any prepetition debt of the
debtor.
order for relief
An order
issued by the court following the
filing of a Chapter 11 petition.
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party in interest
A party who
is actually and substantially
interested in the subject matter, as
distinguished from one who has only
a nominal on technical interest in
it. Top
plan
A debtor's detailed
description of how the debtor
proposes to pay creditors' claims
over a fixed period of time.
plaintiff
A person or
business that files a formal
complaint with the court.
postpetition transfer
A
transfer of a debtor's property made
after the commencement of the case.
pre-bankruptcy planning
The
arrangement (or rearrangement) of a
debtor's property to allow the
debtor to take maximum advantage of
exemptions. (Prebankruptcy planning
typically includes converting
nonexempt assets into exempt
assets.)
preferential debt payment
A
debt payment made to a creditor in
the 90-day period before a debtor
files bankruptcy (or within one year
if the creditor was an insider) that
gives the creditor more than the
creditor would receive in the
debtor's chapter 7 case.
priority
The Bankruptcy
Code's statutory ranking of
unsecured claims that determines the
order in which unsecured claims will
be paid if there is not enough money
to pay all unsecured claims in full.
priority claim
An unsecured
claim that is entitled to be paid
ahead of other unsecured claims that
are not entitled to priority status.
Priority refers to the order in
which these unsecured claims are to
be paid.
proof of claim
A written
statement, filed by a creditor,
describing the reason a debtor owes
the creditor money. (There is an
official form for this purpose.)
property of the estate
All
legal or equitable interests of the
debtor in property as of the
commencement of the case.
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reaffirmation agreement
An
agreement by a chapter 7 debtor to
continue paying a dischargeable debt
after the bankruptcy, usually for
the purpose of keeping collateral or
mortgaged property that would
otherwise be subject to
repossession. Top
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secured creditor
An
individual or business holding a
claim against the debtor that is
secured by a lien on property of the
estate or that is subject to a right
of setoff. Top
secured debt
Debt backed by a
mortgage, pledge of collateral, or
other lien; debt for which the
creditor has the right to pursue
specific pledged property upon
default.
schedules
Lists submitted by
the debtor along with the petition
(or shortly thereafter) showing the
debtor's assets, liabilities, and
other financial information. (There
are official forms a debtor must
use.)
stalking horse
is the name
given to the party submitting the
first bid to purchase assets. The
stalking horse bid can be used to
solicit interest from other bidders
and also acts as a floor for what
will be realized at the auction.
statement of financial affairs
A series of questions the debtor
must answer in writing concerning
sources of income, transfers of
property, lawsuits by creditors,
etc. (There is an official form a
debtor must use.)
statement of intention
A
declaration made by a chapter 7
debtor concerning plans for dealing
with consumer debts that are secured
by property of the estate.
statutory lien
A lien arising
under a statute, not including a
security interest or judicial lien.
A real estate tax lien is an example
of a statutory lien.
stripdown
The writing down of
a secured debt to the value of the
asset that secures it. For example,
if a secured debt on a vehicle is
$4,000 but the vehicle is only worth
$2,500 the debt could be set at
$2,500.
substantial abuse
The
characterization of a bankruptcy
case filed by an individual whose
debts are primarily consumer debts
where the court finds that the
granting of relief would be an abuse
of chapter 7 because, for example,
the debtor can pay its debts.
substantive consolidation
Putting the assets and liabilities
of two or more related debtors into
a single pool to pay creditors.
(Courts are reluctant to allow
substantive consolidation since the
action must not only justify the
benefit that one set of creditors
receives, but also the harm that
other creditors suffer as a result.)
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transfer
Any mode or means by
which a debtor disposes of or parts
with his/her property. Top
trustee The representative of the
bankruptcy estate who exercises
statutory powers, principally for
the benefit of the unsecured
creditors, under the general
supervision of the court and the
direct supervision of the United
States trustee or Bankruptcy
Administrator.
typing service
A business not
authorized to practice law that
prepares bankruptcy petitions.
United States trustee
An officer of the Justice Department
responsible for supervising the
administration of bankruptcy cases,
estates, and trustees, monitoring
plans and disclosure statements,
monitoring creditors' committees,
monitoring fee applications, and
performing other statutory duties.
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undersecured claim
A debt
secured by property that is worth
less than the amount of the debt.
unlawful detainer action
A
lawsuit brought by a landlord
against a tenant to evict the tenant
from rental property--usually for
nonpayment of rent.
unliquidated claim
A claim
for which a specific value has not
been determined.
unscheduled debt
A debt that
should have been listed by a debtor
in the schedules filed with the
court but was not. (Depending on the
circumstances, an unscheduled debt
may or may not be discharged.)
unsecured claim
A claim or
debt for which a creditor holds no
special assurance of payment, such
as a mortgage or lien; a debt for
which credit was extended based
solely upon the creditor's
assessment of the debtor's future
ability to pay.
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voluntary transfer
A transfer
of a debtor's property with the
debtor's consent.
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