Common Mortgage Terms:

Adjustable-Rate Mortgage (ARM)
A loan pegged to an index; as the index goes up or down, the borrower's interest rate follows according to contractual limits, spelled out in the note and trust deed.

Amortized Loan
A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a level payment loan.

Annual Percentage Rate (APR)
Under the truth-in-lending law, the APR is used to disclose the total cost of a loan to a borrower and is converted to the so-called effective interest rate.

Appraisal
An estimate or opinion of value.

Assignment of Deed of Trust
An instrument that transfers the beneficial interest under a deed of trust from one lender to another.

Assignment of Rents Clause
A clause in a trust deed that gives the beneficiary the right under limited circumstances to collect rents of the property if the borrower defaults.

Assumption of Deed of Trust or Mortgage
Taking over responsibility and liability for the payment of the existing deed of trust loan from the seller.

Assumption Fee
A lender's charge for changing and processing records for a new owner who is assuming an existing loan.

Balloon Payment
One installment payment on an amortized note that is at least double the amount of a regular installment. Frequently this is a final payment on this due date.

Basis
Property owner's "book value" for income tax purposes. Usually the original cost plus capital improvements.

Beneficiary
A lender under a note secured by a deed of trust.

Biweekly Payments
Real estate loan payment made every two weeks. A monthly payment divided by two and paid 26 times per year.

Blanket Deed of Trust or Mortgage
A single trust deed or mortgage covering more than one parcel of real estate.

Blended-Rate Loan
The average interest rate produced for total debt when two or more loans at differing interest rates affect the same property.

Bridge Loan
A loan that bridges the gap between two other loans, usually for a short term. (See swing loan)

Broker's Loan Statement
A statement signed and received by the borrower at the time of a loan transaction, indicating the costs and deductions, including commissions, of a loan negotiated by a real estate licensee.

Buy-down
The purchase of a reduced interest rate, usually by home builders, allowing the borrower to qualify at a lower income level.

Cap
Upper limit on adjustable or variable interest rate on periodic basis and during life of loan. Also, upper limit on periodic payments.

Capital Gains
Gains on the sale of property, represented by the difference between adjusted cost basis and adjusted sales price.

Capitalization
In appraising, a method used to determine value of a property by dividing annual net operating income by the capitalization rate.

Capitalization Rate
The rate that is believed to represent the proper relationship between the real property and the net operating income generated from the property.

Closing Costs
Costs paid by the borrower when borrowing for the purchase of a property. Costs paid by buyers and sellers on the sale of a property.

Collateralization
The hypothecating of property, usually personal, as security for a loan.

Co-mortgagor
A person who signs a note and deed of trust in addition to the borrower to give extra security to the loan. The co-mortgagor is jointly liable for the repayment of the loan.

Combination Loan
A combined construction loan and permanent take-out loan after construction is completed.

Commercial Bank
A financial institution chartered by a state or the federal government to receive, lend, and safeguard money and other items of value.

Commitment
Agreement between lender and borrower to lend money (for a limited time), subject to compliance with stated conditions.

Compensating Factors
Positive factors that are considered by lenders to approve loans to otherwise marginal borrowers.

Computerized Loan Originations (CLOs)
Accessing lender loan programs via computer.

Conditional Sale Contract
A contract for the sale of property stating that delivery and possession is to be given to the buyer-vendee, but that legal title is to remain in the seller-vendor until the conditions of the contact have been fulfilled.

Condominium
A form of ownership in which separate units of three-dimensional airspace are owned by individual owners. The individual owners also jointly own an undivided interest in the common areas such as hallways, swimming pools, and land. Sometimes referred to as a vertical subdivision.

Conforming Loan
Maximum loan amount purchased by the FNMA and FHLMC. Contrasted with Jumbo loan.

Constant
A factor representing twelve times the monthly payment expressed as a percentage of the original loan account. A short-cut to providing annual debt service.

Construction Loan
Loan made for the construction of homes and other buildings. Usually funds are disbursed to the contractor at periodic intervals as the work progresses. Also called short-term or interim financing.

Contract Rate
Average rate changed on ARM loans or fixed-rate loans by savings institutions nationally.

Contract of Sale
See Conditional Sale Contact.

Conventional Loan
Any loan that is not insured or guaranteed by a government agency.

Convertible -Rate Loan
A loan that starts out as an adjustable-rate loan, then, at the option of the borrower during a designated period, is switched to a fixed-rate loan.

Correspondent
An abbreviated term meaning mortgage loan correspondent. A mortgage banker who services loans as an agent for the owner of the mortgage. Also applies when a mortgage company originates a loan for an investor.

Cost Approach to Value
A method in which the value of a property is derived by estimating the replacement cost of the improvements, then deducting the estimated depreciation, then adding the market value of the land.

Costs of Funds
The cost to a lender, expressed as a percentage, to obtain funds for lending. Includes interest paid to depositors, costs of borrowing, advertising, give-ways and other sales costs, administrative and overhead costs, reserves, etc.

Creative Financing
Any financing out of the ordinary, such as seller carry backs and wrap-around.

Credit Report
Credit history of a person or business issued by a company in the credit reporting business, used to help determine creditworthiness.

Debt Coverage Ratio (DCR)
Net operating income divided by annual debt service. Used by lenders when analyzing income property loans.

Debt-to-Income Ratio
Borrowers monthly payment obligations as a percentage of their income.

Deed of Reconveyance
Upon the repayment of a promissory note secured by a trust deed, trustee transfers legal title back to the trustor (borrower).

Deed of Trust
Instrument by which title to real estate is transferred to a third-party trustee as security for the repayment of a real estate loan. Used in California instead of a mortgage.

Default
Failure to fulfill a duty or promise. Failure to make the payments on a real estate loan.

Deferred Interest
See Negative Amortization.

Delinquency
Failure to make timely payments on loans.

Demand Deposit
Checking account or transaction deposit withdraw-able upon demand, as opposed to time deposit.

Deposit Receipt
A form used to accept earnest money to bind an offer for the purchase of real property. When accepted by the seller, it creates a sale contract.

Depreciation
A loss in real property value, brought about by age, physical deterioration, or functional or economic obsolescence. Broadly, a loss in value from any cause.

Development Loan
Loans that finance the acquisition of land and the installation, prior to building, of utilities, sewage systems, roads, and so on.

Discount
An amount deducted in advance from the loan before the borrower is given the money. Also referred to as points. In secondary market sales, a discount is the difference between the sale price and the principle balance on the note. Contrast Premium.

Discount Tables
Tables used by lenders and investors to show how much a given value is, called the discounted value, based upon various interest rates and terms of maturity.

Down Payment
The difference between the sale price of the property and the loan amount.

Due-On-Sale Clause
Clause in a trust deed that allows lenders to demand immediate payment of loan balance if borrower sells or transfers interest in the property.

Earnest Money
Sum of money paid with an offer to purchase, given to bind a sale.

Easy Money
Loose money policy of the Federal Reserve Board.

Economic Life
The period during which an improvement on a parcel of land can be used for any beneficial purpose.

Effective Age
The age assigned to the improvements by the appraiser, not necessarily the chronological age.

Effective Interest Rate
The percentage of interest actually being paid by the borrower for the use of the money including certain expenses for obtaining the loan. See Annual Percentage Rate.

Equal Credit Opportunity Act
Federal law prohibiting discrimination in the extension of credit.

Equity
The interest or value that an owner has a real estate over or above liens against the property. The difference between market value and the existing indebtedness.

Equity Financing
Lender finances high-ratio loan in exchange for a percentage of an ownership and the right to share in the property's cash flow.

Escalation Clause
The right reserved by the lender to increase the amount of the payments or interest rate upon the happening of a designated event, usually the sale of the property and the subsequent assumption of the existing loan. Not normally used in residential loans. Also refers to rent increases tied to a cost-of-living index.

Escrow
A neutral depository, where a third party carries out instructions for the lender, buyer, and seller and is responsible for handling the paperwork and disbursing funds needed to transfer the property.

Fair Market Value
The highest price in terms of money that a parcel of property will bring on the open market when neither buyer nor seller is under any compulsion to act.
Federal Deposit Insurance Corporation (FDIC)
Insures accounts at member banks and savings and loan associations up to 100,000.

Federal Home Loan Bank (FHLB)
Provides credit reserves systems for member state and federal savings and loan associations.

Federal Home Loan Mortgage Corporation (FHLMC)
A federal agency known as Freddie Mac, which provides a secondary market for savings and loan associations and other institutions.

Federal Housing Administration (FHA)
Division of the U.S. Department of Housing and Urban Development that insures residential mortgage loans made by approved lenders.

Federal Housing Finance Board (FHFB)
Federal agency that regulates the 12 federal home loan banks.
Federal National Mortgage Association (FNMA)
Popularly known as Fannie Mae, a private corporation whose primary function is to buy and sell mortgages in the secondary mortgage market.

Federal Reserve System
Central banking system of U.S. consisting of 12 federal reserve banks and the federal reserve board, which sets monetary policy.

Fictitious Deed of Trust
A recorded deed of trust that discloses all the terms of the trust deed but does not relate to a specific transaction and is used for reference only.

Fiduciary
A party in position of trust and confidence, who owes certain loyalty under rules of agency.

Finder's Fee
A fee paid by a lender or broker for referring a borrower to a certain lending institution.

Firm Commitment
The amount lenders agree to lend on a specified property to a specified borrower for a certain length of time.

First Deed of Trust or Mortgage
The loan of first priority; it takes precedence over junior loans and encumbrances. Also called senior or primary lien.

Fiscal Policy
Programs by the federal government that are intended to influence economic activity by making changes in government expenditures and taxation, implemented by the U.S.
Treasury.

Fixed Interest Rate Loans
Mortgages with constant interest rates that will not change over life of loan.

Forbearance
Any arrangement that delays foreclosure action.

Foreclosure
Process whereby property pledged as security for repayment of a real estate loan is sold to satisfy the debt if the borrower defaults.

Front Money
The money required to get a real estate project started.

Gift Deed
Deed for which no consideration is given except love and affection.

Government National Mortgage Association (GNMA)
A federal corporation popularly known as Ginnie Mae. It is mainly involved in the administration of the mortgage-backed securities program and other federal programs.

Government Sponsored Enterprise (GSE)
Collective title for the secondary market consisting of the FNMA, FHLMC, GNMA.

Graduated-Payment Mortgage
Fixed-interest rate loan on which the scheduled monthly payments start low, but rise later, then level off. Usually involves negative amortization.

Gross Scheduled Income
Total income from investment property before deducting any expenses.

Gross Rent Multipliers (GRM)
The gross rent multiplier is arrived at by dividing the value of a property by its gross monthly or annual rent. A rule of thumb method of appraising income property in which a multiplication factor deemed appropriate by the appraiser is applied to gross monthly rents or gross annual rents.

Growing Equity Mortgage
Loan with fixed interest rate and scheduled annual increases in monthly payments, resulting in shorter maturity.

Hard Money Loan
Loan usually from a private lender. Actual money loaned and secured by a trust deed as opposed to a loan carried back by a seller, in which no money passes.

Hazard Insurance
Covers dwelling and contents for fire, wind, and water damage, theft, and other specified losses.

HUD
An abbreviation for the Department of Housing and Urban Development

Hypothecate
To give a thing as security without the necessity of giving up possession, such as when real estate is used as security for a loan.

Impound Account
Funds retained in a special account by a lender to cover property taxes and hazard insurance. Also called a trust fund account or loan trust fund.

Income Approach to Value
One of three methods in the appraisal process, which analyzes income and expenses, then uses a capitalization rate to arrive at value.

Income Ratio
The monthly payment on a loan (including principal and interest, taxes, and insurance) divided by the borrower's monthly gross income.

Index
Base for interest rate changes on adjustable-rate loans.

Inflation
Increase in prices for goods and services resulting from too much money in circulation or rising costs of materials and labor.

Installment Note
A loan providing for payment of the principal in two or more installments.

Installment Sale
A sale for income tax purposes in which the seller spreads the receipt of money and payment of taxes thereon over two or more tax years.

Institutional Lender
A bank, insurance company, or savings and loan association that deals in real estate loans.

Interest-Only Loan
A straight non-amortizing loan, in which only interest is paid. Interest can be paid periodically or at maturity, when principal is paid in a lump sum.

Interest Rate
The charge made for a loan of money expressed as an annual or monthly percentage of the principal.

Interim Financing
Any short-term financing, such as a swing loan or a loan used to finance construction, due at the completion of the construction. Usually paid off with the proceeds of a take-out loan.

Intermediary
Financial institution that acts as a go-between for savers, depositors, and investors.

Intermediate-Term Loans
Temporary short-term loans, ordinarily three to ten years, that include home improvement loans, consumer loans, or loans for the purpose of permitting a developer to delay longer term financing until more favorable loan terms become available.

Joint Note
A note signed by two or more persons who have equal liability for payment.

Judicial Sale
A sale of property by court proceedings to satisfy a lien.

Jumbo Loan
Amount of loan exceeding the maximum purchased by FNMA and FHLMC. Also called nonconforming loan.

Junior Mortgage
A subordinate or inferior lien.

Kiting
Also known as ballooning, an unethical and fraudulent act in which dual contracts are made, one at the true purchase price and the second at a higher price, with the hope of duping the lender into granting a higher loan.

Land Contract of Sale
See Conditional Sale Contract.

Late Charge
An additional charge a borrower is required to pay as a penalty for failure to pay a regular installment when due, after the grace period expires.

Lease
A contract between an owner and tenant, setting forth conditions upon which tenant may occupy and use the property.

Letter of Credit
Letter from a bank asking that the holder be allowed to withdraw money from the recipient bank or agency that will be charged back to the first bank.

Leverage
The relationship between an owner's equity and total debt on a property. The higher the leverage, the higher the debt in relation to the value of the property.

Lien
A form of encumbrance that makes the property security for the payment of a debt. Examples include deeds of trust, mortgages, judgments, and mechanics liens.

Life Insurance Company
A business that collects a person's savings by selling contracts (policies) often paid for through periodic premiums to provide cash payment upon death.

Lifetime cap
Ceiling for rate increases over life of an ARM, expressed either as a particular percentage rate or as so many points over or under the initial rate.

Liquidity of Investment
The ease with which investments can be readily converted into cash.

Loan Closing
When all conditions of the loan have been met, the loan officer authorizes the recording of the trust deed and disbursement of funds.

Loan Commitment
An agreement by a lender to make a loan for a certain amount, subject to certain conditions being met, covering a specific period of time.

Loan Committee
A committee or one individual in a lending institution that reviews loan applications and either approves or disapproves.

Loan Origination
Steps involved in the loan process, from application to close of escrow.

Loan Origination Fee
A charge, usually measured by points, made by a lender for originating the loan. Included in closing costs.

Loan Package
Documentation consisting of all the forms, documents, and reports the lender needs in order to make a decision on the loan

Loan-to-Value Ratio
The amount of loan, expressed as a percentage of a property's value or sale price, whichever is lower, that a lender may lend to a borrower.

Loan Underwriting
The process of approving or disapproving loan applications.

Lock-In Rate
Formal commitment to lend a specific amount or at a specific rate, guaranteed for a specific time period.

Lump Sum
Payment of the entire principal amount due at maturity on a straight note.

Margin
The amount added to the index rate to determine a borrower's adjusted interest rate on an adjustable loan.

Market Approach to Value
An appraisal method in which the value of a property is estimated by means of comparing it with similar properties recently sold.

Market Price
Amount paid for property, regardless of motives, knowledge, etc.

Market Value
See Fair Market Value

Maturity Date
The date upon which a real estate note or other negotiable instrument becomes due and payable.

MIS
Mortgage Information System.

Monetary Policy
Policies of the Federal Reserve System that increase or decrease the supply of money in an effort to achieve designated economic goals.

Mortgage
A two-party instrument in which the borrower-mortgagor retains title during loan term while the real estate acts as collateral for the loan. A mortgage is a contract, not a lien.

Mortgage-Backed Securities
Investment securities similar to bonds representing an interest in a pool of mortgages.

Mortgage Banking
The packaging of mortgage loans to be sold to a permanent investor with servicing retained for a fee. Mortgage bankers act as correspondents for investors. Mortgage companies may also lend their own money.

Mortgage Brokers
Differ from mortgage bankers in that they invest no capital; their prime function is to bring together borrowers and lenders.

Mortgage Broker Fee
A charge, usually measured by points, made by the mortgage broker for originating the loan. Included in closing costs. Same as loan origination fee for a bank.

Mortgage Insurance Premium (MIP)
FHA insures lenders against loss on FHA loans. The premium can be paid up front or financed as part of the loan.

Mutual Savings Bank
A savings bank originated in the New England states in which the depositors place their savings with the right to borrow money for home loans. There are no mutual savings banks in California.

Negative Amortization
Loan payment schedule in which the outstanding principal balance goes up rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal.

Negotiable Instrument
A promissory note or other instrument that meets certain legal requirements, allowing it to circulate freely in commerce.

Net Operating Income
Gross annual income less vacancies, uncollectible rents, and other operating expenses.

Net Spendable Income
Net operating income less loan payments and income taxes on the property's taxable income.

Nominal Interest Rate
The interest rate that appears on the real estate promissory note, not the effective rate. Also called the note rate.

Nonconforming Loan
See Jumbo Loan.

Nonfiduciary Lender
Loan sources such as individuals who owe no agency duty, because they lend their own funds rather than invest on behalf of other lenders.

Noninstitutional Lender
Lenders on real estate loans other than banks, insurance companies, and savings and loan associations.

Nonrecurring Closing Costs
Costs that are one-time charges paid at the close of escrow.

Note
An instrument acknowledging a debt and a promise to repay according to the terms outlined.

Notice of Default
Notice that a default has occurred under a deed of trust and that the beneficiary intends to proceed with a trustee's sale. Must be recorded to be valid.

Obligatory Advances
Disbursements of money that the lender is required to make, under the terms of the loan, over the period of the construction loan.

Open-End Trust Deed
A deed of trust containing a clause that permits the borrower to obtain additional advances of money secured by the same deed of trust, if the lender permits.

Origination Fee
A charge for arranging and processing a real estate loan. See Loan Origination Fee.

"Or More" Clause
A clause in a note that permits extra payments on principal of the loan.

Overlapping Trust Deed
See Blanket Deed of Trust or Mortgage.

Package Loan
Loan secured by both real and personal property, usually appliances and other fixtures.

Package Trust Deed or Mortgage
A trust deed secured by both real property and personal property (appliances, furniture, etc.).

Paper
Term used by real estate agents, investors, and others to designate promissory notes, usually secured by trust deeds.

Par
The face amount of a loan with no premium or discount.

Partial Reconveyance Deed
A deed used to reconvey a portion of land encumbered by a trust deed.

Partial Release Clause
A clause in a trust deed that provides for release of part of the property from the lien of the trust deed upon payment of a specific portion of the debt.

Participation
When a lending institution sells a part interest in a block of loans to another institution or agency.

Performance Bond
A bond furnished to guarantee that a builder will perform in accordance with the contract terms and that the property at completion will be free of mechanics' liens.

Permanent Financing
See Take-Out Loan

PITI
An abbreviation for principal, interest, taxes, and insurance, commonly used when referring to the monthly loan payment.

Planned Unit Development (PUD)
A land-use design that combines private fee ownership of a parcel and undivided ownership of common facilities such as grounds, parking, and recreational facilities.

Plans and Specifications
Architectural and engineering drawings and specifications for construction of a building, including description of materials and manner in which they are to be applied.

Points
Amounts paid by the borrower or, in some cases, the seller, which increase the effective yield for a lender. Each point equals 1 percent of the loan.

Premium
An amount, usually measured in points, in excess of the loan balance owing, paid for the purchase of a note and trust deed.

Prepaid Items
Expenses paid by buyer-borrower at closing, such as taxes, insurance, and interest. See Recurring Closing Costs.

Prepayment Penalty
A charge for payment of a trust deed note before maturity.

Prepayment Privilege
Allows borrowers to make extra payments on the principal balance without penalty.

Price Level Adjusted Mortgage (PLAM)
Interest rate is fixed, but outstanding loan balance and monthly payments vary according to changes in some price index.

Primary Mortgage Market
The market in which loans are made directly to the borrowers.

Prime Rate
Interest rate banks charge preferred customers.

Principal
The face amount on a real estate loan, the amount upon which simple interest is calculated.

Private Mortgage Insurance (PMI)
Insurance written by a private company protecting the mortgage lender against loss in case of foreclosure.

Processing
Preparation of loan application and supporting documents for consideration by a lender or insurer.

Promissory Note
See Note.

Purchase Money Deed of Trust
A trust deed given as part or all of the purchase price. Examples: carry back by a seller or a new loan from a lender.

Real Estate Investment Trust (REIT)
A corporation, trust, or association in which investors pool funds for investments in real estate but avoid double taxation as a corporation.

Real Estate Settlement Procedures Act (RESPA)
A federal law that requires lenders to provide borrowers with information on settlement (closing) costs.

Real Property
Land and buildings as opposed to personal property.

Reconveyance
See Deed of Reconveyance.

Recurring Closing Costs
Prepaid repeating expenses paid by the borrower at close of escrow, such as tax reserves, hazard insurance, and prepaid interest. See Prepaid Items.

Refinance
To renew or replace the existing loan with additional financing, or to secure a loan on the free and clear property already owned by the borrower.

Regulation Z
See Truth-in-Lending Law.

Reinstate
To cure a default under a note secured by a deed of trust.

Release of Liability
An agreement by the lender to terminate the personal obligation of the borrower.

Replacement Cost
Amount required to replace damaged or destroyed property of comparable quality, at today's prices.

Request for Notice of Default and Notice of Sale
A recorded notice made by anyone requesting that he or she be notified in the event that a Notice of Default is recorded.

Reverse Annuity Mortgage
Stream of monthly payments provided to homeowners through an annuity purchased by a loan against the owners' accumulated equity in their home.

Risk Rating
A process used by lenders to decide on the soundness of offering a loan.

Rollover
Loans that may extend beyond certain intermediate maturities.

Sales Comparison Approach to Value
See Market Approach to Value.

Sale-Leaseback
Land and buildings may be sold and then leased back by the seller. This is an alternate form of financing.

Savings and Loan Associations
Deposit-type savings institutions that are major lenders in the residential field.

Savings Banks
Savings and loan associations using newly-permitted designations.

Secondary Financing
A loan secured by a junior trust deed or mortgage.

Secondary Mortgage-Market
The purchasing and selling of existing mortgages and notes secured by deeds of trust.

Securitization
Debt issuance backed by mortgage portfolio.

Servicing
Supervising and administering a loan after it has been made. This involves such things as: collecting payments, keeping records, property inspections, and foreclosing on defaulted loans.

Shared Appreciation Mortgage (SAM)
A loan on which the lender shares in the appreciation of the property at the time of resale or specific date in return for a below-market interest rate.

Short Payoff
Lender agreement to compromise a debt. Also called short sale.

Sight Deposit
See Demand Deposit.

Standby Commitment
Agreement by lender to pay off construction loan with new long-term loan. Also refers to a secondary market concept that is not in great use today.

Straight Note
See Interest-Only Loan.

Subject To
The taking of real property "subject to" an existing loan is done without new borrower being personally liable to the existing lender if a deficiency results upon foreclosure. This is in contrast to assuming a loan, when the buyer assumes responsibility and liability for the loan.

Subordination Clause
An agreement under which a prior trust deed is made inferior to an otherwise junior lien. This is occasionally used when a land loan subordinates to a new construction loan.

Syndication
Investors pooling their resources to purchase real estate, usually through a limited partnership.

Swing Loan
Used to assist in purchase of replacement house before sale of original house is completed.

Take-Out-Loan
A permanent loan that pays off the existing construction loan.

Tax Service
A fee paid to a tax service agency which each year reviews the records of taxing bodies and reports any delinquencies to the lender. The fee is usually paid by the borrower.

Terms
Refers to amount of each installment payment, interest rate, due dates, number of years, etc.

Tight Money Market
A market in which the demand for money exceeds the supply, causing interest rates to increase and borrower qualifications to be tightened.

Time Deposit
Savings account with a fixed maturity, as opposed to demand deposit.

Title Insurance
Insurance written by a title company to protect property owners and lenders against loss because of certain title defects.

Townhouse
A residential unit connected to other similar units. Describes a style of architecture, with title to the unit and its lot vested in the individual buyer with an undivided interest in the common areas.

Transaction Accounts
Accounts used to make payments or transfers to others, such as checking accounts.

Trust Deed
Deed given by borrower to a trustee who holds title for security purposes until the borrower pays off a loan also called a Deed of Trust.

Trustee's Deed
A deed given to the successful bidder at a trustee's sale (foreclosure).

Trustee's Sale
Sale of property in foreclosure by the trustee, rather than through a judicial sale.

Trustor
A borrower under a trust deed, who deeds property to trustee as security for the repayment of the debt.

Truth-in-Lending Law (TIL)
A federal law designed to show a borrower the total cost of a loan. The annual percentage rate (APR) is the term used to disclose the effective rate of interest.

Two-Step Mortgage
Loan with lower initial fixed interest rate, increasing after conversion period.

Underwriting
Evaluation by lenders of loan applicant's ability to repay a real estate loan.

Unsecured
A loan that is not secured by a trust deed, mortgage, or other property.

Usurious Interest
Unlawful rate of interest. In California, the greater of 10 percent or 5 percent over the Federal Reserve Board's discount rate at any given time; however, certain institutions, such as banks and savings and loan associations, are exempt are loans arranged by licensed real estate brokers.

Variable Interest Rate
An interest rate that can go up or down, as contrasted with a fixed rate that says the same over the life of a loan.

VOD
Verification of Deposit form sent to borrower's financial institutions to verify funds for down payment and closing costs.

VOE
Verification of Employment form sent to prospective borrower's employer to verify employment status, salary, and length of employment.

VRM
Variable Rate Mortgage. See also Adjustable-Rate Mortgage.

Warehousing
Temporary retention of loans pending sale to investors.

Wrap-Around Deed of Trust
See all- Inclusive Deed of Trust.

Yield
The actual interest earned by the lender on the money loaned. Also called rate of return, it is usually expressed as a percent of the investment.

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