Glossary of Debt Related Terms

Califomia Land Title Association (CLTA)

A statewide association of tide insurers and underwritten title companies. The association adopts standard title policy forms.

Call

In a metes and bounds description, the angle and distance of a given line or arc. Each call is usually preceeded by the word then or thence. Example: N 220 E 100' (lst. call), thence N 800 E 1W (2nd. call).

Cancellation Clause

A clause in a lease or other contract, setting forth the conditions under which each party may cancel or terminate the agreement. The conditions may be as simple as giving notice or complex and require payment by the party desiring to cancel.

Cap

The maximum which an adjustable rate mortgage may increase, regardless of index changes.

Capital Assets

Assets of a permanent nature used to produce income, such as machinery, buildings, equipment, land, etc. Must be distinguished from inventory. A machine which makes pencils, for example, would be a capital asset to a pencil manufacturer, but inventory to the company whose business is to sell such machines.

Capital Gains

Gains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.

Caps (Interest)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (Payment)

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Caravan

An inspection of newly listed properties, either by the entire sales staff of an office or by sales personnel from more than one office in conjunction with a multiple listing group. Generally conducted on a regular basis.

Carrying Charges

The costs involved in keeping a property which is intended to produce income (either by sale or rent) but has not yet done so.

Cash-out Refinance

Refinancing transaction in which the money the borrower receives from the new loan exceeds the total amount he uses to repay the existing first mortgage, closing costs, points; and satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash he can use for any purpose.

Caveat Emptor

"Let the buyer beware." Legal maxim stating that the buyer takes the risk regarding quality or condition of the item purchased, unless protected by warranty or there is misrepresentation. Modernly, consumer protection laws have placed more responsibility for disclosure on the seller and broker.

CC and Rs (Covenants, Conditions and Restrictions)

Limitations placed on the use and enjoyment of real property. These are found most often in condominiums and planned unit developments.

Certificate of Title

A certificate issued by a title company or a written opinion by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence.

Chain of Title

A chronological list of recorded instruments tracing title to land, from the original owner to the present owner.

Chains And Links

Measurements. In real estate measurements (surveying) a chain is 66' long or 100 links, each link being 7.92." The measurement may change when used in fields other than surveying.

Classified Property Tax

Property tax which varies in rate depending on the use (zoning classification) of the property.

Clear Title

Title to property which is free from liens, defects or other encumbrances.

Closing

The meeting between the buyer, seller and lender where the property and funds legally change hands. Also called settlement.

Closing Costs

Includes a loan origination fee, points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The closing costs usually are about 2 percent to 6 percent of the mortgage amount.

Closing Day

The day on which the formalities of a real estate sale are finished. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely reiterates the original agreement reached in the agreement of sale.

Closing Statement

A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.

Cloud (On Title)

An outstanding claim which negatively affects the marketability of title.

Coinsurance

A sharing of the risk of an insurance policy by more than one insurer. Usually one insurer is liable up to a certain amount, the other liable over that amount.

Collateral

Property offered to support a loan that can be seized if you default.

Commercial Property

Property which is zoned "commercial" (for business use). Property such as stores, restaurants, etc., falling between residential and industrial.

Commingling

To mix funds held in trust with other funds. For example: A broker or builder mixes deposits (should be in a trust account) with his funds by putting the deposits in his general account. Although commingling is in itself a violation for which a broker may lose his license, it does not mean that, by commingling, the broker or builder intended to misappropriate the funds.

Commission

The fee charged by or paid to a broker, agent or auto sales rep for negotiating a real estate, car sale or loan transaction. A commission is generally a percentage of the sales price.

Commitment

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the stated conditions.

Community Property

Property acquired during a marriage by either a husband or wife, or both, which is not separate property.

Comparables (Comps)

An abbreviation for comparable properties used for comparative purposes in the appraisal process.

Condemnation

A determination by a governmental agency that a particular building is unsafe or unfit for use.

Conditional Sales Contract

A sale in which the title to property or goods remains with the seller until the purchaser has fulfilled the terms of the contract, usually payment in full.

Condominium

Individual ownership of a unit and an individual interest in the common areas and facilities which serve the project.

Conduit

Secondary market entity that purchases loans from originators. Conduits provide expertise to evaluate, price, purchase, and service nonconforming loans.

Consideration

A required element in all contracts by which some-thing of value, including a promise, is exchanged for the act or promise of another.

Construction Loan

A short term interim loan for financing the cost of construction. The lender advances funds to the builder as the work progresses.

Contingency

Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.

Contractor

A person who contracts to erect buildings. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building and others.

Conventional Loan

A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FmHA).

Conventional Mortgage

Any mortgage which is not insured or guaranteed by a government agency such as HUD/FHA, VA, or the Farmers Home Administration.

Conveyance

The transfer of title or an interest in real property by means of a written instrument such as a deed of trust.

Cooperative Housing

An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Correspondent

An entity that typically sells the Mortgages it originates to other lenders. The Correspondent performs some or all of the loan processing functions such as taking the loan application, ordering credit reports, appraisals, title reports, and verifying the borrower's income and employment. The Correspondent may or may not have delegated underwriting and typically funds the loans at settlement. The Mortgage is closed in the Correspondent's name and the Correspondent may or may not service the Mortgage. The Correspondent could commission a Mortgage Broker to perform some of the processing functions.

Cosigner

Another person who signs your loan and assumes equal responsibility for it.

Credit

The right granted by a creditor to pay in the future in order to buy or borrow in the present; also, a sum of money owed to a person or business.

Credit Bureau

An agency that keeps your credit record.

Credit Card

Any card used from time to time to borrow money or buy goods or services on credit.

Credit History

The record of how you've borrowed and repaid debts.

Credit Limit

The maximum amount of charges that may be charged to an account. For example, if you have a credit limit of $5,000, your total charges cannot exceed this amount.

Credit Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net income (FHA/VA loans) or gross monthly income (Conventional loans).

Credit Report

Report of an individual's credit history that a credit reporting company (CRC) or credit repository prepares that you use to determine a borrower's creditworthiness.

Credit Reporting Company

Company that collects information received from more than one credit repository, merges all the information, and reports it in one form; merged credit reports.

Credit Repository

Company that collects information on an individual's credit history and reports it in one form, the in-file credit report.

Credit Scoring System

Statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.

Credit Warranty

Guarantee or promise by the seller of the loan relating to the creditworthiness of the borrower(s). The seller warrants that the borrower has the willingness to repay and there is evidence of an acceptable credit reputation.

Credit-related Insurance

Health, life, or accident insurance designed to pay the outstanding balance of debt.

Creditor

A person or business from whom you borrow or to whom you owe money.

Creditworthiness

Past and future ability to repay debts.