GLOSSARY OF TERMS
ENCROUCHMENT: An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.
ENCUMBRANCE: A legal right or interest in land that affects a good or clear title, and diminishes the lands value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.
ENDORSER: A person who signs ownership interest over to another party. Contrast with co-maker.
EQUAL CREDIT OPPORTUNITY ACT (ECOA): A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
EQUITY: The difference between the market value of a property and the homeowners outstanding mortgage balance.
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 ones 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.
FDIC: (Federal Deposit Insurance Corporation): Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).
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: (Federal Housing Administration). A division of the Department of Housing and Urban Development. The FHAs main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA neither lends money, nor plans, nor constructs housing.
FHA LOAN: Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
FHFB: Federal Housing Finance Board). It oversees the credit functions of the twelve regional Federal Home Loan Banks.
FHLBB: (Federal Home Loan Bank Board). A regulatory and supervisory agency for federally charted savings institutions, which oversees the operations of the FSLIC and FHLMC. This agency was abolished by the Financial Institutions Reform, Recovery and Enforcement Act of 1989. (See FIRREA.)
FHLMC: (Federal Home Loan Mortgage Corporation, Freddie Mac). A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.
FINANCE CHARGE: The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.
FIRRA: (Financial Institutions Reform, Recovery and Enforcement Act of 1989). An act signed into law in August 1989, by President Bush that restructured the thrift regulatory an insurance system.
FIRM COMMITMENT: A lenders agreement to make a loan to a specific borrower on a specific property.
FIRST MORTGAGE: The mortgage that has first claim in the event of default.
FIXED INSTALLMENT: The monthly payment due on a mortgage loan.
FIXED RATE MORTGAGE: (FRM) A mortgage in which the interest rate does not change during the entire term of the loan.
FNMA: (Federal National Mortgage Association, Fannie Mae). A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.
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.
FORFEITURE: The loss of money, property, rights, or privileges due to a breach of legal obligation.
FORECLOSURE: The process by which a mortgage property may be sold when a mortgage is in default.
FULLY AMORTIZED ARM: An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
FULL RECASTING: Setting the P&I payments to the level that will fully amortize the loans outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.
FULLY INDEXED RATE: The interest (accrual) rate resulting from the index at closing (or at another point in the loan) plus the lenders full spread, rounded as prescribed in the loan documents (often to the nearest 1/8th of 1%).
GENERAL WARRANTY DEED: A deed which conveys not only all the grantor interests in and title to the property to the grantee, but also warrants that if the title is defective or has a cloud on it (such as mortgage claims, tax liens, title claims, judgments, or mechanics liens against it) the grantee may hold the grantor liable.
GOOD FAITH ESTIMATE: An estimate of charges, which a borrower is likely to incur in connection with a loan closing.
GRADUATED PAYMENT MORTGAGE: (GPM) A mortgage where the payments are scheduled to increase, usually annually, for a set number of years, and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30-year term.