Glossary of Terminology
| Amortization- The gradual, systematic payment of a
debt, such as a mortgage or other loan, in installments of principal
and interest for a definite time, so that at the end of that time,
the debt will have been paid in full.
Articles of Incorporation- A document filed with a U.S. state by the founders of a corporation. After approving the articles, the state issues a Certificate of Incorporation; the two documents together become the Charter of Incorporation. Asset- Anything having commercial or exchange value that is owned by a business, institution or individual. A business' assets might include its real estate, equipment inventory, intellectual assets such as copyrights or trademarks, and accounts receivable. Assignee- The person or business entity who is given, obtains, or buys the right to an asset. Assignment- The transfer of the rights, title or interest of any debt instrument or property that is properly owned by another party. Assignment of Deed of Trust- A document that transfers the beneficial interest in a note and deed of trust. Assignor- The person giving or selling an asset, and subsequently, forfeiting rights to that asset. Bad Debt- Any debt that is delinquent and has been written off as uncollectible. Balance sheet- A financial statement that shows a business' current financial condition, with assets on the left side and liabilities and net worth on the right side. Balloon- The balance of principal that is due and owing in its entirety at a specified point in time, but in any event, less than the time required to fully amortize the debt. Bankruptcy- A state of insolvency of an individual or organization. A legal proceeding that allows a debtor to discharge certain debts or obligations without paying the full amount. It gives the debtor time to recognize his / her financial affairs in order to repay his / her debts. A bankruptcy does not discharge obligations secured by a deed of trust. Beneficiary- The person or party (lender) entitled to receive the benefits, or proceeds- ( to whom the obligation is owed). Bidding Authorization Letter- An authorization form which, when signed by the beneficiary, authorizes the trustee to make the initial opening bid at the trustees sale. Bill of Sale- A document used to transfer the title of certain goods from seller to buyer. Cash flow- The flow of cash through a business or household. In business terms, cash flow involves the flow of cash into a company in the form of revenues, and out of the company in the form of expenses. Chattel mortgage- A mortgage on personal property, given to secure a debt. Typically used in the sale of a business. Also called a security agreement. Collateral- Something of value (land, a home, a car, etc.) that is pledged as security to ensure the payment of a debt. Collateral is promised to a lender until a loan is repaid. If the borrower defaults, the lender has the right, by law, to seize the collateral. Collectibility- Refers to the funding source's ability to collect future income stream payments once they are purchased. Commission- Fee paid to a broker for executing or referring a cash flow transaction. Corporation- A legal entity, chartered by a U.S. state or the federal government, and separate and distinct from the persons who own it. It is regarded by the courts as an artificial person; it may own property, incur debts, sue or be sued. Creditor- One who is owed payments on a debt by a debtor. Declaration of
Default- A document instructing the trustee to prepare and
record a Notice of Default, and, if necessary, to sell the trust
property in order to satisfy the unpaid obligation. Default- The omission or failure to perform or fulfill a legal duty, obligation, or promise (i.e. to pay a debt). Due diligence- Exhaustive research on a property, transaction, income stream, Trustor and/or payor. Due diligence may involve appraisals, title searches, lien and property tax searches, property and neighborhood inspections, broker and contractor opinions. Equity- The value or interest an owner has in property over and above any indebtedness owed on the property. Escrow- The system by which money documents, personal property, or real property is held in trust for another party by a disinterested third party until the terms and conditions of the escrow instructions are completed or terminated. Extension
Agreement- An agreement that extends the due date of a
loan. Funding source-
An individual investor or an investment company that buys income
streams. Hypothecation- Borrowing funds from a lender, investing those funds in a debt instrument, and giving the lender a security interest in the debt instrument as the collateral for the loan. Income stream- A future payment or series of payments, or a debt that one party owes to another party. Also known as a debt instrument or cash flow instrument. Institutional lenders- Savings and loan associations, local and regional banks, mortgage companies, finance companies, and commercial lenders. Intangible personal property (not real property)- Something that has value but is not a tangible asset, for example, a car, boat, furniture, jewelry. Joint venture- A business entity established for a specific task, operation, or goal. Junior Lien- A legal claim upon real property recorded subsequent to another legal lien (mortgage lien, tax lien, mechanics lien, judgment, or easement). The lien with an earlier date of recording is a Senior Lien. Leverage- The ratio of debt to total assets. Limited liability company- A form of business structure designed to combine the best of corporate and partnership attributes into one entity. Loan-to-Value ratio- A measure of how heavily mortgaged a property is and how likely the owner is to default on his or her debts. Market value- The price at which a ready, willing, and informed person would buy something; the price property would command in the current market. Military Affidavit- A sworn, written statement, affirming that the property owner is the entitled to any rights under the Soldiers in Sailors Civil Relief Act of 1940. Mortgage- A
written instrument that creates a lien by pledging real property as
security for a debt. Owner financing- A type of financing in which the seller of a tangible item accepts a promissory note as a portion of the purchase price. Also called seller financing. Partnership- A common form of joint ownership of a business. Payee- Person or business receiving a payment. Payor- The person or entity making a payment. Partial- Any part of a payment stream that is less than the full amount due. Personal guaranty- A contractual agreement between a funding source and a seller, whereby the seller assumes personal responsibility and liability for the obligations of the income stream. Portfolio- A group or package of income streams of the same type. Postponement- A verbal announcement made at the time at location of the scheduled trustees sale, extending the sale to a future date and time. Privately held- Owed to a private individual or business rather than to a bank or other financial institution. Profit and loss statement- A financial statement that shows a historical record of a business' income and expenses. Promissory note- A written promise to pay a specified amount to a specified party over a certain period of time. Publication Letter- The letter that, when signed by the beneficiary, authorizes the trustee to prepare, publish and record the Notice of Trustees Sale. Publication
Period- The period beginning after the three-calendar month
default period (this period varies by state) has expired and ending
when the trustees sale has been conducted. During the publication
period, the Notice of Trustees Sale is published, posted and
recorded. Rescission of
Notice of Default- After a default has been cured, this
document, when signed by the lender and recorded by the trustee,
will remove the effect of the previously recorded Notice of
Default. Replevin- A legal proceeding in court to seize property (other than real estate) given as security for a debt that is in default. Reserve- An amount a funding source holds in its account to cover potential payment defaults. After a certain time period has passed, the funding source rebates the reserve to the client less any fees or charges for delinquency. Also called a bad debt reserve. Satisfaction- The discharge of an obligation by paying a party what is due (i.e., the satisfaction of an IRS lien or the satisfaction of a mortgage). Seasoning- The length of time payments have been made on a note or other debt instrument. Secondary market- The marketplace where individuals and businesses can sell privately held income streams to funding sources for cash. Security interest: Seller- The person or company that owns a property, or debt instrument and wants to sell it. Servicing- The collection of payments of interest and principal, and trust fund items such as fire insurance, taxes, etc., on a note by the borrower in accordance with the terms of the note. Servicing by the lender also consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquent loan follow-up and loan analysis. Soldiers' and Sailors' Civil Relief Act of 1940- An act passed by Congress for the financial protection for those individuals serving in the military. Sole proprietorship- A business owned and operated by an individual. Subordination- The act of a creditor acknowledging in writing that a debt due him or her by a debtor shall be inferior to the debt due another creditor by the same debtor. Substitution of Trustee- A written document in which the beneficiary appoints a successor trustee to the trustee of record. Time value of money- Concept that addresses the way the value of money changes over a period of time. Title commitment- A commitment on the part of the insurer, once a title search has been conducted, to provide the proposed insured with a title insurance policy upon closing. Title insurance- Title insurance can benefit either the Trustor or the Lender. Should the beneficiary suffer any damages due to clouded or false title to real estate, title insurance recompenses the damaged party to the extent of the damages. Title policy-
An insurance policy that insures a party against loss due to a
defective title. Uniform Commercial Code (UCC)- Standardized set of guidelines protected by law that set down how business transactions must be conducted. Unseasoned- A lease or note that has had few, if any, payments made. Free Foreclosure Buying Assistance
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Please note: Some states may vary in their legal definitions, time frames, notice periods, requirements, and the foreclosure process.