Mortgage Loan Terms
The Notary who elects to become a Signing Agent will soon be immersed in a sea of perhaps unfamiliar terminology. Most of these terms relate to the mortgage, equity and refinance loans that generate most of the Notary Signing Agent’s assignments. Just as a Notary must know what a jurat, protest and subscribing witness is, so a Notary Signing Agent must know about rescission periods, deeds of trust and settlement statements. This glossary contains many of these important terms which may be helpful to most Notaries, even Notaries who are not yet Signing Agents.
Abstract, or Abstract of Title: A historical summary of all the recorded instruments and proceedings that affect the title of a property.
Closing: A meeting at which all documents are signed and all expenses are paid to transfer ownership or property. Also called a “settlement”.
Deed: The legal document conveying title to a property.
Deed of Trust: The legal document used in some states instead of a mortgage; title is vested in a trustee to secure repayment of the loan.
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 any home loans or liens against the property.
Escrow: An Item of value, money, or documents deposited with a third party to be delivered upon fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
Fannie Mae: The Federal National Mortgage Association, a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation’s largest source of financing for home mortgages. It adds liquidity to the mortgage market by investing in home loans throughout the country.
First Mortgage: A mortgage that has priority as a lien over all other mortgages.
Freddie Mac: The Federal Home Loan Mortgage Corporation. A federal agency within the Department of Housing and Urban Development (HUD), which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.
HUD: The Department of Housing and Urban Development was established by Congress in 1965 and is responsible for the implementation and administration of government housing and urban development programs. These programs include community planning and development, housing production and mortgage insurance (FHA), secondary mortgage market activities (GNMA) and equal opportunity in housing.
HUD-1 Settlement Statement: A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 Statement define the seller’s net proceeds and the buyer’s net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also know as the “closing statement” or “settlement sheet”. Line of Credit: An agreement whereby a financial institution promises to lend up to a certain amount without the need to file another application.
Lock-in: A written agreement in which the lender guarantees a specified loan program interest rate
and points if a mortgage goes to closing within a set period of time.
Lock-in Period: The time period during which the lender has guaranteed an interest rate to a borrower.
Mortgage: A legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Banker: A company that originates, sells and services mortgages exclusively for resale in the secondary mortgage market.
Quitclaim Deed: A deed that transfers, without warranty of ownership, whatever interest or title a grantor may have at the time the conveyance is made.
Recession: The act of cancellation or annulment of a transaction or contract by the operation of a law. Borrowers usually have the option to cancel certain credit transactions, including a refinance or home equity transaction, within three business days after consummation (when the consumer becomes contractually obligated by, for example, signing the loan documents).
Refinance Transaction: The process of paying off one loan with the process from a new loan, typically using the same property as security for the new loan.
Second Mortgage: A subordinated lien created by a mortgage loan, over the amount of the first mortgage. Second mortgages are used to reduce the amount of a cash down payment or in refinancing to raise cash.
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.