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Glossary

Acknowledgement: Formal declaration before a public official that one has signed a document. Prior to recording real estate documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the person’s signature on the document.

Truth and Lending Disclosure: A document required by federal law designed to show a borrower the total cost of a loan.

Notice of Right to Cancel: The borrower has a legal right under federal law to cancel the transaction within three business days from the day they sign the documents, the day they receive the Truth in Lending disclosure or the day they receive the copy of the notice of right to cancel; which ever happens last. In almost all cases, this is the day that they sign their documents.

The date of the transaction: the day they sign their documents.
The date the rescission expires: midnight on the third business day after the day they sign, including Saturdays, but not including Sundays or holidays.
The date of the Confirmation of Non-Rescission or Confirmation Certificate: the day after the rescission has expired.

Note: A signed instrument acknowledging a debt and a promise to repay per the terms outlined.

Deed of Trust: A three-party instrument between a borrower called the trustor, a lender called the beneficiary, and a neutral third party called a trustee. The deed of trust is the instrument that is recorded to give added assurance that the promissory note will be paid when due.

Interest Rate: The percentage of an amount of money that is paid for its use for a specific time period.

Adjusted Rate Mortgage (ARM): A mortgage where the interest rate is not fixed for the life of the loan. These mortgages adjust periodically based on an index that changes with the market conditions. The rate of interest is the sum of the index plus a margin (the margin remains fixed for the life of the loan.) Most ARM’s have a periodic interest rate and payment caps, as well as life caps. ARM’s may also be referred to as AML’s or VRM’s.

Fixed Rate Mortgage: A mortgage where the interest rate is fixed for the life of the loan.

Prepayment Penalty: A charge for the payment of a mortgage or trust deed note before it is actually due.

Impound Account: An account maintained by the lender for payment of property taxes, hazard insurance, mortgage insurance, or other related expenses when applicable. The borrower pays these premiums to the lender in monthly payments along with the principal and interest. Also know as an Escrow Account.

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

HUD 1 Settlement Statement: A closing document required by HUD (Housing and Urban Development) that outlines the settlement cost of a loan. The closing agent generally prepares the document. The borrower and lender receives it shortly after the loan is closed.

Subordination Agreement: An agreement under which a prior trust deed is made inferior to an otherwise junior lien.

Deed: Formal written document transferring title to real estate; a new deed is used for each transfer. The deed should contain an accurate description of the property being conveyed, be signed and witnessed according to the laws of the State where the property is located, and be delivered to the purchaser on the closing day.

Grant Deed: A type of deed common in California, which contains implied warranties to the effect that the grantor has not previously conveyed or encumbered the property.

Quit Claim Deed: A deed that conveys whatever present right, title, or interest the grantor may have. Unlike a grant deed, it does not contain any warranties.

Interspousal Grant Deed: A deed that is used for conveyance of property, interest, or otherwise between husband and wife.

Joint Tenancy: An undivided interest in property taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance and begin at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants rather than to the heirs of the deceased.

Tenancy in Common (TIC): Ownership of property by any two or more persons in undivided interests (not necessarily equal), without right of survivorship.

Community Property: Property acquired by husband and wife, together or separately, during marriage, when not acquired as the separate property of either.

Sole and Separate Property: Property owned before marriage or that acquired afterward by gift, bequest, devise, or descent.

Title Insurance: Assurances as to the condition of title. It protects the owner or other insured, such as a lender, against loss or impairment of title arising from defects in title.

Non-Recurring Closing Costs: One time costs charged in conjunction with the loan. Some examples are fees for loan origination, title policy, escrow, credit report, appraisal, tax service, notary, recording, pest control inspection, etc.

Recurring Closing Costs: Costs that recur after the loan has closed. Some examples are tax reserves, tax proration, hazard insurance reserve, hazard insurance premium, prepaid interest, etc.

Form W-9: This form is used when a person is required to file an information return with the IRS. They must give their correct taxpayer identification number (TIN) to report such items as income paid, real estate transactions, mortgage interest paid, acquisition or abandonment of secured property, or cancellation of debt.

Form 4506: This form is used to get a tax return transcript, verification that you did file a Federal tax return, Form W-2 information, or a copy of a specific tax form.

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DEFINITION OF FEDERAL TRUTH IN LENDING TERMS

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