Mortgage and Loan Glossary (C)
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California bungalow
A small, one-story, compact, early-twentieth-century house.
California ranch
A one-story, post-World War II style, ground-hugging house with a low,
pitched roof.
call option
A provision in a home loan that gives the mortgagee the right to call
the mortgage due and payable at the end of a specified time period
for any reason.
cancellation clause
A contract provision that gives the right to terminate obligations
upon the occurrence of specified events.
cap
A condition of an adjustable-rate mortgage (ARM) that limits how much
the interest rate or loan payments may increase or decrease.
capital
1) The net worth of a business defined by the amount by which its assets
exceed its liabilities.
2) Money used to create income.
3) The money or other assets comprising the wealth at the disposal
of a person or business enterprise.
4) The accumulated wealth of a business or individual.
capital expenditure
The cost of an improvement made to extend the useful life of a property
or to add to its value.
capital improvement
Any component constructed as a permanent improvement to real property
that increases its value and adds to its useful life.
cash-out refinance
A refinance transaction in which the borrower receives additional hard
cash that can be used for any purpose.
CC and R
Abbreviation for Covenants, Conditions and Restrictions - a document
filed by a property developer with the county recorder that sets
forth permitted uses, rules and restrictions for all properties within
a development.
certificate of deposit (CD)
An instrument issued by a bank or other financial institution that
is evidence of a type of savings deposit. The document includes the
institution's promise to return the deposit plus earnings at a specified
interest rate within a specified time period.
certificate of deposit index
A rarely used index that is used to determine interest rate changes
for certain adjustable-rate mortgage (ARM) plans.
Certificate of Eligibility
A document issued by the federal government certifying a veteran's
eligibility for a Department of Veterans Affairs (VA) loan.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes
the maximum value and loan amount for a VA loan.
certificate of title
A statement of opinion rendered by a title company or attorney stating
that a title to real property is legally held by the current owner.
chain of title
A history of all documents, including conveyances and encumbrances,
that affect title to a parcel of real property, starting with the
earliest existing document and ending with the most recent.
change frequency
Term sometimes used to describe the frequency of payment or interest
rate changes in an adjustable-rate mortgage (ARM).
chattel
Anything tangible and owned, other than real estate. The same as personal
property.
Civilian Employment
Economic indicator that reports the number of new civilian jobs created
and the percentage of civilians in the job market who are unemployed.
One of the most anticipated and closely watched economic indicators.
Frequency: monthly. Source: Labor Department.
clear title
A title that is free of clouds, liens, disputed interests or legal
questions as to ownership of the property.
close of escrow
The final step in a real estate transaction, when ownership passes
from seller to buyer. On this date, the deed and deed of trust are
recorded with the county recorder's office in the buyer's name and
the proceeds of the sale are given to the seller after paying off
any outstanding loans and fees.
closing
A meeting at which the sale of a property is finalized by the purchaser
signing the loan documents and paying closing fees. Sometimes also
referred to as the settlement.
closing cost item
A single fee that a home buyer must pay at closing. Closing costs are
made up of individual closing cost items such as origination fees,
escrow fees, underwriting fees and processing fees. Most closing
cost items are included as numbered items on the HUD-1 Settlement
Statement.
closing costs
Various fees and expenses that must be paid by buyers and sellers at
the time of a real estate closing. Sometimes called transaction costs.
Lenders usually provide estimates of closing costs to prospective
homebuyers.
closing statement
An accounting of funds from a real property transaction made to both
the buyer and seller. See HUD-1 settlement statement.
cloud on title
Any conditions such as encumbrances, liens or claims revealed by a
title search that adversely affect the title to real estate. Clouds
on title often cannot be removed except by a quitclaim deed, release,
or court action. Compare with clear title.
coinsurance
A sharing of hazard insurance insurance risk between the insurer and
the insured. A coinsurance clause states the minimum percentage of
value to be insured in order to collect the total amount of loss.
collateral
Property pledged as security for a debt. The borrower risks losing
the collateral if the debt is not repaid according to the terms of
the loan contract.
collection
The process of bringing a delinquent debt current and the filing of
the necessary notices to proceed with repossession or foreclosure
when necessary.
co-maker
A person who signs a promissory note along with the primary borrower.
A co-maker's signature guarantees that the loan will be repaid, because
the borrower and the co-maker are equally responsible for the repayment.
Sometimes called a co-signer.
commission
The fee charged by a broker or agent for negotiating a real estate
or loan transaction. A commission is generally a small percentage
of the price of the property or amount borrowed. Sometimes called
points.
commitment letter
An official notification to a borrower from a lender stating the terms
under which it agrees to lend money to the borrower. Sometimes called
a loan commitment.
common area assessments
Charges against individual unit owners in a condominium complex, or
planned unit development (PUD), for additional funds to repair, maintain
or improve the common areas of the project. Assessments are usually
in addition to homeowners association dues.
common areas
Those areas of a property (usually a planned unit development or condominium
project) that are used by all owners or tenants. Common areas may
include swimming pools, tennis courts, and other recreational facilities,
as well as common corridors of buildings and parking areas.
common law
The body of law based on general custom in England and used to a certain
extent in the United States. Common law sometimes prevails unless
superseded by other law.
Community Home Buyer's Program
An income-based community lending model, under which mortgage insurers
and Fannie Mae offer flexible underwriting guidelines to increase
a low- or moderate-income family's buying power and to decrease the
total amount of cash needed to purchase a home. Borrowers who participate
in this model are required to attend pre-purchase home-buyer education
sessions.
Community Land Trust Mortgage Loan
An alternative financing option that enables low to moderate-income
homebuyers to purchase housing that has been improved by a nonprofit
Community Land Trust and to lease the land on which the property
stands.
community property
In some western and southwestern states, a form of ownership under
which property accumulated through joint efforts of husband and wife
is presumed to be owned equally by them unless acquired as separate
property of either spouse.
comparables
An abbreviated form of comparable properties. Comparables are used
for comparative purposes in the appraisal process and are properties
that are very similar to the property being appraised. They have
been sold recently and have approximately the same size, location
and features. Comparables help the appraiser determine the approximate
fair market value of the subject property. Often just called "comps".
compound interest
Interest paid on the original principal balance, and on the accumulated
and unpaid interest.
condemnation
The taking of private property for a public purpose by a government
under the right of eminent domain. Also, the determination that a
building is not fit for use or is dangerous and must be destroyed.
condominium
A real estate development in which each unit owner has title to a unit
in a building and an undivided interest in all the common areas of
the project. Unit owners sometimes also have the exclusive use of
certain limited common areas. Sometimes called a "condo".
condominium conversion
Changing the ownership of an existing rental complex or building to
the condominium form of ownership.
condominium hotel
A condominium complex that has registration desks, short-term occupancy,
room service and daily cleaning services. Such properties are often
operated as commercial hotels even though the units may be individually
owned.
conforming loan
A loan that conforms to the guidelines establsihed by the Federal National
Mortgage Association (FNMA, or Fannie Mae) and the Federal Home Loan
Mortgage Corporation (FHLMC, or Freddie Mac). These guideline establish
the maximum loan amount, down payment, borrower credit, income requirements,
and suitable properties. Lenders that make loans conforming to these
guidelines may sell those loans to Fannie Mae or Freddie Mac. Also
see non-conforming loan.
construction loan
A short-term, interim loan for financing the cost of building construction.
The lender makes payments to the builder or contractor at periodic
agreed upon intervals as the work progresses.
Construction Spending
Economic indicator that measures the total amount of spending in the
U.S. on all types of construction. The residential construction component
is useful for predicting future national new home sales and mortgage
origination volume. Frequency: monthly. Source: Commerce Department.
Consumer Confidence
A monthly survey of 5,000 households designed to measure Americans'
optimism about their current situation and the future. Frequency:
monthly. Source: Conference Board.
Consumer Credit
Economic indicator that measures the level of outstanding consumer
installment debt. Can be used in conjunction with retail sales to
determine whether cash or credit is fueling growth. Frequency: monthly.
Source: Federal Reserve.
Consumer Price Index (CPI)
Measures the change in the cost of living for most American families.
Widely followed as an indicator of inflation of retail purchases.
Frequency: monthly. Source: Federal Reserve.
consumer reporting agency (CRA)
A company that prepares detailed reports that are used by lenders to
determine a potential borrower's creditworthiness. These agencies
obtain data for these reports from a credit repository as well as
from other sources. More commonly referred to as credit bureaus.
Consumer Sentiment
An index designed to measure consumer optimism. Includes a preliminary
report at mid-month and final report near month-end. Frequency: semimonthly.
Source: University of Michigan.
contingency
A condition that must be met before a contract is legally binding.
For example, homebuyers often include a contingency that specifies
that the contract is not binding until a qualified buyer for their
current home is found.
contract
An oral or written agreement to do or not to do a certain thing for
consideration.
conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
Compare with government mortgage.
convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the
borrower to change the ARM to a fixed-rate mortgage at specified
period within the term of the loan.
convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate
mortgage under certain conditions.
cooperative (co-op)
A type of property ownership in which the residents of a multi-unit
housing complex own shares in the corporation that owns the property,
giving each resident the right to occupy a specific apartment.
cooperative corporation
A corporation that holds the title to a cooperative project and grants
occupancy rights to shareholders through leases or similar rental
agreements.
cooperative project
A residential or mixed-use building wherein a corporation holds title
to the property and sells shares of stock representing the value
of a single apartment to individuals who then receive a lease, or
similar agreement, as evidence of title.
co-ownership
Two or more people sharing ownership of a property. Forms of co-ownership
include community property, joint tenancy, and tenancy in common.
cosigner
Another person who signs your loan and assumes equal responsibility
for it.
cost of funds index (COFI)
An index that is sometimes used to determine interest rate changes
for certain adjustable-rate mortgages (ARMs). It represents the weighted-average
cost of savings, borrowings, and advances of the 11th District members
of the Federal Home Loan Bank of San Francisco.
covenant
A promise written into deeds, mortgages and other financial instruments
that obligates or restricts the borrower. The violation of some covenants
can result in foreclosure.
credit
An agreement in which a borrower receives something of value in exchange
for a promise to repay the lender at a later date.
credit bureau
An agency that keeps your credit record.
credit history
A record of a person's debt history, including all open and fully repaid
obligations. A credit history helps a lender to determine whether
a potential borrower has a satisfactory history of repaying debts
in a timely fashion.
credit life insurance
A type of insurance often bought by borrowers that will pay off the
debt if the borrower dies while the policy is in force.
creditor
A person or business who is owed money.
credit-related insurance
Health, life or accident insurance designed to pay the outstanding
balance of debt.
credit report
A report of an individual's credit history prepared by a credit bureau
and used by a lender in determining a potential borrower's creditworthiness.
Also see merged credit report.
credit repository
An institution that collects, maintains, stores and sells financial
and publicly recorded information about the payment records of individuals
applying for credit.
credit scoring system
A statistical system used to rate credit applicants according to various
characteristics relevant to creditworthiness.
creditworthiness
Past and future ability to repay debts.