Mortgage Glossary
# A B C D E F G H I J K L M N O P Q R S T U V W X Y ZL
A type of mortgage in which the seller retains the original loan and the buyer makes monthly payments to the seller to cover the amount of the original loan and any new mortgage. No transfer of title occurs until the loan is fully paid, and thus no equity is established until the debt is completely paid off. Most loans of this type have below-market interest rates and a balloon payment of principal at the end of the term.
Land Development Loan
An advance of funds, secured by a mortgage, to finance the making, installing, or constructing of the improvements necessary to convert raw land into construction-ready building sites.
Land Flip
A technique to artificially increase the book value of a parcel of land. The land is sold several times in quick succession among persons acting in concert, with the price increasing each time the land is sold. In a land flip, multiple sales of the same property can occur within a few days.
Late Charge
A penalty fee imposed by a lender for delinquent payments.
Lease Option
An option for a tenant to purchase a property after a rental period; monthly rent payments also include an overage, which can later be applied to a down payment.
Lease Purchase
Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.
Leasehold
An interest in an estate held by a tenant who possesses certain rights of occupancy and use by virtue of renting the real property, even though the tenant does not hold title to the property.
Legal Description
A description of a property's location that, for legal purposes, does not require oral testimony.
Lender
An individual (such as a loan officer) or firm that makes a loan.
Lending Institution
An organization that makes loans.
Lending Policy
An institution's statement of its basic lending philosophy, including standards, guidelines, and limitations that are to be observed and adhered to in the process of deciding whether to grant a loan. The policy must adhere to applicable law and regulations.
Leniency Clause
A provision written into a promissory note spelling out the lender's willingness to adjust loan payments temporarily if a borrower is experiencing severe financial difficulties through no personal fault.
Lessee
A person, business or other organization that is granted the use and possession of property in return for payment of rent. When real estate is rented, the lessee is known as the tenant.
Lessor
The owner of property who allows another to use and possess it in return for payment of rent. When real estate is rented, the lessor is known as the landlord.
Letter of Credit
An arrangement in which a lender agrees to substitute its credit for a borrower's under specified conditions.
Level Payment Mortgage
A mortgage that provides for a constant, fixed payment at periodic intervals during its term. Part of each payment consists of interest with the balance of the payment used to reduce the principal. See constant payment.
Leverage
Purchasing property with money belonging to someone else.
Liability
An item of value that is part of the overall debt or obligation of a person or business. For example, a mortgage is a liability of the homeowner/borrower, but the same mortgage is an asset of the savings and loan/lender. At savings institutions, savings deposits and all borrowed money are considered liabilities. Net worth, or regulatory capital, is accounted for as a liability because it is an obligation of the institution to its owners.
Liability Insurance
Insurance offering protection from claims that a homeowner or property owner's negligence resulted in injury or property damage to someone else; it is usually part of a homeowner's insurance coverage.
Lien
A legal claim against property that must be satisfied when the property is sold.
Lien Holder
A person or institution holding a mortgage or having a legal claim on the specific property of another person as security for a debt.
Lien Theory
An assumption of real estate law, which holds that a mortgage conveys to the lender a claim to, or lien on, the mortgaged property.
Lien Waiver
A document signed by a contractor, subcontractor, or other supplier of goods or services stating that the supplier has been paid for the work performed or goods supplied and waiving the supplier's right to file a claim against the property.
Life Estate
A freehold estate giving a beneficiary all property rights except the right to sell. The right to the estate is terminated upon the death of the beneficiary.
Life of Loan
The agreed upon length of time in which a loan must be repaid.
Life of Loan Cap
The limit beyond which the rate of interest may not rise throughout the term of an adjustable rate loan.
Line of Credit
A preestablished loan authorization with a specified borrowing limit extended by a lending institution to an individual or business based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit.
Liquid Asset
An asset made up of cash, or easily converted to cash.
Liquidity
Capability to sell an asset or investment.
Listing
A written authorization by the owner to sell or lease real property.
Loaded Couponing
The practice of a lender including the cost of mortgage insurance in the interest rate stated in the loan note, rather than listing it as a separate monthly charge. The practice permits a lender to cancel the mortgage insurance at a later date, while continuing to collect the monthly insurance premium from the homeowner/borrower. The practice was prohibited in 1985 by the Federal Home Loan Mortgage Corporation.
Loan
Money borrowed that is usually repaid with interest.
Loan Discount Points (Mortgage Discount)
The amount paid by the borrower to increase the yield of a mortgage to the lender. Sometimes called points, loan brokerage fee, or new loan fee. The discount is computed on the amount of the loan, not the selling price of the property.
Loan Fraud
Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
Loan Officer
Solicits loans and represents his or her lending institution, to which the loan officer represents the borrower.
Loan Origination
The steps by a lending institution up to the time a loan is placed on its books, including solicitation and processing of applications and loan closing.
Loan Origination Fee
The initial service charge imposed by a lending institution on a borrower for placing a loan on the institution's books.
Loan Participation
(a) The buying of portions of outstanding loans by investors, who then participate on a pro rata basis in collecting interest and principal payments. (b) the sharing by two or more lenders in the ownership of a loan or package of loans.
Loan Proceeds
The net amount of funds that a lending institution disburses under terms of a loan, and which the borrower then owes.
Loan Processing
All the steps taken by a lending institution from the time a loan application is received to the time the loan is closed and placed on the books, including taking the application, conducting the credit investigation, evaluating the loan terms and other steps.
Loan Servicing
The acts performed to collect and process loan payments during the life of a loan. They include billing the borrower; collecting payments of principal, interest, and payments into an escrow account; disbursing funds from the escrow account to pay taxes and insurance premiums; and forwarding funds to an investor if the loan has been sold in the secondary market.
Loan Settlement Statement
A document prepared for and presented to the borrower at the loan closing showing all disbursements to be made, such as payment to the seller.
Loan Terms
The specifications in a loan agreement that prescribe the loan amount, interest rate, length of time in which to repay the loan, and any other enforceable agreements entered into by the borrower and lender to effect the advance of funds.
Loan Workout
A series of steps taken by a lender with a borrower to resolve the problem of delinquent loan payments. Steps can include rescheduling loan payments into lower installments over a longer period of time so that the entire outstanding principal is eventually repaid.
Loan-to-Value (LTV) Ratio
A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.
Lock-In Clause
A clause in a loan agreement that prevents the borrower from repaying the loan until a specified date.
Lock-In Period
Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
Loss Mitigation
A process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.
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