AAA tenant
A prime tenant who has the highest credit rating.

abandonment
The intentional relinquishment of claim or title to personal or real property.

abatement
A decrease or reduction in the assessed valuation of real property taxes.

absentee ownership
Ownership of property (usually income producing) by a non-occupant who employs others to manage and maintain the property.

absorption
The level of property units rented or sold after which price concessions must be made for market demand to continue at current levels. Used to determine the feasibility of new residential or commercial construction.

abstract of title
A written history of ownership of a parcel of land, summarizing the material parts of any occurrence affecting title of said land.

abstraction
Method for computing depreciation by comparing the replacement cost of the improvements to the sales price less land value.

accelerated cost recovery system (ACRS)
Part of the Economic Recovery Act of 1981, an accounting method which allows for a shorter depreciation period for real property over traditional depreciation methods.

accelerated depreciation
A method of calculating depreciation in which a larger portion of depreciation is charged in early years than in later years.

accelerated remittance cycle (ARC)
An option available to Freddie Mac's sellers and servicers which allows the lender to decrease the guarantee fee due Freddie Mac in return for shortening the monthly remittance delay by paying principal and interest payments early.

acceleration clause
A common provision of a mortgage which allows the holder to demand the entire outstanding mortgage balance due and payable in the event of a breach of the mortgage contract.

acceptance
An offeree's consent to enter into a contract and be bound by the terms of the offer.

acceptance letter
A document signed by a construction loan borrower stating that all work is complete and of acceptable quality.

access rights
A right to ingress and egress from one's property; may be implied or expressed.

accident and health premium
A portion of the amount paid by a borrower for mortgage insurance that ensures the continuance of mortgage payments in the event of a mortgagor's disability or illness.

accommodation party
A person who lends his name to guarantee a loan for another by signing a note, bill, or other negotiable instrument; the endorser becomes the guarantor of the loan and is therefore responsible for its repayment.

accounts payable
Money owed by a business to suppliers of goods or services. Accounts payable are considered current liabilities on the balance sheet.

accounts receivable
Money owed to a business for goods or services provided to customers. Accounts receivable are classified as current assets on the balance sheet, with a contra account for bad debts on receivables.

Accredited Residential Underwriter (ARU)
A professional designation awarded by the Mortgage Bankers Association of America, in recognition of excellence in residential underwriting.

accretion
A build up of land by natural forces, such as wind, waves, or the flow of water.

accrual bonds
A bond on which the interest accrues, but is not paid to the investor during period of accrual. Instead, the amount accrued is added to the principal balance and is paid at maturity. Also called accretion bonds or Z-bonds.

accrual basis of accounting
An accounting method under which income and expenses are charged to the periods for which they are applicable, rather than when payment is made or received. In contrast, cash accounting is the method calling for income and expenses to be based on payment being made or received.

accrued interest
Interest earned for the period of time elapsed since interest was last paid.

acknowledgement
A formal declaration attached to or part of an instrument, made before a duly authorized officer (usually a notary public) by the person who has executed that instrument, the execution being a free act and deed.

acquisition and development loan (A and D loan)
A loan for the purchase and preparation of raw land for development. Usually a construction loan or land sale is the source of repayment.

acquisition cost
In a HUD/FHA transaction, the price the borrower paid for the property plus any of the following costs: closing, repairs, or financing (except discounts in other than a refinance transaction). Does not include prepaid discounts in a purchase transaction, mortgage insurance premiums, or similar add-ons.

acquisition loan
See land acquisition loan.

acre
A unit of measure for land, 43,560 square feet.

action to quiet title
A court action to remove any interest or claim in or title to real property; to remove a cloud on title.

act of God
An event which causes damage by nature such as a flood, earthquake, or winds; an occurrence which was not caused by man.

adaptive re-use
The rehabilitation of old property for a new purpose.

addendum
An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.

add-on interest
The full amount of interest calculated on the original principal for the term of the loan. This interest is added to the original principal, thereby becoming a part of the face amount of the promissory note.

adjustable rate mortgage
A mortgage loan or deed of trust which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan. Also called variable rate mortgages (VRM).

adjusted basis
The original cost of a property, plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.

adjustment date
The date of periodic interest rate adjustments for an adjustable mortgage loan.

ad valorem taxes
Real estate taxes on the assessed value of property.

advance
In real estate, a partial disbursement of funds under a note. Most often used in connection with construction lending.

advance commitment (conditional)
A written promise to make an investment at some time in the future if specified conditions are met.

adverse possession
The right by which someone occupying a piece of land acquires title against the real owner, if the occupant's possession has been actual, continuous, hostile, visible, and distinct for a statutory period.

affidavit
A sworn statement in writing, usually requiring notarization.

after-acquired property
The property a debtor acquires after the execution of a mortgage or other form of indebtedness that additionally secures the indebtedness. If the mortgage note contains a statement on after-acquired property it is said to have an "after-acquired" clause.

after-tax cash flow
The cash flow remaining after deduction of an allowance for taxes attributable to that income.

agent
One who legally represents another, called a principal, from whom express or implied authority has been derived.

agreed amount endorsement
An insurance endorsement used with a policy containing a coinsurance clause. It binds the insurance company to an agreement that the amount of insurance carried under the policy is sufficient to meet the requirements of the coinsurance clause in the policy.

agreement for deed
A contract for the sale of property in which transfer of title to the buyer is contingent on the fulfillment of certain conditions.

agreement for sale
A written document in which the purchaser agrees to buy certain real estate or personal property and the seller agrees to sell under stated conditions. Also called a sales contract, binder, or earnest money contract.

air rights
The ownership of the right to use, control, or occupy the air space over a designated property, without the right to use the land surface.

air space
The space above the surface of land that is owned by the landowner and that may be divided and sold or leased to others.

alienation
The transfer of title to real property from one owner to another.

alienation clause
A type of acceleration clause that demands payment of the entire balance upon sale or other transfer of title; also called a "due-on-sale" clause.

all-inclusive trust deed
A refinancing technique involving the creation of a new deed of trust that includes the balance due on the existing note plus new funds advanced; also known as a wrap-around mortgage.

allocation method
A method of site valuation in which the appraiser deducts the estimated value of the building from the total sales price of an improved property to arrive at the estimated land value.

allowance for vacancy and income loss
In accounting, an estimated amount reflecting probable vacancy, non-payment of rent by tenants, and any other income loss. these funds are set aside to cover either expected or unanticipated income losses.

alternative mortgage instrument
A mortgage that differs from the typical mortgage instrument either in the amount of principal, the interest rate, the periodic or monthly payments, or terms for repayment.

amenity
A feature that enhances property value. Examples are off-street reserved parking within a condominium community, the proximity of public transportation, tennis courts, or a swimming pool.

American land Title Association (ALTA)
A national association of title insurance companies, abstractors, and attorneys specializing in real property laws. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.

amortization
Repayment of a mortgage debt with equal periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.

amortization schedule
A table showing the amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made.

amount realized
The amount of money, or fair market value of other property, received in a sale or exchange.

amount to make the project operational (AMPO)
An allowance, ordinarily a percentage of the replacement cost, that can be included in the mortgage insured by HUD/FHA to provide a nonprofit sponsor with working capital during the initial period of operation of a project.

anchor tenant
A prime tenant in a shopping center, such as an established department store, which attracts the bulk of customers to the center.   Smaller tenants are referred to as satellite tenants.

annual contributions contract (ACC)
A contract under which HUD makes payments to public housing agencies to cover debt service payments on public housing projects or to provide rent subsidies and administrative costs under the Section 8 Housing Assistance Payments Program.

annual housing survey (AHS)
A yearly HUD/Census Bureau study of housing units and trends in the movement of owners and renters.

annual mortgage statement
A report prepared by the lender or servicing agent for the mortgagor, stating the amount of taxes, insurance, and interest that was paid during the year, and the outstanding principal balance.

annual percentage rate (APR)
A term defined in section 106 of the federal Truth in Lending Act (PL 90-321; 15 USC 1606), which expresses on an annualized basis the charges imposed on the borrower to obtain a loan (defined in the Act as 'finance charges"), including interest, discount and other costs.

annuity
Periodic fixed payments to be received for a specified period of time or for life, in consideration for prior lump sum or installment payments made to the other party in the annuity contract.

annuity starring date
The first day of the first period for which an amount is due as payment under an annuity contract.

apartment
A complete and separate living unit in a building containing at least one other like unit.

apartment hotel
An apartment complex which provides some hotel services, such as a restaurant or cleaning and linen services. Units are furnished and tenants may stay for extended periods.

applicant
A prospective borrower who has completed an application. An application is a series of steps, usually including the completion of documents, a lender requires of those seeking a loan.

apportionment
A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents, and other income and expenses. When a property is sold, apportionment is used to distribute or collect funds due from the buyer and seller for income and expenses.

appraisal
An opinion or estimate of value. Also refers to the process by which a value estimate is obtained.

appraiser
one qualified by education, training, and experience to estimate the value of real and personal property.

appreciation
An increase in value for any reason, except inflation.

appurtenance
Anything belonging to or attached to land such as a barn, garage, or easement, that is part of the property and is therefore included in a sale or transfer.

APR
See annual percentage rate.

arbitrage
The simultaneous buying and selling of any securities including mortgages, mortgage-backed securities, or futures contracts in different markets for the purpose of realizing a profit from differences in pnce.

architect's inspection certificate
A document, usually issued by an independent architect, verifying that a certain portion of construction on a project has been completed in accordance with approved plans and specifications. This document is often required by construction lenders when advances of funds are to be made at specific stages of construction. Also known as an architect's progress certificate.

arm's length transaction
A transaction in which the parties involved are entirely independent of each other, deal with each other as strangers, and have no reason for collusion.

arrears
The situation in which mortgage interest and real estate taxes are paid at or after the end of the period for which they are levied. Late payment is also described as being in arrears.

asbestos
An insulative, fire and heat resistant material commonly used in insulation and roofing.

ask or asking price
The offering or sales price at which a security would be sold by a securities dealer to an investor.

assemblage
The process of acquiring adjacent parcels of land to combine into a single site for development.

assessed valuation
The value that a taxing authority places upon real property that becomes the base for computing local property taxes.

assessment
A value factor assigned to real property and used to determine real property taxes. The process of reaching the assessed valuation. Also, an add-on tax to raise money for a special purpose.

assessment rolls
The public record of taxable property.

assessor
A public official who appraises taxable property to reach its assessed valuation or base on which taxes are calculated.

asset
A property or right owned, tangible or intangible, that has monetary value and is capable of providing future benefits to its owner.

asset turnover ratio
The ratio of sales over total assets used as an indicator of how well the total investment in assets is being used to generate sales.

assignee
The person to whom ownership, rights or interest in property is transferred .

assignment
The transfer of ownership, rights, or interests in property, as in a mortgage, lease, or deed of trust.

assignment of lease
A mortgage clause that passes control of leases on an income producing property to the lender. Often a condition to making a loan to ensure, in the case of mortgage default, that any continuing income from the property goes directly to the lender.

assignment of mortgage
A document that evidences the transfer of a mortgage from one party to another.

assignment of rents
A transfer to the mortgagee of the right to collect rents from tenants in the event of default by the property owner.

assignor
One who transfers to another ownership or interest in property.

assumption agreement
A written agreement by one party to pay an obligation originally incurred by another.

assumption fee
The amount paid a lender for the paperwork and processing of records necessary to approve and document a new debtor.

assumption of mortgage
A buyer's acceptance of primary liability for payment of an existing note secured by a mortgage or deed of trust. The seller remains secondarily liable, unless specifically released by the lender.

at-risk rules
Internal Revenue Service rules restricting leverage opportunities by limiting a taxpayer's deductible losses to the amount one has "at-risk." One is "at-risk" to the extent of cash contributed and amounts borrowed for which one is responsible for payment from personal assets.

at-the-money
In options trading, the point at which the strike price is equal to the market price of the underlying security.

attachment
The act of taking property by judicial order into the custody of the court as security for payment of a judgment in an impending suit.

attorney-in-fact
The agent who is granted authorization to perform specific acts on behalf of another.

attornment
See letter of attornment.

audit
The official examination and verification of bookkeeping accounts to prove the accuracy of figures and the adequacy of accounting controls. An audit may be done by public accountants hired for this purpose or by a company's own employees. The latter is called an internal audit.

Automatic Lender
A VA program that enables eligible single-family lenders to conduct the processing and closing of VA single-family loan applications without VA's prior review. The VA is, however, responsible for performing the appraisal report for all VA loans including those performed via the Automatic Lender program.

average life of a mortgage
A statistic used to estimate the yield on mortgages. Most mortgages written for long terms pay off earlier, either voluntarily or by foreclosure after default. For example, 30-year mortgages have traditionally been considered to have approximately a twelve year average life. Investors base impact of discounts or premiums on the yield of a mortgage on the average life, as opposed to the written term.

average rate of return
The return on an investment as calculated by averaging the total cash flows over the years during which the cash flows are received by the investor.

avulsion
An abrupt and extensive erosion of land by a force of water and its subsequent deposit onto the property of another owner.