Dealer
An investment banker or firm in the business of buying and selling mortgage-backed securities not as an agent, but as a principal. Unlike brokers, dealers hold inventories of securities.

Debenture
An interest-bearing bond issued against the general credit of a corporation or government organization, with no specific pledge of assets.

Debt Capital
Money loaned at an agreed interest rate for a fixed term of years; distinguished from equity capital which is money invested by owners (shareholders) for use in business operations.

Debt Coverage Ratio
A ratio of effective annual net income to annual principal and interest payments. Also called debt service coverage.

Debt/Equity Ratio
The proportion of capital borrowed to the amount of capital invested out-of-pocket or obtained through the sale of common stock; also called leverage ratio.

Debt Service
A borrower’s periodic mortgage payments comprised of principal plus interest on the unpaid mortgage balance.

Debt Service Constant
A factor that, when multiplied by the original loan amount, yields the annual debt service payment (principal plus interest) required to amortize the loan.

Decree of Foreclosure and Sale
In a judicial foreclosure, the court decree of judgment that establishes the amount of the mortgage debt and orders the property sold to satisfy the debt.

Dedication
The granting of land by the owner for some public use and its acceptance for such use by authorized public officials.

Deed-in-Lieu
A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.

Deed of Reconveyance
The transfer of a legal title from the trustee to the trustor (the borrower) after the trust deed is paid in full.

Deed of Trust
A type of security instrument in which the borrower conveys title to real property to a third party (trustee) to be held in trust as security for the lender, with the condition that the trustee shall reconvey the title upon the payment of the debt, and, conversely, will sell the land and pay the debt in the event of a default by the borrower. See mortgage.

Deed Restriction
A condition placed in a deed limiting or restricting the use of the real property.

Default
A breach or nonperformance of the terms of a note or the covenants of a mortgage.

Default Ratio
The occupancy level at which the effect gross income from an income-producing property is insufficient to pay operating expenses and debt service, thus creating the risk of default. The ratio is calculated by dividing the effective gross income into operating expenses plus debt service.

Defeasance Clause
A mortgage provision which allows the mortgagor to reclaim property that has been foreclosed, if certain conditions are met.

Defect of Record
An encumbrance on a title that is made a part of the public record. Some recorded defects are judgments, mortgages, other liens, or easements.

Deficiency
The difference between the balance outstanding on a loan and proceeds from the sale of the loan collateral.

Deficiency Judgment
A court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan.

Delay
In mortgage securities, the time elapsed from receipt of mortgage payments from borrowers to remittance of pass-through cash flows to investors. For Fannie Mae MBSs, it is 54 days; for GNMA I and II MBSs, 45 days; for Freddie Mac PCs, it is 75 days; for conventional pass-throughs, 54 days.

Delinquency
Failure of a borrower to make timely payments under a loan agreement.

Delinquency Ratio
The ratio of number of past due loans to total number of loans serviced.

Delivery
In mortgage banking, the physical transfer of loan documents to an investor or agent in conformance with the commitment.

Delivery Date
The contracted date when the actual payment of funds and delivery of mortgage-backed securities occurs.

Delivery Month
The calendar month during which a given contract expires and delivery can be made; also called expiration month.

Demand Note/Mortgage
A note or mortgage that the lender can call due at any time and without prior notice.

Deposit
A sum of money given to (1) bind a sale of real estate, or (2) assure payment or an advance of funds in the processing of a loan. Also called earnest money.

Deposit Receipt
A form used to acknowledge the acceptance of the earnest money that binds an offer to purchase real property.

Depreciation
A decline in value of a building or other real estate improvement, resulting from age, physical wear, and economic or functional obsolescence. This figure is deducted annually from net income.

Developer
A person or entity who prepares raw land for building sites or rehabilitates existing buildings.

Development Loan
A short-term loan advanced before a construction loan, used by developers to acquire land and install basic utilities such as roads, sewers, and water supply systems.

Development Process
The process through which development projects are conceived, initiated, analyzed, financed, designed, built, and managed

Development Rights
The rights a landholder sells to improve a property or enhance the use of said property.

Differential
In a mortgage-backed security, the difference between the MBS security rate and the coupon rates of the underlying mortgages. The issuer retains the differential to pay for servicing costs and the guarantee.

Direct Costs
Labor and materials costs of construction, excluding overhead.

Direct Endorsement (DE)
A HUD program that enables an eligible single-family lender to conduct the processing and closing of FHA single-family loan applications without HUD’s prior review.

Directors and Officers Liability Insurance (D & O Liability Insurance)
Insurance that protects both a corporation and its key employees. The standard D & O policy usually includes corporate reimbursement, which covers expenses insured by the directors and officers for legal costs and judgments indemnified.

Disbursements
Actual payment of monies. Used to describe construction loan draws.

Disclosure
Information relevant to specific transactions that is required by law.

Discount
In loan originations, a discount refers to an amount withheld from loan proceeds by a lender. In secondary market sales, a discount is the amount by which the sale price of a note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upward, either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower, and the rate or terms of the note.

Discount Point
Amount payable to the lending institution by the borrower or seller to increase the lender’s effective yield. One point is equal to one percent of the loan.

Discount Rate
In central banking, the rate the Federal Reserve charges to member banks that borrow money from it.

Dispossess
To obtain physical possession of property by due process of law.

Dividend
A stockholder’s share of profits of a corporation. An insurance dividend is not a true dividend but a return of premium. Dividends from a savings and loan association, credit union passbook account, or certificate are interest, and are not considered dividends.

Documentary Stamp
A mark "stamped" onto a deed certifying the amount of transfer tax paid.

Dominant Estate
When an owner of property is given certain rights to use another’s property.

Dower
The rights a widow has to her husband’s property at his death. Dower laws are being changed in many states.

Down Payment
A portion of the sales price paid a seller by a buyer to close a sales transaction, with the understanding that the balance will be paid later. Also, the difference between the sale price of real estate and the mortgage amount.

Draw
Periodic advances of funds according to the schedule of payments in a construction loan agreement. Also called advance, disbursement, payout, progress payment, or takedown.

Due-on-Sale
A clause in a mortgage stating that if the mortgagor sells, transfers, or in any way encumbers the property, then the mortgagee has the right to implement an acceleration clause making the balance of the obligation due.

Duplex
A single structure designed with two separate housing units.

Duration
An estimate of the volatility or sensitivity of the market price of a bond to changes in interest rates; it measures the weighted average time until cash flow repayment.

Duress
Compulsion, pressure, or coercion under protest.

Dwelling Unit
Living quarters occupied, or intended for occupancy, by a household.