Glossary of Terms

A • C • D • H • I • L • M • N • R • S • T

Abstract of Title
Summary of the public records relating to the title to a specific piece of land. Title insurance companies and attorneys generally order these from companies/abstractors that specialize in researching a property's chain of title. The abstract is reviewed by attorneys or title insurance companies to determine if there are any title defects to be cleared before a buyer can purchase a clear, marketable and insurable title.

Cancellation of Mortgage
Sometimes called a Satisfaction of Mortgage, Certificate of Satisfaction, or Discharge of Mortgage - a legal instrument signed by a lender acknowledging that a mortgage has been fully paid. It must be recorded with the County Recorder (or Recorder of Deeds) to clear the title to the real property owned by the person who paid off the debt. A Satisfaction of Mortgage is a non-conveyance instrument.

Certificate of Satisfaction
Sometimes called a Discharge of Mortgage, Satisfaction of Mortgage, or Cancellation of Mortgage - a legal instrument signed by a lender acknowledging that a mortgage has been fully paid. It must be recorded with the County Recorder (or Recorder of Deeds) to clear the title to the real property owned by the person who paid off the debt. A Satisfaction of Mortgage is a non-conveyance instrument.

Clear Title
A title free of disputed interests or clouds.

Cloud (on title)
An outstanding claim or encumbrance which negatively affects the marketability of title. Title companies and/or attorneys work to resolve these clouds prior to closing real estate transactions.

Deed
Formal written instrument used to transfer title from one owner to another.

Deed of Trust
A security instrument whereby real property is given as security for a debt.

Deed to Secure Debt
A legal document that pledges property to a lender as security for the repayment of the loan. The term also is used to refer to the loan itself. This document is recorded at the county courthouse and transfers to the lender legal title to the subject property until the loan is satisfied.

Discharge of Mortgage
Sometimes called a Satisfaction of Mortgage, Certificate of Satisfaction, or Cancellation of Mortgage - a legal instrument signed by a lender acknowledging that a mortgage has been fully paid. It must be recorded with the County Recorder (or Recorder of Deeds) to clear the title to the real property owned by the person who paid off the debt. A Satisfaction of Mortgage is a non-conveyance instrument.

HUD-1 Settlement Statement
A standard form that shows all charges imposed on borrowers and sellers in connection with the settlement.

Instrument
A written document.

Judgment
A court order.

Lien
A hold, a claim or charge by one person on the property of another as security for money owed. Claims may include obligations not met or satisfied, judgments, unpaid taxes, material or labor.

Marketable Title
A title that is free and clear of objectionable liens, clouds or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Mortgage
A legal instrument that creates a lien upon real estate for the purpose of securing a debt. The instrument is executed by a lender and a borrower or guarantor as collateral for the payment of a debt that creates a lien on real estate owned by the borrower or guarantor. The borrower or guarantor is called the mortgagor and the lender is called the mortgagee. In some states, a different legal instrument called a deed of trust fulfills a similar function even though it is not legally the same.

Note
A written promise to pay a certain amount of money, at a certain time, or in a specified number of installments.

Real Property
Land and that which is permanently affixed to it.

Refinancing
Process fo the same mortgagor paying off one loan with the proceeds of another.

Rescission
The cancellation of a contract. When using your home as collateral for a loan you have a right to cancel the transaction within 3 business days (most often applicable in a refinance).

Satisfaction of Mortgage
Sometimes called a Discharge of Mortgage, Certificate of Satisfaction, or Cancellation of Mortgage - a legal instrument signed by a lender acknowledging that a mortgage has been fully paid. It must be recorded with the County Recorder (or Recorder of Deeds) to clear the title to the real property owned by the person who paid off the debt. A Satisfaction of Mortgage is a non-conveyance instrument.

Security Interest
An agreement by the owner of real property to convey a right or interest therein to a creditor in exchange for a thing of value. This right or interest provides possession of the property to the creditor in the event the underlying obligation of the owner/borrower is breached (foreclosure). It must have 3 qualities to be created: 1. Value must be provided in exchange for the collateral; 2. the debtor must have rights in the collateral or the ability to convey rights in the collateral to a secured party; and 3. either the debtor must have authenticated a security agreement with a description of the collateral or the creditor must be in possession of the collateral. When all three of these formalities are met, the security interest attaches to the collateral and becomes enforceable.

Title
The evidence or right a person has to the ownership and possession of real property. It may be used to refer to a party's ownership interest in a property, or it may be used to refer to the documents by which a right of ownership is established.

Title Insurance Binder
Frequently referred to as binder or commitment. It is the written commitment of a title insurance company to insure title to the property under the conditions stated in the binder. If the transaction closes, and the settlement agent does not meet all of the conditions on the binder, the result may not be a clear title and the settlement agent may become liable for loss incurred.

Title Insurance Policy
Protects lenders or homeowners against loss of their interest due to legal defects or failure of title to a particular parcel of real property. Benefits are paid only to the "named insured." A lender's policy is required by the lender; however, an owner's policy, though normally purchased, is optional. A title defect could cause an owner to lose all or part of their real property to a superior ownership interest or claim if uninsured.

Title Search or Examination
A check of the title records to determine that the buyer is purchasing a house from the legal owner and that there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants on file which would adversely affect the marketability of title. Used to generate an Abstract of Title. 

Trustee
The party given legal reponsibility to hold property in the best interest of or "for the benefit of" another. When a borrower defaults on a Deed of Trust the trustee may sell the property.