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Glossary of Terms - C

Call Option:

A provision in the mortgage that gives the mortgagee (the lender) the right to call the mortgage due and payable at the end of a specified period for whatever reason.

Cap:

A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

Capital:

(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure:

The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital Gain:

At resale of an asset, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). 

Capital Improvement:

Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Carrying Costs:

The costs incurred to maintain a property (taxes, interest, insurance, utilities and so on).

Cash-Out Refinance:

A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points and the amount required to satisfy any outstanding subordinate mortgage liens.  In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Certificate of Deposit:

A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Deposit Index:

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.  It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit.

Certificate of Eligibility:

A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.

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 mortgage.

Certificate of Title:

A statement provided by an abstract company, title company or attorney stating that the title to real estate is legally held by the current owner.

Chain of Title:

The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency:

The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Change Order:

A change in the original construction plans ordered by the property owner or general contractor.

Chattel:

Another name for personal property.

Clear Title:

A title that is free of liens or legal questions as to ownership of the property.

Closing:

A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs.  Also called “settlement.”  At this meeting, ownership of the property is transferred from the seller to the buyer.

Closing Agent:

The person or entity that coordinates the various closing activities, including the preparation and recordation of closing documents and the disbursement of funds.  This person may also be referred to as an “escrow agent” or “settlement agent.”  Typically, the closing is conducted by title companies, escrow companies or attorneys.

Closing Cost Item:

A fee or amount that a home buyer must pay at closing for a single service, tax or product.  Closing costs are made up of individual closing cost items such as origination fees and attorney’s fees.  Many closing cost items are included as numbered items on the HUD-1 statement.

Closing Costs:

Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property.  Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow and charges for obtaining title insurance and a survey.  Closing costs percentage will vary according to the area of the country; lenders or REALTORS® often provide estimates of closing costs to prospective homebuyers.

Closing Date:

The date on which the sale of a property is to be finalized and a loan transaction completed.  Often, a real estate sales professional coordinates the setting of this date with the buyer, the seller, the closing agent and the lender.

Closing Statement:

An accounting of funds made to the buyer and seller separately.  Required by law to be made at the completion of every real estate transaction.

Cloud on Title:

Any conditions revealed by a title search that adversely affect the title to real estate.  Usually clouds on title cannot be removed except by a quitclaim deed, release or court action.

CLUE (Comprehensive Loss Underwriting Exchange):

CLUE (Comprehensive Loss Underwriting Exchange) is the insurance industry’s national database that assigns individuals a risk score.  CLUE also has an electronic file of a property’s insurance history.  These files are accessible by insurance companies nationally.  These files could impact the ability to sell property as they might contain information that a prospective buyer might find objectionable, and in some cases not even insurable.

Co-Insurance:

A sharing of insurance risk between the insurer and the insured.  Co-insurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

Co-Insurance Clause:

A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.

Collateral:

An asset (such as a car or a home) that guarantees the repayment of a loan.  The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Collection:

The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.

Co-Maker:

A person who signs a promissory note along with the 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.

Commission:

The fee charged by a real estate broker or salesperson or mortgage broker for negotiating a real estate or loan transaction.  A commission is generally a percentage of the price of the property or loan.

Commission Split:

The percentage split of commission compensation between the real estate salesperson and the real estate brokerage.

Commitment Letter:

A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.  Also known as a “loan commitment.”

Common Area Assessments:

Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners’ association costs and expenses and to repair, replace, maintain, improve or operate the common areas of the project.

Common areas:

Those portions of a building, land and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’ association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance.  Common areas include swimming pools, tennis courts and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Law:

An unwritten body of law based on general custom in England and used to an extent in the United States.

Comparables:

An abbreviation for ‘comparable properties’; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location and amenities and have recently been sold.  Comparables help the appraiser determine the approximate fair market value of the subject property.

Comparative Market Analysis (CMA):

A study done by a real estate licensee using active, pending and sold comparable properties to estimate a listing price for a property.

Compound Interest:

Interest paid on the original principal balance and on the accrued and unpaid interest.

Concession:

Something given up or agreed to in negotiating the sale of a house.  For example, the sellers may agree to help pay for closing costs.

Condemnation:

The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.

Condominium:

A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project and sometimes the exclusive use of certain limited common areas.

Condominium Conversion:

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel:

A condominium project that has rental or registration desks, short-term occupancy, food and telephone services and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

Construction Loan:

A short-term, interim loan for financing the cost of construction.  The lender makes payments to the builder at periodic intervals as the work progresses.

Contingency:

A condition that must be met before a contract is legally binding.  For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract:

An oral or written agreement to do or not to do a certain thing.

Contract-for-Deed:

A sales contract in which the buyer takes possession of the property, but the seller holds the title until the loan is paid.  Also known as an installment sales contract.

Conventional Mortgage:

A mortgage that is not insured or guaranteed by the federal government.  Contrast with a 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 timeframes after loan origination.

Convertible ARM:

An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative (Co-op):

A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Cooperative Commission:

A commission offered to the buyer’s agent brokerage for bringing a buyer to the selling brokerage’s listing.

Cooperative Corporation:

A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.

Cooperative Mortgages:

Mortgages related to a cooperative project.  This usually refers to the multi-family mortgage covering the entire project, but occasionally describes the share loans on the individual units.

Cooperative Project:

A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.

Corporate Relocation:

Arrangements under which an employer moves an employee to another area as part of the employer’s normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office

Co-Signer:

A second party who signs a promissory note together with the primary borrower.

Cost of Funds Index (COFI):

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.  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.

Cotenancy:

Ownership of an interest in a particular parcel of land by more than one person; e.g. tenancy in common or joint tenancy.

Counteroffer:

The response to an offer or a bid by the seller or buyer after the original offer or bid with changed terms.

Covenant:

A clause in a mortgage that obligates or restricts the borrower and that, if violated, 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 History:

A record of an individual’s open and fully repaid debts.  A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Life Insurance:

A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Creditor:

A person to whom money is owed.

Credit Report:

A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

Credit Reporting Agency (or Bureau):

An organization that prepares reports that are used by lenders to determine a potential borrower’s credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Credit Repository:

An organization that gathers, records, updates and stores financial and public records information about the payment records of individuals who are being considered for credit.

Credit Score:

A score assigned to a borrower’s credit report based on information contained therein.