CA Broker Exam V.4

FEDERAL DEPOSIT INSURANCE CORPORATION

(FDIC) Agency of the federal government which insures deposits at commercial banks, savings banks and savings and loans.

FEDERAL HOUSING ADMINISTRATION

(FHA) An agency of the federal government that insures private mortgage loans for financing of new and existing homes and home repairs.

FEDERAL NATIONAL MORTGAGE ASSOCIATION

(FNMA) "Fannie Mae" a quasipublic agency converted into a private corporation whose primary function is to buy and sell FHA and VA mortgages in the secondary market.

"FREDDIE MAC"

(See FEDERAL HOME LOAN MORTGAGE CORPORATION.)

FRAUDS, STATUTE OF

(See Statute of Frauds.)

FISCAL YEAR

A business or accounting year as distinguished from a calendar year.

GRID

A chart used in rating the borrower risk, property and the neighborhood.

HUNDRED PERCENT LOCATION

A city retail business location which is considered the best available for attracting business.

EXECUTORY CONTRACT

A contract in which something remains to be done by one or both of the parties.

GAMBREL ROOF

A curb roof, having a steep lower slope with a flatter upper slope above.

GIFT DEED

A deed for which there is no consideration.

INDENTURE

A formal written instrument made between two or more persons in different interests, such as a lease.

FIRST MORTGAGE

A legal document pledging collateral for a loan (See "mortgage") that has first priority over all other claims against the property except taxes and bonded indebtedness. That mortgage superior to any other.

FIRST TRUST DEED

A legal document pledging collateral for a loan (See "trust deed") that has first priority over all other claims against the property except taxes and bonded indebtedness. That trust deed superior to any other.

GENERAL LIEN

A lien on all the property of a debtor.

GRANT DEED

A limited warranty deed using the word "grant" or like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor.

EXCLUSIVE AGENCY LISTING

A listing agreement employing a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent.

EXCLUSIVE RIGHT TO SELL LISTING

A listing agreement employing a broker to act as agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold during the duration of the listing through another broker or by the owner without the services of an agent.

FUNCTIONAL OBSOLESCENCE

A loss of value due to adverse factors from within the structure which affect the utility of the structure, value and marketability.

EXECUTOR

A man named in a will to carry out its provisions as to the disposition of the estate of a deceased person. (A woman is executrix.)

GROSS RATE

A method of collecting interest by adding total interest to the principal of the loan at the outset of the term.

INSTALLMENT REPORTING

A method of reporting capital gains by installments for successive tax years to minimize the impact of the totality of the capital gains tax in the year of the sale.

GOVERNMENT SURVEY

A method of specifying the location of parcel of land using prime meridians, base lines, standard parallels, guide meridians, townships and sections.

INSTALLMENT NOTE

A note which provides for a series of periodic payments of principal and interest, until amount borrowed is paid in full. This periodic reduction of principal amortizes the loan.

GROSS RENT MULTIPLIER

A number which, times the gross income of a property, produces an estimate of value of the property. Example — The gross income from an unfurnished apartment building is $200,000 per annum. If an appraiser uses a gross multiplier of 7%, then it is said that based on the gross multiplier the value of the building is $1,400,000.

FIDUCIARY

A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

GRATUITOUS AGENT

A person not paid by the principal for services on behalf of the principal, who cannot be forced to act as an agent, but who becomes bound to act in good faith and obey a principal's instructions once he or she undertakes to act as an agent.

GRANTEE

A person to whom a grant is made.

INDEPENDENT CONTRACTOR

A person who acts for another but who sells final results and whose methods of achieving those results are not subject to the control of another.

GRANTOR

A person who transfers his or her interest in property to another by grant.

HIP ROOF

A pitched roof with sloping sides and ends.

GABLE ROOF

A pitched roof with sloping sides.

GAIN

A profit, benefit, or value increase.

FEUDAL TENURE

A real property ownership system in which ownership rests with a sovereign who may grant lesser interests in return for service or loyalty. This is in contrast to allodial tenure.

FIDELITY BOND

A security posted for the discharge of an obligation of personal services.

FRANCHISE

A specified privilege awarded by a government or business firm which awards an exclusive dealership.

HOMESTEAD (exemption)

A statutory protection of real property used as a home from the claims of certain creditors and judgments up to a specified amount.

GRANT

A technical legal term in a deed of conveyance bestowing an interest in real property on another. The words "convey" and "transfer" have the same effect.

FRONTAGE

A term used to describe or identify that part of a parcel of land or an improvement on the land which faces a street. The term is also used to refer to the lineal extent of the land or improvement that is parallel to and facing the street, e.g., a 75-foot frontage.

IMPOUNDS

A trust type account established by lenders for the accumulation of borrowers funds to meet periodic payment of taxes, FHA mortgage insurance premiums, and/or future insurance policy premiums, required to protect their security. Impounds are usually collected with the note payment. The combined principal, interest, taxes and insurance payment is commonly termed a PITI payment.

INJUNCTION

A writ or order issued under the seal of a court to restrain one or more parties to a suit or proceeding from doing an act which is deemed to be inequitable or unjust in regard to the rights of some other party or parties in the suit or proceeding.

FANNIE MAE

An acronymic nickname for Federal National Mortgage Association (FNMA).

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

An agency of HUD, which functions in the secondary mortgage market, primarily in social housing programs. Commonly called by the acronymic nickname "Ginnie Mae" (GNMA).

FARMERS HOME ADMINISTRATION

An agency of the Department of Agriculture. Primary responsibility is to provide financial assistance for farmers and others living in rural areas where financing is not available on reasonable terms from private sources.

INDEMNITY AGREEMENT

An agreement by the maker of the document to repay the addressee of the agreement up to the limit stated for any loss due to the contingency stated on the agreement.

GROUND LEASE

An agreement for the use of the land only, sometimes secured by improvements placed on the land by the user.

HIGHEST AND BEST USE

An appraisal phrase meaning that use which at the time of an appraisal is most likely to produce the greatest net return to the land and/or buildings over a given period of time; that use which will produce the greatest amount of amenities or profit. This is the starting point for appraisal.

FEE SIMPLE DEFEASIBLE

An estate in fee subject to the occurrence of a condition subsequent whereby the estate may be terminated.

FREEHOLD ESTATE

An estate of indeterminable duration, e.g., fee simple or life estate.

FEE

An estate of inheritance in real property.

INCREMENT

An increase. Most frequently used to refer to the increase of value of land that accompanies population growth and increasing wealth in the community. The term "unearned increment" is used in this connection since values are supposed to have increased without effort on the part of the owner.

FEDERAL HOME LOAN MORTGAGE CORPORATION

An independent stock company which creates a secondary market in conventional residential loans and in FHA and VA loans by purchasing mortgages.

GOODWILL

An intangible but salable asset of a business derived from the expectation of continued public patronage.

FIXTURES

Appurtenances attached to the land or improvements, which usually cannot be removed without agreement as they become real property; examples — plumbing fixtures, store fixtures built into the property, etc.

INITIAL RATE DISCOUNT

As applies to an adjustable rate mortgage, the index value at the time of loan application plus the margin less the initial note rate.

FULLY INDEXED NOTE RATE

As related to adjustable rate mortgages, the index value at the time of application plus the gross margin stated in the note.

HOUSING FINANCIAL DISCRIMINATION ACT OF 1977 (Holden Act)

California Health and Safety Code Section 35800, et seq., designed primarily to eliminate discrimination in lending practices based upon the character of the neighborhood in which real property is located. (See Redlining.)

EXPENSES

Certain items which appear on a closing statement in connection with a real estate sale.

IMPERATIVE NECESSITY

Circumstances under which an agent has expanded authority in an emergency, including the power to disobey instructions where it is clearly in the interests of the principal and where there is no time to obtain instructions from the principal.

INSTALLMENT SALES CONTRACT

Commonly called contract of sale or "land contract." Purchase of real estate wherein the purchase price is paid in installments over a long period of time, title is retained by seller, and upon default by buyer (vendee) the payments may be forfeited.

GROUND RENT

Earnings of improved property credited to earnings of the ground itself after allowance is made for earnings of improvements; often termed economic rent.

FEDERAL LAND BANK SYSTEM

Federal government agency making long term loans to farmers.

FISCAL CONTROLS

Federal tax revenue and expenditure policies used to control the level of economic activity.

FINANCIAL INTERMEDIARY

Financial institutions such as commercial banks, savings and loan associations, mutual savings banks and life insurance companies which receive relatively small sums of money from the public and invest them in the form of large sums. A considerable portion of these funds are loaned on real estate.

GRADE

Ground level at the foundation.

GRADUATED LEASE

Lease which provides for a varying rental rate, often based upon future determination; sometimes rent is based upon result of periodical appraisals; used largely in long-term leases.

FORFEITURE

Loss of money or anything of value, due to failure to perform.

INCORPOREAL RIGHTS

Nonpossessory rights in real estate, a rising out of ownership, such as rents.

INCOME (CAPITALIZATION) APPROACH

One of the three methods of the appraisal process generally applied to income producing property, and involves a three-step process— (1) find net annual income, (2) set an appropriate capitalization rate or "present worth" factor, and (3) capitalize the income dividing the net income by the capitalization rate.

HOLDER IN DUE COURSE

One who has taken a note, check or bill of exchange in due course: 1. before it was overdue; 2. in good faith and for value; and 3. without knowledge that it has been previously dishonored and without notice of any defect at the time it was negotiated to him or her.

HEIR

One who inherits property at the death of the owner of the land, if the owner has died without a will.

INCOMPETENT

One who is mentally incompetent, incapable; any person who, though not insane, is, by reason of old age, disease, weakness of mind, or any other cause, unable, unassisted, to properly manage and take care of self or property and by reason thereof would be likely to be deceived or imposed upon by artful or designing persons.

FORECLOSURE

Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

FRONT FOOT

Property measurement for sale or valuation purposes; the property measured by the front linear foot on its street line—each front foot extending the depth of the lot.

GRADUATED PAYMENT MORTGAGE

Providing for partially deferred payments of principal at start of loan. (There are a variety of plans.) Usually after the first five years of the loan term the principal and interest payment are substantially higher, to make up principal portion of payments lost at the beginning of the loan. (See Variable Interest Rate.)

FHLMC

See FEDERAL HOME LOAN MORTGAGE CORPORATION.

HOLDOVER TENANT

Tenant who remains in possession of leased property after the expiration of the lease term.

FIDUCIARY DUTY

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

HABENDUM CLAUSE

The "to have and to hold" clause which may be found in a deed.

HUD

The Department of Housing and Urban Development which is responsible for the implementation and administration of U.S. government housing and urban development programs.

INDORSEMENT

The act of signing one's name on the back of a check or note, with or without further qualification.

FUTURE BENEFITS

The anticipated benefits the present owner will receive from the property in the future.

FROSTLINE

The depth of frost penetration in the soil. Varies in different parts of the country. Footings should be placed below this depth to prevent movement.

FEDERAL RESERVE SYSTEM

The federal banking system of the United States under the control of central board of governors (Federal Reserve Board) involving a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.

FACADE

The front of a building, often used to refer to a false front and as a metaphor.

FEE SIMPLE ESTATE

The greatest interest that one can have in real property. An estate that is unqualified, of indefinite duration, freely transferable and inheritable.

FINANCING STATEMENT

The instrument which is filed in order to give public notice of the security interest and thereby protect the interest of the secured parties in the collateral. (See definition of Security Interest and Secured Party.)

FRAUD

The intentional and successful employment of any cunning, deception, collusion, or artifice, used to circumvent, cheat or deceive another person whereby that person acts upon it to the loss of property and to legal injury. (Actual Fraud — A deliberate misrepresentation or representation made in reckless disregard of its truth or its falsity, the suppression of truth, a promise made without the intention to perform it, or any other act intended to deceive.)

FEE SIMPLE

The maximum possible estate in land in which the owner holds unconditional power of disposition; an estate freely transferable and inheritable.

FRONT MONEY

The minimum amount of money necessary to initiate a real estate venture, to get the transaction underway.

FIXITY OF LOCATION

The physical characteristic of real estate that subjects it to the influence of its surroundings.

FILTERING

The process whereby higher-priced properties become available to lower income buyers.

FINANCING PROCESS

The systematic 5 step procedure followed by major institutional lenders in analyzing a proposed loan, which includes — filing of application by a borrower; lender's analysis of borrower and property; processing of loan documentation; closing (paying) the loan; and servicing (collection and record keeping).

GROSS NATIONAL PRODUCT (GNP)

The total value of all goods and services produced in an economy during a given period of time.

FAIR MARKET VALUE

This is the amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under pressure to buy or sell.

EXECUTE

To complete, to make, to perform, to do, to follow out; to execute a deed, to make a deed, including especially signing, sealing and delivery; to execute a contract is to perform the contract, to follow out to the end, to complete.

HYPOTHECATE

To pledge a thing as security without the necessity of giving up possession of it.

GROSS INCOME

Total income from property before any expenses are deducted.

GROSS MARGIN

With regard to an adjustable rate mortgage, an amount expressed as percentage points, stated in the note which is added to the current index value on the rate adjustment date to establish the new note rate.

INITIAL NOTE RATE

With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from the fully indexed note rate.