TITLE INSURANCE GLOSSARY
During the course of buying or selling your home, you will likely come across a host of unfamiliar real estate-related words and phrases. Attorneys' Title Guaranty Fund, Inc. (ATG) provides this list to help ease any confusion you may have. Please Note:The definitions below apply to the meaning of the term as typically given in the issuance of ATG policies. For a complete definition or for use in different contexts, please refer to a legal dictionary (e.g., FindLaw Legal Dictionary) or ask your lawyer.
a condensed history of the title to a parcel of real property consisting of copies of all documents from the public record that affect that parcel such as deeds, mortgages, encumbrances, easements, marriages, deaths, divorces, liens, etc.
standard American Land Title Association (ALTA) format for commitments, policies and miscellaneous title insurance forms. All ATG forms are standard ALTA format.
Annual Percentage Rate (APR)
the yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The APR is disclosed as a requirement of federal truth in lending statutes.
an opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.
a nonrecurring charge levied against property to meet some specific purpose portioned either by benefit derived to property or based on value of property (value for taxation).
the transfer of an interest in a bond, mortgage, lease or other instrument by writing.
Assumption of Mortgage
the act of acquiring title to property that has an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments.
the legal seizure of property to force payment of debt.
the title insurance company is owned by and operated through lawyer-members who issue title insurance policies as part of their law practices. The first bar-related title insurance company was founded in Florida in 1947. Today there are eight separate companies operating in fourteen states.
a line usually shown on the plat map specifying how far a building must be set back from the lot line.
limitations on the use of property or the size and location of houses that are established by governmental law or by covenants in deeds or plats.
Chain of Title
the succession of conveyances from some accepted starting point whereby the present holder of title to real property derives his or her title.
a title that is not encumbered or burdened with unacceptable defects.
a listing of the debits and credits of the buyer and seller to a real estate transaction for the financial settlement of the transaction.
a title insurance term for the preliminary report issued before the actual title policy. It shows the condition of title (as revealed by a title search, a thorough search of the county records) and the steps necessary to complete the transfer of title. It is a written promise to insure a loan.
a form of property ownership providing for individual ownership of a specific apartment or other space not necessarily on ground level, together with an undivided interest in the land or other parts of the structure in common with other owners.
the actual price at which the property is transferred.
Constant Payment Mortgage
a systematic loan reduction plan by which the borrower pays a fixed amount each month, part to repay principal and part interest.
Contract for Deed
an agreement between the seller and the buyer for the purchase of real property. The purchase price is paid in installments over the period of the contract, with the balance due at maturity. When the buyer completes the required payments, the seller is obliged to deliver a deed to the buyer. Under the terms of the Contract for Deed, the buyer is given possession of the property, and he or she is said to have equitable rights in the property while the seller retains legal title.
the act of deeding or transferring title to another.
a written instrument that passes interest in real estate from one person to another, including land contracts, leases, deeds, etc.
an agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property.
Date of Policy
date of recording of deed, mortgage or other interest being insured as evidenced by the later date search report.
an instrument in writing that, when executed and delivered, conveys an interest in real property.
Deed and Money Escrow
an agreement in which money is deposited with a third party to be delivered to the seller of real estate upon receipt of the deed to the property sold.
Deed in Trust
an instrument that conveys property into a trust
Deed of Trust
an instrument creating a lien on real property as security for a debt; a mortgage.
Deposit, Earnest Money
a sum of money or other consideration tendered in conjunction with an offer to purchase rights in real property.
upon completion of closing, funds to be paid out to respective parties in conjunction with the RESPA and/or closing statement.
the right to use or enjoy the land of another, such as the right of way or the right to receive air and light.
Effective Date of Commitment
date of initial search report (i.e., date through which the records in the Recorder's office that affect title to the property being transferred have been searched).
an unauthorized invasion or intrusion of an improvement, fixture or other real property wholly or partly upon another's property. Encroachments typically are either: (1) over building line, (2) over lot line, (3) over easement, or (4) onto the insured premises.
any claim, lien, charge or liability attached to and binding on real property that may lessen its value or obstruct the use of the property but not necessarily prevent transfer of title; a right or interest in a property held by one who is not the legal owner of the property. There are two general classifications of encumbrances: (1) those that affect the title, such as judgments, mortgages and mechanics' liens, and (2) those that affect the physical condition of the property, such as restrictions, encroachments and easements.
form provided by the title insurance company for the amendment of any information that has appeared as part of any commitment or policy or for granting additional coverage or excluding coverage due to some defect or condition of title.
the value of the interest of an owner of property, exclusive of the encumbrances on the property.
the process by which money and/or documents are held by a third person until the satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow). When these terms have been satisfied, there is delivery and transfer of the escrowed funds and documents.
the interest or nature of the interest that one has in property, such as a life estate, the estate of a deceased, real estate, etc.
Evidence of Title
abstract or title policy.
Federal National Mortgage Association (FNMA or Fannie Mae)
a private corporation dealing in the purchase of first mortgages at discounts.
the maximum possible estate one can possess in real property; absolute ownership. It is of indefinite duration, freely transferable and inheritable.
a mortgage that has priority as a lien over all other mortgages.
a legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document.
"Gap" Coverage Endorsement
an endorsement extending the effective date of the commitment to the date of recording of the deed and mortgage.
"Gap" in Chain of Title
an instance in which a conveyance is missing from the county records.
the time between effective date of initial search and recording of instruments from closing during which no search has been performed.
Government National Mortgage Association (GNMA or Ginnie Mae)
a federal association, working with FHA, that offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity.
one who receives an interest in real property by deed, easement, or other instrument of conveyance.
real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
includes the coverage of Hazard Insurance plus added coverage such as personal liability, theft away from home (items stolen from the insured's car), and other such coverage.
the dwelling (house and contiguous land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of creditors. Property tax exemptions (for all or party of the tax) are also available in some states. Statutory requirements to establish a homestead may include a formal declaration to be recorded.
an acronym for the United States Department of Housing and Urban Development, a Cabinet-level agency of the federal government. Its mission is to increase homeownership, support community development, and increase access to affordable housing free from discrimination.
Ingress and Egress
the right of legal access to insured premises.
search of the county records from the date of prior evidence of title or for the required period of time, if prior title evidence is unavailable, to the latest current entry at the county Recorder's office for purpose of preparing commitment.
the serialized exterior into which Schedules A and B are placed.
an undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
a debt or other obligation resulting from a court order.
a mortgage, such as a second mortgage, that is subordinate in right or lien priority to an existing mortgage on the same property.
Later Date Search
search of the county records to update the search from the date of the initial search. It may include a search through the recording date of the deed or other documents for the transaction.
the transfer of possession and right to use property for a stipulated period with rent paid to owner.
a description, either by metes and bounds, lot and block, unit and/or volume and page, that exactly details the perimeter of certain property. Legal descriptions are relied upon more heavily than street addresses as they are more exact and unchanging.
a claim on the property of another person as security for the payment of a debt.
a lien given by statute to those who perform labor or furnish material for the improvement of real property.
Metes and Bounds
a description of real property by courses and distances, giving the lengths and direction of the boundaries of a tract of land, usually irregular in shape.
a legal document used to secure the performance of an obligation. The purpose of the mortgage is to create a lien on the mortgaged property as security for repayment of a debt.
insurance written by an independent mortgage insurance company (referred to as an "MIC") protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal Government writes this form of insurance through the FHA and the VA.
the source of funds for a mortgage loan; one who receives and holds a mortgage as security for repayment of a debt.
a title insurance policy used to insure the mortgage lien that a lender is acquiring.
the owner of property who borrows money and mortgages property as security for the loan.
a title insurance policy used to insure title to real property that a purchaser is acquiring.
a plan or map of a town, section or subdivision indicating the location and boundaries of individual properties.
a public record of maps of subdivided land showing the location and size of each parcel of land in a stated area.
the right to prepay a loan without penalty, either in full or in part.
a penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due.
Prior Title Policy
a previous title policy written by a title insurer, insuring title to the subject property.
Private Mortgage Insurance
insurance against a loss by a lender in the event of default by the borrower (mortgagor). The insurance is similar to insurance by a government agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.
Purchase Money Mortgage
a mortgage securing a promise to pay the purchase price for the sale of real estate. A third party lender may be a purchase money mortgagee, providing the proceeds of the loan were actually used to purchase the real estate. A mortgage securing a debt in which all of the loan proceeds are used for the purchase of real estate.
Quit Claim Deed
a deed of conveyance whereby whatever interest the grantor possesses in the property described in the deed is conveyed to the grantee without warranty.
an acronym for Real Estate Settlement Procedures Act of 1974, a consumer protection statute designed to help homebuyers be better shoppers in the home buying process by specifically addressing closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is enforced by the Department of Housing and Urban Development (HUD). The term “RESPA” is also used in connection with the main document of most real estate transactions: The document contains the final itemized charges and amounts due from/to the buyer and seller. This document, created by the Department of Housing and Urban Development (HUD), is called a
“HUD-1 Settlement Statement” but is often referred to as “the RESPA” or “the HUD-1.”
filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors, or other interested parties. Recording is controlled by statute and usually requires the witnessing and notarizing of an instrument to be recorded.
(1) the renewing of an existing loan with the same borrower and lender; (2) a loan on the same property by either the same lender or borrower; (3) the selling of loans by the original lender.
a limitation upon the use or occupancy of real estate placed by covenants in deeds or plats or by government- imposed laws.
a binding agreement between the buyer and seller outlining the terms of a sale of real estate.
the first page of the commitment or policy inside jacket cover containing information as to the name of the insured, amount of insurance, and the interest and property insured.
the schedule of the commitment or policy inside jacket cover containing an enumeration of general and specific items for which coverage under the policy is or will be excepted.
the Commitment, Owner Policy and Mortgagee Policy, Construction Mortgage Policy and Assumption Certificate are the serialized forms for which the member must account to ATG.
a statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale. A separate statement is prepared for the seller and the buyer.
an instrument drawn under order of court to convey title to property sold to satisfy a judgment at law.
a charge placed against real estate by public authority to defray the cost of making public improvements from which the real estate benefits.
an estate in fee; a form of ownership. The main types are joint tenancy, tenancy in common, and tenancy by the entirety.
Tenancy by the Entirety
a form of ownership by the husband and wife whereby each owns the entire property. In the event of the death of one, the survivor owns the property without probate.
Tenancy in Common
an undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists.
an agreement binding the insurer to indemnify the insured for losses sustained by reason of defects in title to the real estate.
a review of all recorded documents affecting specific piece of property to determine the present condition of title.
state tax on the transfer of real property. Based on purchase price or money changing hands. Check statutes for each state. Also called documentary transfer tax.
a right of property, real or personal, held by one party for the benefit of another.
a certificate of beneficial ownership in real estate, the title to which is held in trust by the trustee who issues the certificate.
term used synonymously with a mortgage.
(1) one who is appointed, or required by law, to execute a trust; (2) one who holds title to real property under the terms of a deed of trust.
instrument that conveys title to property from a trust (i.e., executed by the trustee)
Truth in Lending
also referred to as Regulation Z. Part of the Consumer Credit Protection Act. Federal legislation designed to protect borrowers by requiring lenders to furnish information regarding the cost of the loan. The law requires interest to be expressed as the annual percentage rate (APR) to the nearest 1/8 of one percent. The APR must include charges such as loan fees, discount points, servicing fees, etc., as well as interest. The law applies to one- to four-family residential property only. Also applies to other consumer loans.
conveyance of title that contains certain assurances and guarantees by the grantor that the deed conveys a good and unencumbered title.
a second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgage under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate than if refinancing.