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Glossary of Mortgage Terms
Accelerate – An option given to servicers through principal balance to the originating lender for
an “acceleration” clause in the mortgage or deed their home. The 3 parties included on this
of trust requiring the borrower to pay the entire security instrument are the borrower, the
balance of the loan in full if his or her loan is in originating lender and trustee.
default.
Default – A mortgage or deed of trust is said to
Amortization – The gradual repayment of a be in default when the borrower fails to make the
mortgage loan with equal periodic payments of payments as agreed in the original promissory
both principal and interest calculated to retire note.
the loan at the end of a fixed period of time.
Deferred Payments – Payments that the servicer
Annual Percentage Rate – The cost of your loan authorizes to be postponed in a loan workout.
expressed as a yearly rate. Mortgages include
interest, points, origination fees, and any Deficiency Judgment – A judgment against the
mortgage insurance required by the lender. borrower for the remaining balance on the loan
after a foreclosure sale.
Appraisal – An estimate of the value of a
property. Delinquency – Borrower’s failure to make
mortgage payments on time.
Appreciation – The difference between the
increased value of the property and the original Equity – The net value of an asset, calculated by
value when the property was purchased. determining the difference between the present
value of the property and the mortgage amount
Beneficiary – Washington law defines a owed on that property.
beneficiary to be “the holder of the instrument or
document evidencing the obligations secured by Escrow Account – A segregated trust account in
the deed of trust, excluding persons holding the which escrow funds are held. This account is held
same as security for a different obligation.” by a servicer for payments of taxes, insurance, or
other periodic debts against real property. Part of
Debt-to-Income Ratio (DTI) – Expressed as a the borrower's monthly payment goes into this
percentage, the “DTI” is calculated by dividing the account so funds will be available to pay the
total house payment plus all other debt that taxes, insurance, and other impounded matters
appears on a credit report by the gross monthly when due to avoid the need for the borrower to
income. pay a big lump sum payment.
Deed-in-Lieu of Foreclosure – A foreclosure Fair Market Value – The price a property would
alternative where the servicer allows the sell for on the open market. (If you were to sell
borrower to transfer ownership of the property your home today, how much would it sell for?)
(the deed) to the servicer if the home cannot be
sold at market value Second mortgage Forbearance – An agreement to suspend or
lienholders must be willing to waive their claims. reduce normal monthly payments for a fixed
period of time. At the end of the forbearance
Deed of Trust (DOT) – The recorded document period, the borrower must cure the delinquency
that shows the homeowner/borrower owes a
January 2020 | Page 69
