Oscar Castillo
"Residential" Real Estate

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    - Glossary

 

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Fair Credit Reporting Act   the Fair Credit Reporting Act gave consumers the right of access to, and correction of, credit reports.

Fair Employment and Housing Act   California's Fair Employment and Housing Act (FEHA) (Sections 13100-13196 of the Government Code) prohibits housing discrimination based on marital status as well as race, color, religion, sex, national origin or ancestry. The Department of Fair Employment and Housing enforces the law.

Fair Housing Act   pursuant to the federal Fair Housing Act, any offer to sell, rent, buy, or exchange property shall not contain any preference, limitation, or discrimination based on race, color, religion, sex, national origin, handicap, familial status, or an intention to make such preference, limitation or discrimination.

Fair Housing Amendment Act of 1988   extends the Civil Rights Act of 1968 to cover handicapped persons and families with children.

Fair Market Value (FMV)   the most likely sales price of a property within a specific amount of time. An appraised value is an estimate of the current fair market value. Offers are compared to an independent assessment of the home’s current market value. In preparing the offer to submit to the investor for approval, the Short Sale Specialist will counter offer to get the best possible fair market value. When offers do not represent fair market values, they are less likely to be approved by the investor.

Fannie Mae   is the nickname for the Federal National Mortgage Association (FNMA).  Established in 1938, Fannie Mae's purpose is to create a secondary market for the purchase and sale of mortgages.  In 1968, Fannie Mae ceased to exist as a government entity and became a quasi-governmental, federally chartered corporation in order to buy mortgages other than those insured by the Federal Housing Administration (FHA).  Fannie Mae purchases pools of mortgages from lenders and resells them in the form of mortgage-backed and other securities to investors. Purchases are generally restricted to conforming loans, which are loans that meet certain size limits and other conditions. Fannie Mae purchases mortgages from banks, bundles them and sells them off on the market as larger, consolidated financial instruments. This process was established by the federal government to enable banks to wipe debt off of their books, while at the same time allowing Fannie Mae to profit from relatively low investments.

Fannie Mae's mortgage-backed securities are similar to bonds and have varying maturities and coupon rates. The securities generally pay interest as well as principal to the investor monthly, which means investors earn interest on a decreasing principal amount over time. Fannie Mae is exempt from Securities and Exchange Commission regulations and is not subject to state or local income taxes.  

Fannie Mae's purchasing activity increases the funding available for mortgage lending by providing lenders with cash to make additional loans. As a result, Fannie Mae's conditions for loan purchases affect the availability and interest rates on certain types of conforming and nonconforming loans.   Fannie Mae guarantees the payment of interest and principal on its mortgage-backed securities; if there are defaults on the underlying mortgages, Fannie Mae will make the required monthly payments on the securities.

Federal Deposit Insurance Corporation (FDIC)   an independent federal agency that insures the deposits in commercial banks.

Federal fair housing law   In 1968, Congress enacted Title VIII of the Civil Rights Act, called the Federal Fair Housing Act, which declared a national policy of providing fair housing throughout the United States (reference Sections 3601-3631 of Title 42, United States Code). This law makes discrimination based on race, color, sex, familial status, handicap, religion or national origin illegal in connection with the sale or rental of most dwellings and any vacant land offered for residential construction or use.

Federal funds rate (aka: Fed Funds Rate) The interest rate at which banks and other depository institutions lend money to each other, usually on an overnight basis.  The law requires banks to keep a certain percentage of their customer's money on reserve, where the banks earn no interest on it. Consequently, banks try to stay as close to the reserve limit as possible without going under it, lending money back and forth to maintain the proper level.   How it's used: Like the federal discount rate, the federal funds rate is used to control the supply of available funds and hence, inflation and other interest rates. Raising the rate makes it more expensive to borrow. That lowers the supply of available money, which increases the short-term interest rates and helps keep inflation in check. Lowering the rate has the opposite effect, bringing short-term interest rates down.  Currently: What surprised the markets was the Fed's decision to tie the Fed Funds Rate to the unemployment rate. Instead of keeping with its plan of maintaining low rates until "at least mid-2015," now the Fed is going to hold the Fed Funds Rate steady as "long as the unemployment rate remains above 6.5%."  Bottom Line:  Home loan rates remain near historic lows, making now a great time to purchase or refinance a home.

Federal Housing Administration (FHA)   a federal agency established in 1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home-financing system through the insurance of housing mortgages and credit and to exert a stabilizing influence on the mortgage market. FHA was the government's response to a lack of quality housing, excessive foreclosures and a building industry that collapsed during the depression.

Federal Home Loan Bank System (FHLB)   regulates the nation's savings and loan associations, much like the Federal Reserve governs the commercial banking industry

Federal Home Loan Mortgage Corporation (FHLMC)   commonly known as "Freddie Mac," a federally chartered corporation established in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie Mac was created as a part of the savings association system and, while it is not so limited, its loan purchase policies are designed to accommodate savings association needs. It functions with an independent board of directors but is subject to oversight by HUD.

Federal National Mortgage Association (FNMA)  popularly known as "Fannie Mae," an active participant in the secondary mortgage market. Fannie Mae was established as a federal agency in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government-insured loans in a depression-that wacked the economy when only a few lending institutions would undertake this type of loan. The FNMA’s primary focus was to ensure that lower-income families would have access to housing loans by purchasing and securing mortgages. The idea was that by purchasing a mortgage from an approved mortgage seller, the FNMA could then offer that mortgage to a family that would otherwise not qualify for lending. The FNMA backed and secured the mortgage seller’s loan, which guaranteed the mortgage seller’s interests.

Federal Reserve System ("the Fed")   the nation's central bank created by the Federal Reserve Act of 1913. Its purpose is to help stabilize the economy through the judicious handling of the money supply and credit available in this country. The system functions through a seven-member Board of Governors (appointed by the President) and 12 Federal Reserve District Banks, each with its own president. The system sets policies and works with the privately owned commercial banks.

Federal Water Pollution Control Act   enacted by Congress in 1972, this federal law administered by the EPA regulates the release of pollutants into navigable waters.

Fee simple estate   the maximum possible estate one can possess in real property. A fee simple estate is the least limited interest and the most complete and absolute ownership in land; it is of indefinite duration, freely transferable and inheritable.

Fee simple determinable   a fee simple determinable is an estate in real property that exists "so long as," "while" or "during the period" that a certain prescribed use continues.  Such use is described in the grant of conveyance. For example, a conveyance to the University.  This can automatically end when the purpose for which it has been prescribed terminates.  At this point in time, it can be reverted back to the grantor or the grantors heirs.

Fee simple subject to a condition subsequent   a fee simple subject to a condition subsequent is an estate conveyed "provided that," "on the condition that" or "if" it is used for a specific purpose. If it is no longer used for that purpose, it reverts to the original grantor or his heirs.  When the fee condition subsequent property is no longer used for its prescribed purpose, the original grantor (or heirs) must physically retake possession of the property within a reasonable period of time after the breach.

Fee title  The maximum possible estate one can possess in real property. A fee title estate is the least limited interest and the most complete and absolute ownership in land; it is of indefinite duration, freely transferable and inheritable.

FHA  (Loans)    HUD charges two insurance premiums – a monthly one (MMIP) and an up-front one (UFMIP) that is usually added into the loan.  A loan insured contract in which HUD through FHA insures that the named lender will recover a specific percentage of the loan amount from the insurer (FHA) in the event that the loan goes bad.

FICO   acronym for "Fair, Isaac & Company." FICO is the most commonly used scoring system used by lenders to derive credit scores for borrowers.

Fictitious business (company) name   a business name other than that of the person under whom the business is registered. Most state license laws require such brokerage offices operating under an assumed name be jointly registered under the supervising broker's name and the fictitious business name.

Fictitious business name statement (California)   a fictitious business name statement must be filed with the county clerk in the county of the broker's principal business address, and a copy sent to the Real Estate Commissioner. The commissioner may refuse to allow the use of a name that may be inappropriate or misleading.

Fiduciary   a relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker (and salesperson) to a principal. The fiduciary owes complete allegiance to the client. Among the obligations that a fiduciary owes to his or her principal and the duties are that of of loyalty, obedience and full disclosure; the duty to use skill, care and diligence; and the duty to account for all monies.

Fiduciary Duties   an obligation of trust imposed on an agent toward his/her principal. These duties include loyalty, disclosure, confidentiality, obedience, reasonable care, due diligence, and accountability for funds and documents under the agent's control. Every agent has a fiduciary responsibility to the principal, once they are engaged.

Final escrow instructions   statements prepared by the escrow agent which reflect the final figures and instructions required to close escrow.

Financial intermediaries   a financial institution that accepts deposits and makes loans.

Financial Management Rate of Return (FMRR)   a multi-year analysis of rate of return. Used by investors in medium and large properties (occasionally on small properties). Multi-year cash flows and net sale proceeds are analyzed using discounted cash flow techniques to solve for the Financial Management Rate of Return (FMRR).    FMRRs are the best rate of return indicator, because they require an analysis of the investor's entire holding period, not just a single year. The discounting process takes into consideration the time value of money, and thereby produces a more realistic rate of return.

Financial statement   a brief summary of a person's assets, liabilities and earnings records.

Financing Acceptance Deadline   the date in the offer to purchase that the buyer expects to have the loan commitment from the bank and may be used to nullify the sale contract if the mortgage is not obtained.

Finder's fee   a fee paid to someone for "finding" either the buyer to purchase or the seller to list a property.

Fire insurance requirement form   A statement signed by the "borrower" agreeing to comply with the lender's requirements for fire insurance coverage.

Fire rating   a rating of the length of time it takes a fire to penetrate a barrier. Designates the ability of a material to contain a fire in a carefully controlled test setting for a specified period of time.

Fiscal policy   the government's policy in regarding to taxation and spending programs. The difference between these two areas determines the amount of money the government will withdraw from or feed into the economy, which can stimulate or restrain economic growth.


Fiscal Solvency Act of 2012 -  minimum annual premiums for mortgage insurance will be set, and lenders that have committed fraud will be required to reimburse the FHA for mortgage-insurance premium (MIP) losses.  The purpose of this Act will allow the Federal Housing Administration (FHA) to continue its efforts to strengthen its enforcement capabilities in order to protect its insurance fund and American taxpayers.


Fixed expenses   those recurring expenses that have to be paid regardless of whether the property is occupied; for example, real property taxes, hazard insurance and debt service. These expenses contrast with operating expenses necessary to maintain the production of income from the operation of a property.

Fixed-fee   a contractor submits a bid proposing a fixed amount to do a job. Most construction bids are made on this basis.

Fixed-rate loan   a loan with the same rate of interest for the life of the loan.

Fixed-rate mortgage    are mortgages where the interest rate stays the same for the entire term of the loan. The advantage to a fixed rate mortgage is that if you lock a relatively low rate, your payment won’t go up when rates do

Fixtures   an article that was once personal property but has been so affixed to real estate that it has become real property. Whether an article is a fixture depends on the intention of the parties and may be determined by the manner in which the item is attached, its type and adaptability to the real property, the purpose it serves, and the relationship of the parties.

Flash Sale   In a "hot" housing market homes sell in less than 24 hours. That is:  from the time the home is listed and an offer is accepted,  the list status status goes from ACTIVE to PENDING in less than a day.

Flashing   sheet metal or other impervious material used in roof and wall construction as a barrier to water seepage.

Flag Lot - a parcel of land "shaped like a flag", the staff is a narrow strip (the road) providing vehicular and pedestrian access to a public street or waterway with bulk of the property containing no frontage and the bulk of the property lying/located to the rear of other lots. . When planned, it is a way to maximize property density without having to install additional streets. Some jurisdictions require subdivision platting and approval for any project that includes building additional streets. Flag lots sometimes viewed as a way around the "platting" laws of a City/community.  The Pros of a flag lot would be that you and neighbors whom you share it with have a private road to yourselves. This might be a good thing if you have children and want them to play in a "safer" place where the only cars coming up the road are usually those that live there or guests visiting.  The Cons are that you do have to share this road with others, there is usually limited parking, and your home is often hard to find (usually behind frontage lots). This can be a major disadvantage for emergency situations when a fire truck will have difficulties navigating a flag lot as well as finding your home.  Since the driveway/road is often a shared easement, there might be the shared road/easement "repair and road maintenance" issues as well.  Look closely at the tax records and plat maps when purchasing a home that is on a flag lot to see if there are any restrictions or shared costs for that particular property.

Flat fee   a property management fee expressed as a dollor amount per year or month.

Flood certification   a required document on all loans. Confirms if the property is in or out of a FEMA designated flood zone or within a located Special Flood Hazard Area for purposes of flood insurance requirements under the National Flood Insurance Program .

Flood hazard areas   locations specified on Federal Emergency Management Agency (FEMA) maps indicating areas that are subject to flooding. The seller's agent is required to inform potential buyers if the agent has knowledge that a property is located in such an area.

Flue   the pipe or conduit that allows combustion gasses to exit the house.

Forbearance   the act of refraining from taking legal action despite the fact that payment of a promissory note in a mortgage or deed of trust is in arrears. It is usually granted only when a borrower makes a satisfactory arrangement by which the arrears will be paid at a future date... A temporary agreement between you and your lender to postpone your loan payments for a set period of time during a temporary hardship. Acceptable hardships may vary from case to case and can include job loss, illness, divorce, etc. At the end of the postponement, you can choose to pay the overdue payments with a one-time payment, add the past due amount to the back-end of your mortgage, or increase the amount of your monthly mortgage payments until the past due amount is repaid.

For Sale By Owner (FSBO)   some owners choose to sell their own property without the aid of a real estate broker. "For Sale By Owner" properties are often a source of listings when the owner is unsuccessful finding qualified buyers.

Foreign Investment in Real Property Tax Act (FIRPTA)   Enacted by the United States Congress in 1985, the act requires buyers to withhold estimated taxes equal to 10% of the sale price of a property sold or exchanged by a foreign person. The withholdings must be reported and paid to the Internal Revenue Service within 10 days of closing. The act applies to sales of personal residences with prices of $300,000 or more.

Foreclosure  (Bank Repossesions) 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. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgage property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.  Foreclosure is a fancy way of saying “home repossession”. Foreclosures result after a borrower has missed not one, but multiple, mortgage payments, resulting in the bank taking ownership of the home as collateral. The foreclosure time line varies from one state to another, yet the process is nearly identical. Lenders nationwide are relegated to a systematic notification system leading to a foreclosure, redemption and eviction

Foreclosure  (Judicial vs. Non-judicial).  A foreclosure proceeding being judicial or non-judicial will depend on the documentation signed at closing. A judicial foreclosure requires that the lender allow the borrower to have a hearing before the auction of his property, a non-judicial foreclosure does not require a hearing, allowing the lender to auction or sell the property with the assistance of an appointed bank trustee. While nearly every state allows for a judicial foreclosure proceeding, most Deeds of Trust give lenders the right to foreclosure using non-judicial methods. The difference between the two for borrowers: the judicial foreclosure gives the borrower more rights.

Foreclosure Hold   the postponement of a property foreclosure. Foreclosures work on a parallel timeline to the short sale. Investor/state policies pertaining to foreclosure postponement vary and can change over time. Because postponement is not a guarantee, you should consider pending foreclosure dates before initiating a short sale transaction.

Foreclosure Starts – are the first steps taken by the bank after the borrower becomes delinquent on their mortgage payments. The “start steps” are Notices of Default (NOD) being issued which could be followed by a foreclosure auction date and the actual auction of said property.

Foreclosure   “Tax foreclosure”  -  most states also allow governments to take properties for failure to pay property taxes.

Foreclosures "Zombie"  happen when a homeowner receives a foreclosure notice and the bank subsequently files for the home to be foreclosed on.  Soon after receiving the notice,  the homeowners move out and in this situation the bank never completes the foreclosure - perhaps because it would cost more to fix up the home than the bank could make by selling it.  At this point, the property cannot be sold because the foreclosure is still in play and technically neither the borrower nor bank fully own it.  Years later after the property was abandoned and the bank never took possession,  the homeowners find out that they are still liable for current and past property taxes, late fees and repairs.  These "walk away" homeowners have had their wages garnished, their credit obviously destroyed and their tax refunds seized.  They've opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn mowing.  These abandoned homes also pose a danger to neighborhoods, particularly those in the process of recovering from the housing crisis.  Homes in this unintended “ownership limbo” sit vacant and are susceptible to vandalism, damage by squatters and possible criminal activity.

Forfeiture of Title -  a provision in a deed creating a condition which will cause title to be passed to another should certain circumstances occur.

Fractional basis   each property in the improvement district is charged a prorated share of the total amount of the special tax assessment. The share is determined either on a fractional basis (four houses may equally share the cost of one streetlight) or on a cost-per-front-foot basis (wider lots incur a greater cost than narrower lots for street paving and curb and sidewalk installation).

Franchise    (1)  a privilege granted to conduct certain service businesses, such as a franchise real estate brokerage. And  (2). the private contractual right to operate a business using a designated trade name and the operating procedures of the parent company (the franchisor). Such firms as Century 21 and Coldwell Banker operate national franchise brokerages.

Franchise Investment Law   administered by the California corporations commissioner, the law requires disclosure from the franchisor to the franchisee and is intended to protect prospective purchasers of franchises.

Franchise tax   an income tax, California corporations pay.

Fraud   any form of deceit, trickery, breach of confidence or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another. Unlike negligence, fraud is a deceitful practice or material misstatement of a material fact, known to be false, and done with intent to deceive, or with reckless indifference as to its truth, and relied on by the injured party to his or her damage.

Freddie Mac     was chartered by Congress in 1970 with a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership and affordable rental housing.  Freddie Mac’s statutory mission is to provide liquidity, stability and affordability to the U.S. housing market by participating  in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment and by issuing guaranteed mortgage-related securities.  The secondary mortgage market consists of institutions engaged in buying and selling mortgages in the form of whole loans (i.e., mortgages that have not been securitized) and mortgage-related securities. . Freddie Mac does not lend money directly to homeowners.

Freddie Mac is operating under a conservatorship that began on September 6, 2008, conducting our business under the direction of the Federal Housing Finance Agency (FHFA).

Freddie Mac is focused on meeting the urgent liquidity needs of the U.S. residential mortgage market, lowering costs for borrowers and supporting the recovery of the housing market and U.S. economy. By continuing to provide access to funding for mortgage originators and, indirectly, for mortgage borrowers and through our role in the federal Making Home Affordable program,  they are working to (1)Meet the needs of the mortgage market by making homeownership and rental housing more affordable,  (2)Reduce the number of foreclosures and (3)Helping families keep their homes.

Frivolous    void of significance or reason; of little or no worth, or importance; not worthy of serious notice; trivial; unimportant.

Front-end qualification   when qualifying a prospective buyer for financing, the ratio of the borrower's income to monthly debt obligation is a primary consideration.

Front-end ratio   the ratio of monthly housing cost (PITI) to gross monthly income.

Front-end zero   under a conventional loan, a borrower may elect to finance all of the mortgage insurance premium, thus incurring no cash obligation for this charge at closing.

Front footage   the measurement of a parcel of land by the number of feet of street or road frontage

FSBO (For Sale By Owner)   a home that is being sold by the owner of the property without the representation of a broker.

Fully amortized   mortgages are paid in equal monthly installments, which include interest and amortization of principal, paid over a period of years. The interest is set at a predetermined rate and is charged only on the loan balance. As payments are made, the amount allocated to interest decreases while the amount allocated to principal increases. At the end of the term the mortgage will be paid in full, including interest. No balloon payment is required.

Functional obsolescence   a loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design.

Funding conditions - these are items that must be delivered to the mortgage underwriter before the loan can be funded. An example of a funding condition would be proof that the buyer has a fire insurance policy ready to immediately take effect upon closing.

Funding fee   a percentage of the loan amount charged on VA loans to provide for administrative costs. The fee has increased over time and is higher for subsequent use by veterans, reservists and National Guard.

Funding letter   a cover letter prepared by the escrow agent to the lender detailing the documents being forwarded to the lender to complete the borrower's loan and release the loan proceeds to escrow.

 

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