• a

  • A type of home loan with an interest rate that varies or “adjusts” throughout the duration of the loan. The interest rate will typically be based on a financial index such as Wall Street Journal Prime or the 30 day Secured Overnight Financing Rate (SOFR). The borrower felt that an(...)
  • The projected value of a property that is to be repaired, rehabilitated, or newly constructed after completion of the build and stabilized.   In the context of underwriting, it is a variation in calculating loan to value ratios using the following formula: Loan Amount divided by Projected(...)
  • An individual or business that is in the business of buying or acquiring loans from third-party lenders or originators [link will be here for Originator definition].     Articles relating to(...)
  • A schedule of payments of a loan that shows the borrower the amount, the date, and the balance remaining for each month.   In most fully amortized loans, there will be a gradual reduction of interest payments and a gradual increase in principal repayments over time.  
  • The gradual reduction of an amount through scheduled payments.    Amortized, amortizing 
  • The total yearly cost of a loan charged to a borrower, represented in the form of a percentage.     When looking for the best loan option, a borrower must consider the Annual Percentage Rate (APR) to ensure they have the available funds to finance the loan. 
  • The estimated value of a property given by a licensed appraiser.  Articles relating to Appraisal:   https://fortralaw.com/the-originate-report/appraisals-in-the-new-world/
  • The value of a property as it stands at the time of valuation.  Articles relating to As Is Value:  https://fortralaw.com/denied-but-determined-the-battle-for-title-coverage-beyond-loan-value/
  • A practice of lending that focuses primarily on the value of the collateral as opposed to the creditworthiness of the borrower.    *Asset-based Lending Is a broader type of lending that exists beyond Real Estate – it is often used in the context of Commercial Assets such as Receivables,(...)
  • Assignment: The transfer of property or rights.  Allonge: A sheet of paper utilized to provide additional space or endorsements on a contract.  Assignment & Allonge: refers to the assignment of the security instrument (Mortgage or Deed of Trust) and an allonge to the promissory(...)
  • A legal document in which a property owner transfers the right to collect rent payments to a third party.   https://fortralaw.com/assignment-of-rents-what-why-and-how/
  • A party not obligated on a loan agrees to voluntarily be obligated on the loan and complete the terms of the former borrowers’ loan agreement. This typically occurs after the property is transferred or sold and the mortgage is agreed to be assumed by the buyer/assignee of the property. Most(...)

  • b

  • A summary of financial balances that an individual or organization has at a specific point in time. A balance sheet will outline assets, liabilities and the value of the equity of the organization.    Articles relating to Balance(...)
  • Direct lenders that source funds from their own balance sheet. Articles relating to Balance Sheet Lender:   https://fortralaw.com/what-is-the-difference-between-table-funding-white-labeling-wholesale-and-correspondent-lending/
  • A large lump-sum payment of principal that is due at the end of loan term.   Articles relating to Balloon(...)
  • A short-term financing option that a borrower utilizes to bridge the gap between one event (either a purchase or a refinance) to the next (either a further refinance or the sale of the property).  Articles relating to Bridge(...)
  • A business or individual that acts as a facilitator or intermediary on behalf of others to fund, sell, or buy loans, real estate, businesses or other assets. A mortgage/loan broker arranges or facilitates the funding, selling or buying of mortgages / loans for a fee.   Articles relating to(...)
  • A business or individual that buys and sells securities on behalf of others for compensation. Broker-dealers must be duly licensed by state and federal securities regulators including FINRA. Individuals must pass and maintain good standing in specific exams offered through FINRA – these(...)
  • A property evaluation from a licensed real estate broker or mortgage broker.   Articles relating to Broker Price Opinion:  https://fortralaw.com/show-me-the-equity/
  • A term that refers to the practice of lending for business-related activities secured by residential real estate. Commonly included loans are: Fix & Flip Loans (RTL Loans), DSCR Loans, SFR Construction Loans, and Bridge Loans.   Also referred to as Business Purpose Loan  Articles(...)

  • c

  • A general term to describe the various  sources of  capital, ie: Warehouse Line of Credit (WLOC), Master Repurchase Agreement, Credit Facility, High Net Worth Investors, Joint Ventures
  • The rate of return on a property calculated by dividing the Net Operating Income (NOI) [link to NOI definition] by the current market value of the property.   Articles relating to Capitalization Rate:  https://fortralaw.com/the-new-normal-in-commercial-real-estate-lending/
  • A form of financing where an existing mortgage loan is replaced with a new larger loan, allowing the borrower to “cash out” on the difference between the initial loan balance and the new loan amount based on the increased value of the collateral property.   
  • A calculation used by lenders to measure the total amount of loans and other liens secured by a property compared to its market value to assess the risk of lending money to a prospective borrower to purchase or refinance that property.   Formula:  CLTV= Home Value  —  Total(...)
  • A property that is used for business-related purposes, with the intent to generate profit, either from rental income or capital gain i.e., Multifamily, Hospitality, Mixed Used.  Articles relating to Commercial Real(...)
  • Loan proceeds that are held in reserve and advanced in periodic disbursements, called Draws, to fund real estate construction costs.   Articles relating to Construction Reserve/Draws:  https://fortralaw.com/construction-loan-considerations-for-lenders
  • An arrangement or partnership between a lender and mortgage broker or correspondent lender allowing correspondent lenders to originate loans on behalf of the lender while following set guidelines created by the lender. The arrangement usually involves where the originator will temporarily(...)
  • A broker or originator that originates and funds a loan through a correspondence program [link to correspondence program definition] offered by a wholesale lender.   Articles relating to Correspondent(...)
  • A financial arrangement between a borrower and lender that provides the borrower access to a specific amount of credit over a set period. The facility is typically on a revolving basis and includes a collateral pledge arrangement in which the equity of the borrower company and/or its assets(...)
  • A financing agreement where one or several assets are utilized as collateral for single or multiple loans.   Articles relating to Cross(...)

  • d

  • An investment fund that invests in debt instruments, such as loans, bonds, or fixed-income securities. Typically, a limited partnership or limited liability company that offers limited partnership interests or membership interests respectively to investors for certain stated returns or profit(...)
  • The dollar amount required to cover the payment of a loan, whether interest-only or principal and interest, over a specific period.   The lender evaluated the borrower's financial statements to ensure that their income was sufficient to cover the debt service, which included both principal(...)
  • A metric used by lenders to determine the borrower’s ability to repay their debt by comparing the borrower’s net operating income to their debt service obligations.  Articles relating to Debt-Service Coverage Ratio(...)
  • A formula that determines a borrower’s ability to repay debt and manage monthly loan payments, calculated by dividing gross monthly income by monthly debt payments.   Debt  ÷           X 100 = DTI%  Income  
  • A legal arrangement/agreement where a borrower transfers ownership of a mortgaged property to a lender to fulfill a loan agreement and avoid foreclosure.   Articles relating to Deed in Lieu of Foreclosure:  https://fortralaw.com/why-consider-deed-in-lieu-of-foreclosure/
  • A legal document/agreement between a lender, borrower, and third-party trustee, that uses real estate as collateral to secure a loan. Also known as a Trust Deed. Certain states utilize a Deed of Trust to secure real estate loans, others use mortgages.   Articles relating to Deed of(...)
  • The failure to fulfill the terms and conditions of a loan agreement.   Articles relating to(...)
  • A term used to describe the state of falling behind on payments.  Articles relating to Delinquent:   https://fortralaw.com/understanding-loan-participation-agreements/
  • A property valuation conducted by a licensed appraiser without physically visiting the property using technology and data to assess the property value.   Articles relating to Desktop Appraisal:  https://fortralaw.com/the-originate-report/appraisals-in-the-new-world/
  • An individual or business that provides loans directly to a borrower as opposed to correspondence or wholesale funding relationships. Direct lenders are generally considered to have more discretion as opposed to wholesale / correspondent lenders.   The borrower preferred to work with a(...)
  • A disbursement process where the lender does not distribute loan funds until after all requirements are met or documents are signed.   The lender did not officially close the loan until after final title verification, opting for Dry Funding.  
  • A type of long-term, fully amortized, loan that utilizes the Debt-Service Coverage Ratio [link to debt-service coverage ratio definition] to determine the borrower's ability to repay the loan. Typically used for rental properties, also referred to as Term Rental Loans. Applies to both SFR and(...)
  • A method of calculating interest based on the risk assessment of the project, with interest charged based on the full loan amount, even if the principal has not been fully drawn by the borrower. This method is commonly used in construction loans.  The Borrower selected a loan offer with(...)

  • e

  • Used commonly in Commercial Real Estate loans – this is a legal agreement between a lender and a borrower, providing protection or security from damage or losses caused by environmental factors such as environmental contamination or risks.  
  • A financial arrangement where a third party manages and holds funds for two parties that are involved in a transaction until specific conditions are met. The third party is typically required to be duly licensed as an escrow company by the state in which they practice.  
  • A fee a lender charges a borrower at the maturity of the loan or before. This allows the lender to recoup any costs or prevent any unexpected losses. Separate from a pre-payment penalty, which is a fee for early paydown. 
  • An agreement between a borrower and lender to provide the borrower additional time to repay a loan past its original maturity date.   Articles relating to the term Extension:   https://fortralaw.com/the-importance-of-documenting-a-modification/

  • f

  •  A family office is a private wealth management advisory firm that serves ultra-high-net-worth individuals and families. It provides a comprehensive suite of financial and personal services, tailored to the specific needs and goals of the family. These services can include investment(...)
  • A Bridge Loan [link to bridge loan] designed for borrowers who intend to purchase properties, renovate them, and sell them for profit.   Articles relating to Fix &(...)
  • An interest rate that remains the same for the entirety of the loan agreement, regardless of changes in market condition or other variables.  
  • A temporary agreement in which a lender allows a borrower to reduce or pause their loan payments for a period of time without penalty.  Articles relating to(...)
  • A legal process a lender uses to recover the loan balance from a borrower who has failed to make payments by forcing the sale of the property. 
  • A loan agreement that grants a lender the right to seek repayment by seizing a borrower’s personal assets in addition to the collateral to repay the outstanding balance on a loan if the borrower defaults [link to Default].  The loan terms held a full recourse agreement to provide the(...)
  • A loan that combines the features of fixed-rate and adjustable-rate mortgages. 
  • A investment vehicle designed to pool investor capital in the form of Limited Partnership or LLC Membership Interests to acquire, invest, and pool assets for a stated return or participation in profits. See Debt Fund

  • g

  • A Bridge Loan designed for borrowers looking to fully develop a structure from the ground up, providing necessary capital for purchasing land, covering construction costs, and permits or fees.  Articles relating to Ground-up Construction(...)

  • h

  • A lending business practice where the lenders focus primarily or only on the value of the collateral (property) rather than borrower credit and financial history. This is commonly used in real estate finance.   Articles relating to Hard Money(...)
  • Individuals with high net worths that usually meet the definition of Accredited Investor as defined by 17 CFR 230.501:   a. Individuals: $1MM net worth (less primary residence) or $200,000 adjusted gross income for the past two years or $300,000 for husband and wife or passed Series 7, 65,(...)
  • A line of credit that is secured by the borrower’s property, allowing the borrower to withdraw funds based on the property’s equity. HELOCs are typically revolving lines of credit.  

  • i

  • Real estate that is developed or purchased with the intent to generate income through  leasing the property to others, or generating operating income from business operations on sight.   Similar to: Investment Properties 
  • A large organization that accumulates funds to purchase or invest in securities, property, and other assets on behalf of its members, clients, or shareholders. Institutional Investors can include:   Aggregators – See “Aggregator” above.
  • A portion of the loan set aside by the lender to cover the borrower’s interest payments during the loan term, ensuring that the lender will receive interest payments on time if the borrower has insufficient funds.   The private lender included an interest reserve in the loan agreement,(...)

  • j

  • A legal process that involves filing a lawsuit in a court of law, utilized by lenders to recover unpaid loan proceeds and fees and/or claim property when a borrower defaults on a loan. 
  • Also known as a subordinated loan or second lien  A type of loan that sits in a position junior to another loan in terms of payment priority.  The borrower took out a junior loan to finance the completion of the project, knowing that it would sit behind the senior loan in the repayment(...)

  • k

  • The primary individual or entity who takes on the financial responsibility of a loan, often required to provide collateral or guarantee the loan.

  • l

  • A type of loan used to finance the purchase of a plot(s) of land.   The loan may secure “raw land,” which has no entitlements (no permits, engineering, legal approvals or infrastructure; undeveloped), or “entitled land,” which does have entitlements (has necessary legal approvals, ready(...)
  • A type of funding in which lenders will provide other lenders with the financing they need to fund new loans. Lender finance loans are typically secured by the borrower’s equity or the loans funded using the lender finance loan proceeds.   The firm utilized lender finance to leverage its(...)
  • A legal claim from a lender that is placed on a borrower's property to secure the repayment of a loan or to secure the repayment of a debt. A lien is typically recorded with the appropriate government agency. Secretary of State for personal property, County Recorder’s Office for real(...)
  • An asset type that can be quickly converted to cash so the asset can be sold with minimal impact on its value.  
  • An entity or individual that purchases loan portfolios or loans from lenders.   The loan buyer purchased a portfolio of residential mortgages from the private lender, hoping to profit from the steady stream of interest payments over time. 
  • Charges associated with the processing, approvals, and maintenance of a loan, in addition to the interest rate, typically paid by the borrower.   Types of loan fees include:    i. Origination Fees – Fees charged for obtaining a loan. Typically a percentage of the loan amount.  ii.(...)
  • The process of finding a borrower who needs a loan, negotiating the terms of the loan and submitting it for underwriting and funding. 
  • A metric used by lenders to determine the potential risk associated with financing a construction project calculated by dividing the total loan amount by the total project cost. 
  • A ratio used by lenders to determine the potential risk of a loan calculated by comparing the amount of the loan to the appraised value (or purchase price) of the property. 

  • m

  • A short-term borrowing mechanism that is used by private lenders to borrow funds by using their loans as collateral. A lender sells a loan or other asset (such as mortgage-backed securities) to a buyer (another financial institution), with the agreement to repurchase the asset later. These(...)
  • A type of Junior Loan [link to junior loan definition] that sits between senior secureddebt and junior secured debt. It is secured by the all or a portion of the equity (ownership interests) of the borrower entity.  These loans typically have higher interest rates and/or equity in the(...)
  • An individual or entity that funds, services, and originates mortgage loans.
  • An insurance policy to protect lenders if the borrower defaults on a mortgage loan.

  • n

  • A metric used to assess the profitability of a property by deducting all operating expenses from the total income generated by the property.  NOI=Gross Rental Income−Operating Expenses 
  • A loan that is not performing according to its terms, either from the borrower failing to fulfill payment obligations, or the note has matured without being paid off.  A lender issues a $500,000 loan to a real estate developer for a property renovation project. The developer makes timely(...)
  • A lender financing program where a lender provides financing that is secured by an existing loan.   A lender has originated $10 million worth of loans to real estate investors. To raise additional capital for future lending without selling the loans, the lender seeks a note-on-note(...)

  • o

  • An individual or company that sources, structures, and processes loan applications, acting as an intermediary between borrower and lender.   Articles relating to Originator:   https://fortralaw.com/table-funding-v-selling-loans-for-private-lenders/

  • p

  • A legal commitment made by an individual or entity to accept full responsibility of a loan if the borrower defaults on the loan.   Articles relating to Personal(...)
  • A fee incurred by a borrower when their loan is paid off early before the loan term ends.   The lender charged the borrower a prepayment penalty fee to recoup lost interest income. 
  • An assessment process given by a lender to evaluate a borrower’s financial situation to determine the loan amount the borrower is qualified to receive.   The borrower submitted their basic financial information to the lender in a prequalification process. 
  • The amount of the loan or money borrowed, excluding interest or fees, that must be repaid.   As a borrower makes timely payments, their principal balance decreases.
  • A financial institution that manages investment funds on behalf of institutional and accredited investors to generate returns. They typically invest in other companies by acquiring ownership interests.   A private equity firm is looking to acquire a new private lending business to add to(...)
  • A securitization [link to securitization definition] not issued or offered by an investment bank, government agency, or sponsored program.  The investment firm opted for private label securitization to package and sell its mortgage loans. 
  • GENERAL term: A business or individual that is not a bank or financial institution and makes loans secured by real estate.   INDUSTRY term: A lender that is not a bank or financial institution that concentrates on making business purpose loans secured by SFR or loans secured by(...)
  • GENERAL term:  The business practice of a private lender. A type of financing offered by entities or individuals that are not banks or financial institutions.  INDUSTRY term:  INDUSTRY term: A subset of the mortgage industry that concentrates on loans secured by real estate made by(...)
  • The practice of private entities or individuals lending personal funds to borrowers, with a focus on real estate investments, conducted outside the traditional financial industry.  Similar to - Hard Money Lending, Private Lending [links to these definitions]  The real estate investor(...)
  • A written promise from a borrower to a lender in a legally binding document, where the borrower promises to pay the lender a specific amount under agreed-upon terms.   Articles relating to Promissory(...)

  • q

  • A loan that qualifies for conventional mortgage financing offered by government agency lenders and banks.  

  • r

  • securitization [link to securitization definition] rated by a rating agency like Morningstarto assess risk and meet due diligence requirements.  The firm chose to invest in rated securitization products because they provide a more transparent assessment of credit risk. 
  • An entity that operates, finances, or owns income-producing real estate, providing individual investors an opportunity to earn a share of the income without having to finance or manage the properties directly.  REITs must meet certain testing obligations to qualify. These qualifications are(...)
  • Properties owned by a lender, bank, or government agency, after the unsuccessful sale of the property at a foreclosure auction in association with a foreclosure of a defaulted loan.  Articles related to Real Estate Owned(...)
  • An individual or firm registered with a state securities regulator, FINRA , and/or the Securities and Exchange Commission (SEC) that manage investment portfolios, recommend investments, and provide investment advice for clients.   Articles relating to Registered Investment Advisors(...)
  • A loan that was previously considered to be non-performing, that has been rectified, modified, or refinanced by the borrower fulfilling timely payments. A lender buys a reperforming loan at a discount, having previously been classified as non-performing due to the borrower missing several(...)
  • A term used to describe short-term loans (12 months or less) secured by residential real estate. This term is often associated with residential investment properties as opposed to primary residences.  Similar to: Fix & Flip Lending, Business Purpose Lending (BPL) When a borrower is(...)

  • s

  • A loan backed by borrower collateral, which can include property such as vehicles, real estate, or other personal assets.
  • The financial process of pooling various debt assets, such as mortgage loans or consumer debt, and repurposing them as interest-bearing securities that can be sold to investors. Related Terms: Private Label Securitization, Rated Securitization They employed securitization to bundle(...)