Acknowledge: To admit the existence or truth of a statement and accept responsibility. Acknowledgements are typically found on security instruments, powers of attorney, subordination agreements, and other documents containing terms and conditions. By signing the document, the signer agrees to be bound by the provisions in the document. The purpose of an acknowledgement is to evidence the authenticity of the signature, ensuring that it can be trusted as genuine.
Acknowledgment: A formal declaration made to the authoritative witness by the person who executed the document that it was freely executed.
Administer: To give or apply in a formal way.
Affiant: One who makes a swearing statement in an affidavit.
Affidavit: A written declaration made under oath before a notary public or other authorized officer.
Affirmation: To declare positively or firmly; maintain to be true. An affirmation replaces “swearing before God.”
Affix: To secure (an object) to another; to attach; add to.
Amortization: Repayment of a loan with periodic payments of both principal and interest calculated to pay off the loan at the end of a fixed period of time. A schedule can be 10, 15, 20, 25, 30 years, or any number on a refi if the borrower is just refinancing at a lower interest rate and keeping the same term.
Apostille or Authentication Certificates: Authentication document for Hague Convention members. The National Notary magazine, January 2020, states, “An Apostille is issued by the Secretary of the State for a document that is destined for a country that is party to the Hague Apostille convention after the notarization has been completed. The purpose of the Apostille is to validate the Notary’s commission with the state so that it may be received in the country of destination.
Appointment: The act of designating for an office or position.
Adjustable Rate Mortgage Loans (ARM): Unlike a fixed rate mortgage, an adjustable rate loan’s interest rate will change, often after a set amount of years of fixed payments. The payment maybe low initially because it is based on payment that is 30 years but the rate will change/adjust after “X” years. The most common adjustable rate terms are 3, 5, 7, or 10 years. After the fixed term is up, the interest rate will change on a yearly basis until it is completely paid off. That is why ARMs are called 5/1, 7/1 or 10/1. Fixed for 5 years and changes every year thereafter. After the term is up, the rate will change via an index (usually the treasury bill or the London Interbank Offered Rate aka LIBOR) plus margin that is set by the lender. The margin never changes but the index will go up or down with the LIBOR or treasury note. For example, if this index 3 percent and the margin is 3 percent the rate for that year would be 6 percent.
Attest: To affirm to be correct, true, or genuine; corroborate.
Authenticate: To prove or verify as genuine.
Borrower (Mortgagor): An individual who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.
Borrower Information Sheet: Just as the name implies, this is the form that gives escrow all the information they need to open up escrow. The current payoff, whom they owe and how much, any private liens, HOA info and/or insurance information.
Certificate: 1) A document testifying to a fact, qualification, or promise; or 2) A written statement legally authenticated. To ensure your certificate language is compliant, ideally every certificate should answer four key questions: where, who, when, and what. Out of state certificates wording needs to comply with your state’s laws and does not ask you to do something you are not allowed to do. Hybrid certificates will have both acknowledgement and jurat wording meaning that the notary must administer a verbal oath in addition to signing. If there’s is no notarial wording, the notary will ask the signer to tell the notary what notarial act and certificate form to use.
Civil Action: Not a criminal action. A lawsuit for the purpose of protection of private (not public) rights and compensation for their violation.
Civil Liability: The responsibility and obligation to make compensation to another person for damages caused by improper performance of duties and acts.
Closing Disclosure: The Closing Disclosure discloses and itemizes all of the closing costs. Page one includes loan amount, interest rate, projected monthly payments, closing costs and cash to close. The remaining pages include details of the closing costs, payoffs and payments, cash to close calculations, disclosures, loan calculations and contact information. The Closing Disclosure combines and replaces the HUD/Settlement Statement and Truth in Lending (TIL) Statement for most loans applied for beginning October 3, 2015. When signing in a trust, there may be multiple copies of the CD for the borrower’s to sign, including signing as an individual, a trustee, and sometimes the settlor, the persons who set up the trust.
Closing Statement: The closing statement is the document that brings together all of escrow, title and the lender’s fees and puts them on one document for the borrower to see and approve. Being that escrow is the third neutral party, they create the closing statement. Since escrow creates the closing statement and it makes sense that they get a copy along with the lender.
Commercial Paper: 1) Any of various short-term negotiable papers originating in business transactions; or 2) A document whose purpose is to transfer money such as a check, bill of exchange, or draft.
Commission Certificate: A document describing the notary’s appointment and term of office.
Credible Witness: A believable witness worthy of confidence who personally knows the signer of a document.
Deed of Trust/Mortgage: This document is recorded in county land records as evidence of the lender’s security interest in the property. The Deed of Trust and Riders have 5 main functions:
1) it records who actually owns the property: e.g. Jane Doe and John Doe, husband and wife as joint tenants.
2) It records the amount the borrower is borrowing from the bank, also known as the lien amount.
3) It records who is lending the money, also known as the lien holder.
4) It records the legal description of the property. We all know the street address to a property. e.g., 123 Main Street. The legal description is how the county recognizes the property location via the lot boundaries and lot location within the county.
5) Last but not least, it states the rules and regulations in which the property owner has to abide by.
Riders are attached to the deed are just amendments that get recorded with the deed. Examples would be condominium riders, family riders/assignment of rent, or planned unit development (PUD) riders.
Default: Lenders will only lend on a house if they have the right to take the house back from the borrower if the borrower fails to pay the loan on the terms that were mutually agreed upon. Banks may give you 30 days past your due date before they consider you in default of your loan. Default means the borrower has not lived up to the agreed upon terms. Consult an attorney in your state to understand the default definitions and ramifications that apply in your state.
Discount Points/Buy Down Points: are an up-front fee paid to the lender at the time that you get your loan to lower the interest rate you qualified for. You can literally buy down an interest rate. Let’s say you qualify for a 5 percent rate on a 30 year fixed. You could pay the bank $2,400 (whatever the agreed upon price is) to get 4.5 percent. This is why it’s called a buying the rate down.
Disbursement of Proceeds: If the borrower is due a refund from closing, this tells escrow how the borrowers would like to receive it. This form tells escrow whether the borrowers want to pick up the check at the local escrow office, have it mailed first class, or sent via a courier over night via FedEx or UPS, deposited, or wired. If this is not filled out then escrow will not know how give the money to the borrower. Notably, if the borrower is borrowing or refinancing via a trust, the payee must be made out to the exact name of the trust. The date of distribution of proceeds can be found on the upper left hand corner of the Closing Disclosure (CD).
Escrow Agent: A person with fiduciary responsibility to the buyer and seller, or the borrower and lender, to ensure that the terms of the purchase/sale or loan are carried out.
Escrow Company: An escrow company is a licensed neutral third party that distributes legal documents and funds on behalf of a buyer and seller. Or more simply stated, Escrow is the middle person. They are the authority to make sure that the seller, lender, and borrower all follow through on their agreed upon terms. The seller doesn’t get any less than what they agreed upon and buyer doesn’t pay any more than what they agreed upon. The same goes between the borrower and bank. Escrow ensures the fees are accurate as agreed. Escrow is the neutral third party to make sure everyone behaves. Their role is to keep track of what is going on between the borrower, lender, and title company. Escrow keeps records of what is going on between on all the parties.
Escrow Instructions: Escrow instructions simply describe escrow’s role and responsibility during the transaction to the borrower. Since they are escrow instructions, it makes sense that escrow gets back their original instructions. And since the borrower is agreeing to enter escrow with the escrow company it makes sense why the lender wants to see the agreement signed, and that’s why everybody gets a copy. The same applies to Escrow Amendments which are changes made to the original escrow instructions, such a change in the loan amount or purchase price and everybody gets a copy.
FHA (Federal Housing Administration) Loans: Federal Housing Administration (FHA) loans are fixed- or adjustable-rate loans insured by the U.S. Department of Housing and Urban Development (HUD). FHA loans are designed to make housing more affordable, particularly for first-time home buyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans. With FHA insurance, eligible buyers can purchase a home with a down payment of as little as 3 percent of the appraised value or the purchase price, whichever is lower. FHA borrowers typically are required to participate in a face-to-face meeting with their lender or a government-approved mortgage counselor prior to closing on a new mortgage loan. The current FHA loan limits vary depending on home type and home location. To find the most recent limits for your home, consult the FHA Maximum Mortgage Limits web page.
Fix Rate Note: This means the interest rates will not change for the duration of the loan. Whether that means 15, 20 or 30 years. The fixed rate note allows the payment to stay the same for full amount of the term. The longer the term, the higher interest rate. For example, interest on a 15-year loan might be 5 percent while a 30-year loan might be 5.5 percent. The shorter the term the higher the payment because the loan has to be paid back in a shorter duration of time.
Foreclosure: Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan. The Oregon foreclosure process begins as soon as you miss the first payment or after the second payment is missed. This usually depends on the lender. The lender will initiate the foreclosure process through the court systems in your local county by filing a notice of default and having you served with it.
Form 4506-C: The IRS IVES Request for Transcript of Tax Return (IRS Form 4506-C) gives the lender permission from the borrower to obtain tax transcripts from the IRS.
Fannie Mae requires lenders to have each borrower whose income (regardless of income source) is used to qualify for the loan to complete and sign a separate IRS Form 4506-C at or before closing. EXCEPT that this requirement does not apply if all of the borrower’s income has been validated by the Desktop Underwriter (DU) validation service. This aligns with the Selling Guide policy that does not require lenders to obtain tax transcripts as part of the quality control process in these cases. If all borrower income is not validated through the DU validation service, the lender must obtain the completed and signed IRS Form 4506-C. The lender has the discretion to determine at what point in the process it is obtained, understanding that the form is only valid for 120 days from the date of the borrower’s completion/signature.
Some lenders may submit the Form 4506-C to the IRS to document borrower income, but the intent of this policy is to validate the income documentation provided by the borrower and used in the underwriting process.
Fannie Mae does not require lenders to obtain tax transcripts from the IRS prior to closing, but does require that obtaining tax transcripts be part of the lender’s post-closing quality control processes, unless all borrower income has been validated through the DU validation service.
If the lender chooses to obtain tax transcripts from the IRS prior to closing, the transcripts received must validate the applicable income documentation used in the underwriting process.
Form 4506-T: A 4506-T is used to order IRS transcripts. A bank or other lending association uses this form as proof to avoid fraudulent behavior. This form can be used to request a business return transcript, transcript of an account, including payments, penalties, and adjustments, or a record of account.
Form I-9: Is a federal form for Employment Eligibility Verification via the Department of Homeland Security, U.S. Citizenship and Immigration Services.
Good Faith Estimate: The Good Faith Estimate is an estimate is an estimate of all closing fees including pre-paid and escrow items as well as lender charges. The Good Faith Estimate was replaced by the Loan Estimate for most loans applied for beginning October 3, 2015.
Grant Deed or Quitclaim Deed: A grant deed or quitclaim deed changes the way property title is held. Whether that be from a seller to a buyer, or somebody changing the way they hold title. For instance, if someone got married and was adding their spouse to the property, or if someone is putting their house into a trust. Other ways of adding or removing names from title include a Statutory Bargain and Sale Deed or a General Warranty Deed. Seek the professional option of lawyer in your state.
Hazard Insurance: Hazard insurance is another word for homeowner’s insurance. It protects the insured against loss due to fire or other natural disasters in exchange for a premium paid to the insurer. Hazards insurance is not the same as flood insurance or earthquake insurance.
Home Equity Line of Credit (HELOC): A home equity line of credit is a line of credit that is tied to the equity of your house. For instance, the home is worth $500,000 and there is a first loan for $200,000, that means there is $300,000 of equity. In this example, a bank may approve the borrower for a line of credit for $100,000. Unlike a loan that has a specific payoff term (15, 20 or 30 years), the line of credit works like a credit card. So in this example, the borrower may buy a car for $15,000 on that line of credit, which then means they would have $85,000 remaining that they could charge against the HELOC. If they borrowed $15,000, they would make payments only on the amount borrowed, just like a credit card.
HUD Settlement Statement: The U.S. Department of Housing and Urban Development hereinafter know as HUD. The HUD Settlement Statement itemizes all closing costs; on pages 1 and 2 items that appear on this statement included real estate commissions; fees; points; and payoffs and escrow amounts. Page 3 of the Settlement Statement is a comparison of the fees disclosed on the Good Faith Estimate (GFE) to the actual costs as listed on the HUD Settlement Statement. The bottom of page 3 shows the loan terms. The loan amount, rate, term, principal and interest payment, as well as total payment, are at the bottom.
Insurance Information Sheet: This is where the borrower lets escrow know what insurance company that they use. Insurance company name, policy number, the insurance agent’s name, and phone number. If the borrower doesn’t have an insurance company, the lender will choose a company on your behalf.
Interest Rate: The interest rate is what the borrower agrees to pay back the bank on the money that is borrowed. How are interest rates determined? The generic answer is a rate sheet that lenders used, but more specifically interest rates are tied to risk. The lower the perceived risk, the lower the interest rate. The main computation of interest that you qualify for off a rate sheet is based on your credit score, loan to value (LTV) ratio, term, and whether or not you occupy the property. That is why if you have a high credit score, you have shown that you regularly pay back the money that you borrow. Therefore, you get a lower interest rate because of the lower perceived risk for the bank to lend you money. The opposite is true when you have a lower credit score, you get a higher interest rate.
Impound Account/Escrow Account: The impound account and escrow account are the same thing. Some borrowers either request or are forced to have an impound account for taxes and insurance. To understand what an impound account is, you need to first understand that property taxes are due twice a year in almost every county in the country. Homeowner insurance (hazard/fire insurance) is due on an annual basis. With that being said, some lenders are nervous that the borrowers will not make these payments as they come due. So, they require that a savings account for taxes and insurance is set up with them (the lender) and the borrower will make a monthly deposit to this account and as the taxes and insurance come due, the lender will make the payments for them. Not all borrowers are required to have an impound account, but they may prefer it. In conclusion, an impound or escrow account is a fancy word for a savings account for taxes and insurance.
Insurance: Insurance refers to the borrower’s homeowners insurance or also know as hazard insurance. Homeowner’s insurance covers anything that may happen to the home like a fire, flood or anything can happen to the structure of the house. Banks will not lend against a home that is not insured. It is escrow’s responsibility to make sure the borrower has insurance on the home they are buying or refinancing. Escrow keeps an original of the insurance Declarations Page and the lend keeps a copy.
Jurat: A certificate added to an affidavit declaring when, where, and before whom it was sworn. Jurats are typically found on affidavits and certifications; by signing this document, the signer swears before the notary that the statement made in the document are true. Since the purpose of a jurat is to compel truthfulness, notaries should be instructed to obtain a verbal oath from the signer of all documents containing a jurat. Sometimes “jurats” are referred to as a “verification” or an “oath” or “affirmation”. The state of Oregon does not use the term jurat.
Jurisdiction: The geographical area where a notary may notarize. An Oregon Notary Public may notarize anywhere in Oregon, but not outside the state, certain conditions may apply if you are RON certified.
Lender: The lender is the bank that is lending the money. The lender has the biggest role in the process, because without them lending the money, there would be no need for a title or escrow company. This is the reason why the majority of the documents in your loan signings are lender documents.
Lien: A lien is a form of security interest granted over a property to secure the payment of a debt. Anyone can put a lien against a home as long as they have the homeowner’s consent. In term of mortgages, when the bank lends money to borrower, the way they guarantee repayment is by recording a lien against the house. The amount of lien recorded is equivalent to the amount lent to the borrower. If the borrower fails to live up to the agreed upon repayment terms, the bank has the right to sell the property and recoup whatever money they have lent or more specifically whatever the lien amount is. Notably, there are positions of liens. What is a first and second lien? Most mortgages are recorded in the first position, which mean they are the first to be paid off. That is why most mortgages are called first liens. If something was to happen to the property, like a sale of the property, the lien recorded in the first position gets paid first. There can be a number of lien positions (1st, 2nd, 3rd, etc.). Another bank (or the same bank) can lend more money to the borrower and will record a lien as well. If there is lien already on the house, then naturally the next lien recorded would be the second lien. That is why you hear of second mortgages simply referred to as a second. So, if you are doing a loan signing for a “second” that should tell you the borrower already has a first. Or if you get a signing for a first and second, that means they are taking out two different loans at the same time. One will be recorded in the first position and the other will be recorded in the second position. Lastly, as liens get paid off, the lien that was in the next position moves into the lien position that had been vacated. So, if you pay off a first, the second moves into the first position.
Loan to value: Loan to value (LTV) means how much you owe versus the value (appraised value or sale price, whichever is lower) of the home. For instance, if your house is worth $200,000 and you owe $100,000, your loan to value is 50 percent. The higher the loan to value, the higher the perceived risk.
L.S.: Indicates where the official notary stamp imprint is to be placed. Latin term Locus Sigilli means “place of the seal/stamp.”
Mobile Notary: A notary that travels to you wherever you are to help you get the services you need when you are unable to travel or leave your home or business.
Mortgage/Deed of Trust: This document is recorded in county land records as evidence of the lender’s security interest in the property.
Note: The Note is a written promise to pay a sum of money at a stated interest rate during a specified term. It’s also known as a contract or financial instrument. For example, a note may specify that the borrower is borrowing $500,000 at a 2.70 % interest rate, and will have a certain fixed payment for 15, 20 or 30 years. Note that the Note does not include payments that are impounded in the Escrow Account.
Personally Known: Familiarity with an individual resulting from interactions with that individual over a period of time sufficient to eliminate every reasonable doubt that the individual has the identity claimed.
PITI: Abbreviation for principal, interest, taxes and insurance, the components of a monthly mortgage payment.
Power of Attorney: A legal instrument authorizing one to act as another’s agent or attorney in fact. The person giving another the agent or attorney in fact is known as the principal. There are many variations of Power of Attorney legal documents and may require up to two impartial witnesses who have nothing to gain from the appointment.
Preliminary Change of Ownership Report (PCOR): The PCOR helps the county understand what is going on with the grant deed or quitclaim deed. For example, if there is a transfer between spouses because of a removal from a trust, a PCOR would be filled out to help define. A PCOR only gets filled out if there is a grant deed or quitclaim deed.
Principal: The principal is the amount of debt, not counting the interest, left on a loan.
Property Tax: Property tax is a real estate ad-valorem tax, considered a regressive tax, calculated by a local government, which is paid by the owner of the property. The tax is usually based on the value of the owned property, including land. Property taxes are usually due twice a year. Property taxes can be impounded into the borrower’s or homeowner’s escrow account along with hazardous insurance, and mortgage insurance, to be paid monthly as part of the mortgage payment, or it can be waived at the borrower’s or homeowner’s request. Everyone who owns or occupies property pays property taxes, but the rules and amount vary widely from state to state. In fact, this is usually the main source of local government funding based on the home’s value.
Quit Claim Deed: Despite it’s counter-intuitive name, a quit claim deed form is used by the owner of real estate to quickly transfer ownership of the property to another person or entity. It is one of the quickest and cleanest ways to transfer property.
As opposed to a General Warranty Deed, a quit claim deed does not make any warranties as to whether there is a clear title or whether or not any encumbrances or other restrictions on the property exist. For this reason, this deed is most frequently used to transfer property between family members, to a trust, or in other situations in which the parties involved already trust each other. It is also used to transfer property in divorce settlements and in tax deed sales.
Record: Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
Refinance: The process of paying off one loan with the proceeds from a new loan secured by the same property
Resignation: A written statement that one is resigning a position or office.
Reverse Mortgage: A reverse mortgage enables older homeowners (62 or older) to convert part of their equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you based off the equity established in the home. For example, if the home’s value is $500,000 and the borrower owes $100,000, a reverse mortgage would literally pay out the equity you own on a monthly basis, until a cap is reached.
Revoke: To cancel or rescind.
Remote Online Notary (RON): The Oregon Legislature recently passed SB 765, which was signed into law by the Governor on June 15, 2021. This means that Remote Online Notarization (RON) is now legal in Oregon. Effective July 26, 2021, Jiffy Mobile Notary is now offering RON signings via the Nexsys Clearsign platform for clients who support Nexsys. Clients requesting RONs must have current government issued photo ID, a compatible computer with a camera, Wi-FI, Google Chrome, and must be able to answer knowledge based questions. The sessions will be recorded and saved for 10 years.
S.S. or SCT: Usually found in the venue portion of the notary certificate.. It stands for the Latin term Scilicet; meaning “in particular” or “namely.” Used to specify the location of the notarization in very old-fashioned language. Not required for Oregon certificates.
Seal: A seal is generally an impression stamped or embossed on paper to authenticate a document or attest to a signature, such as a corporate or notary seal.
Settlor: One that makes a settlement or creates a trust of property.
Statement of Information: The statement of information is essentially an application for title insurance. It typically asks for knowledge based information that only the applicant would know the answers including former marriages, and a 1o years history of jobs and residents.
Subordination Agreement: To understand what a subordination agreement is you first need to learn about lien positions. When a lien is recorded, their position of importance is noted on the title. If a lien is recorded in the first position, they are the first to be paid off. Most mortgages are called first liens. If something was to happen to the property, the lien recorded in the first position gets paid first.
There can be a number of lien positions, (1st, 2nd, 3rd, etcetera). Now, as liens get paid off, the lien that was in the next position moves into the lien position that had been vacated. So if you pay off a first, the second moves into the first position.
So now that you understand lien positions you are now ready to understand what a subordination agreement is.
When a loan is in a subordinate position, be it 2nd, or 3rd, or 4th, a subordination agreement tells everyone that the loans in the subordinate position stay in the same lien position even though the lien above it has been paid off.
What this allows is a new lien holder to go in the empty 1st position. As an example, if someone refinances a first but there is also a second on the property, the new lender will only approve the loan if their loan will go in the first lien position.
And that is a subordination agreement.
Subscribe: To sign one’s name in attestation, testimony, or consent.
Swear/Sworn: To make a solemn promise; to vow, usually before God, a supreme being, or higher power.
Title: Not the same as title insurance, the title is the document that gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property. Individuals who will have legal ownership in the property are considered “on title” and will sign the mortgage and other documentation.
Title Company: The title company makes sure that a piece of real estate is legitimate, then issues title insurance for that property that protects both the lender and the owner from lawsuits as a result of title disputes. Their main responsibilities in a mortgage transaction is to accurately record liens, lien holders and ownership to the property in the transaction. The title company’s role is to be in charge of anything that is being recorded against the property.
Title Insurance: Title insurance protects a lender against any title dispute that may arise over a particular property. It is required to close on your home. You may also purchase owner’s title insurance which protects you as the homeowners.
Trust: An arrangement whereby a person (a trustee) holds property as its nominal owner for the good of one or more beneficiaries. Signers typically sign more papers in loan closings when title is vested in a trust. Signers may sign as an individual, as the trustee, and sometimes as the settlor, the one who created the trust. To avoid the lengthy paperwork, sometimes signers will sometimes take the property out of the trust for the signing and put the property back into the trust after the loan funds.
Trust Certification: The trust certification is a summarized document that proves that a borrower has an established valid trust. In lieu of actually providing the whole entire trust, which at times could exceed 100 pages. If the property is held in a trust in any matter, a trust certification has to be filled out. Title keeps an original and the escrow keeps a copy.
Trustee: An individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified.
Venue: The state and county where a notarization takes place, giving the locality for a cause of action.
Verification: A confirmation of the truth of a fact.
VA Loans: VA (Veteran’s Administration) loans are fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs. They are designed to make housing affordable for eligible U.S. veterans. VA loans are available to veterans, reservists, active-duty personnel, and surviving spouses of veterans with 100 percent entitlement. Eligible veterans may be able to purchase a home with no down payment, no cash reserve, no application fee, and lower closing costs compared to other financing options.
Witness: A person who watches an action take place. Notary Public’s witness signatures. CT, FL, GA, LA, and SC are witness states that require additional witnesses on loan signings. CT, FL, SC allow the notary to be a witness and the notary. GA mandates the notary be a witness. LA does not allow the notary to be a witness.