Glossary of Note Investing

1. Allonge: An attachment to a promissory note used to document assignments or modifications.
2. Amortization: The gradual reduction of a debt through regular payments of interest and principal.
3. Assignment: The transfer of rights in a mortgage or deed of trust from one party to another.
4. Balloon Payment: A large final payment due at the end of a loan term.
5. Beneficiary: The lender or note holder who receives payments from the borrower.
6. BPO (Broker Price Opinion): An estimate of a property’s value provided by a real estate broker.
7. Collateral: Property or assets pledged as security for a loan.
8. Deed in Lieu: A deed given by a borrower to a lender to avoid foreclosure.
9. Default: Failure to meet the terms of a loan agreement, typically by missing payments.
10. Due Diligence: The process of investigating and verifying the details of a potential investment.
11. Equity: The difference between a property’s market value and the outstanding loan balance.
12. Escrow: A third-party account used to hold funds or documents during a transaction.
13. First Lien: A primary claim on a property that takes precedence over other liens.
14. Foreclosure: The legal process of a lender taking possession of a property due to default.
15. ITV (Investment to Value): The ratio of the amount invested to a property’s value.
16. Junior Lien: A secondary claim on a property that is subordinate to the first lien.
17. Lien: A legal claim on a property as security for a debt.
18. LTV (Loan to Value): The ratio of a loan amount to the property’s appraised value.
19. Modification: A change to the original terms of a loan agreement.
20. Mortgage: A legal agreement that gives a lender a claim on a borrower’s property if they default.
21. Note: A legal document that obligates a borrower to repay a loan under specific terms.
22. Non-Performing Note: A loan where the borrower has stopped making payments.
23. OPM (Other People’s Money): Using borrowed funds or investor capital for investments.
24. Partial: The sale of a portion of future payments from a note.
25. Performing Note: A loan where the borrower is making regular, on-time payments.
26. Power of Attorney: Legal authorization for one party to act on behalf of another.
27. Principal: The original amount borrowed in a loan.
28. Promissory Note: A written promise to repay a debt under specific terms.
29. REO (Real Estate Owned): Property owned by a lender after an unsuccessful foreclosure auction.
30. Seasoned Note: A loan with an established payment history.
31. Secondary Market: Where existing mortgages and loans are bought and sold.
32. Secured Note: A loan backed by collateral, typically real estate.
33. Servicing: The process of collecting and managing loan payments.
34. Short Sale: The sale of a property for less than the amount owed on the mortgage.
35. Title: Legal ownership of a property.
36. UPB (Unpaid Principal Balance): The remaining balance on a loan.
37. Yield: The return on an investment, often expressed as a percentage.
38. Subordination: The process of ranking liens in order of priority.
39. Trustee: A third party who holds legal title to a property in a deed of trust.
40. Reconveyance: The transfer of a property’s title from a lender back to the borrower upon loan repayment.
41. Hypothecation: Pledging an asset as collateral without transferring ownership.
42. Forbearance: A temporary postponement of loan payments agreed upon by lender and borrower.
43. Chain of Title: The historical record of a property’s ownership.
44. Acceleration Clause: A provision allowing a lender to demand full repayment if certain conditions are not met.
45. Cure Period: A grace period allowing a borrower to remedy a default before further action is taken.
46. Pooled Notes: A collection of notes bundled together as a single investment.
47. Loan Servicer: A company that handles the administrative aspects of a loan.
48. Maturity Date: The date on which the final payment on a loan is due.
49. Prepayment Penalty: A fee charged for paying off a loan before its maturity date.

  50. Workout: A mutual agreement between lender and borrower to resolve a defaulted loan