Home Loan Glossary of Terms

• Assets
  Anything of value. Any interest in real or personal property which can be appropriated for the payment of debt.

• Capital
  Broadly, all the money and other property of a corporation or other enterprise used in transacting its business.

• Capitalization
  Long-term debt, preferred stock and net worth. The loan capital of a community development loan fund; includes that which has been borrowed from and is repayable to third parties as well as that which is earned or owned by the loan fund (i.e. "permanent capital").

• Collateral
  Assets pledged to secure the repayment of a loan.

• Debt
  An amount owed for funds borrowed. The debt may be owed to an organization's own reserves, individuals, banks, or other institutions. Generally, the debt is secured by a note, bond, mortgage, or other instrument that states repayment and interest provisions. The note, in turn, may be secured by a lien against property or other assets.

• Default
  A failure to discharge a duty. The term is most often used to describe the occurrence of an event that cuts short the rights or remedies of one of the parties to an agreement or legal dispute, for example, the failure of the mortgagor to pay a mortgage installment, or to comply with mortgage covenants.

• Delinquent
  In a monetary context, something that has been made payable and is overdue and unpaid,

• Equity
  The value of property in an organization greater than total debt held on it. Equity investments typically take the form of an owner's share in the business, and often, a share in the return, or profits. Equity investments carry greater risk than debt, but the potential for greater return should balance the risk.

• Liabilities, Total Liabilities
  Total value of financial claims on a firm's assets. Equals total assets minus net worth.

• Line of Credit
  Agreement by a bank that a company may borrow at any time up to an established limit.

• Market Rate
  The rate of interest a company must pay to borrow funds currently. Program-related investments generally are offered at below market rates or at no interest rate.

• Negative Covenants
  Statements of actions or events of the borrower must prevent from occurring or existing, for example, additional borrowing without the lender's consent.

• Principal
  In commercial law, the principal is the amount that is received, in the case of a loan, or the amount from which flows the interest.

• Promissory Note
  Promise to pay. Written contract between a borrower and a lender that is signed by the borrower and provides evidence of the borrower's indebtedness to the lender.

• Recourse

  Refers to the right, in an agreement, to demand payment from the person who is taking on an obligation. A full recourse loan refers to the right of the lender to take any assets of the borrower if repayment is not made. A limited recourse loan only allows the lender to take assets named in the loan agreement. A non-recourse loan limits the lender's rights to the particular asset being financed -- an approach that is common in home mortgages and other real estate loans.

• Security

  A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples of securities include real estate, equipment stocks or a co-signer. Mortgages are a form of security with strong legal standing, because they are publicly registered following a formal legal procedure. A mortgage gives the lender holding a mortgage security the right to reclaim the asset being financed, if repayment is not made.

• Term
  Refers to the maturity or length of time until final repayment on a loan, bond, sale or other contractual obligation.

• Warranties
  Statement attesting that certain statements are true. For instance, the borrower may warrant that it is a corporation, that it is entering into the agreement legally and that financial statements supplied to the bank are true.