Adjustable Rate Mortgage, or ARM: Mortgage in which the rate of interest is adjusted based on a standard rate index. Most ARMs have caps on how much the interest rate may increase.
Amortization schedule: A timetable for the gradual repayment of a mortgage loan. An amortization schedule indicates the amount of each payment applied to interest and principal, and also the remaining balance after each payment is made.
Amortization term: The amount of time required to amortize (repay) a mortgage loan. The amortization term is usually expressed in months. A 30-year fixed-rate mortgage, for example, has an amortization term of 360 months.
Amortize: Paying off a debt by making regular installment payments over a set period of time, at the end of which the loan balance is zero.
Ancillary fees: All fees and income derived from and related to the Mortgage Loans, excluding Servicing Fees attributable to the Mortgage Loans, but including late charges, prepayment penalties, incentive fees payable under HAMP, fees received with respect to checks or bank drafts returned by the related bank for non-sufficient funds, assumption fees, optional insurance administrative fees, income on escrow accounts and custodial accounts or other receipts on or with respect to such Mortgage Loans, and all other incidental fees, income and charges collected from or assessed against the Mortgagor, other than those charges payable to the applicable Investor under the terms of the applicable Servicing Agreements or as otherwise agreed by the Parties.
Annual Percentage Rate (APR): A standardized method of calculating the cost of a mortgage, stated as a yearly rate which includes such items as interest, mortgage insurance, and certain points or credit costs.
Appraisal: A written report by a qualified appraiser estimating the value of a property.
Appraised value: An opinion of a property’s fair market value, based on an appraiser’s inspection and analysis of the property.
Appraiser: A person qualified by education, training and experience to estimate the value of real property.
Appreciation: An increase in the value of a property due to changes in market conditions or improvements to the property.
Assessed value: The value of a property as determined by a public tax assessor for the purpose of taxation.
Bank Statement: A printed record of the balance in a bank account and the amounts that have been paid into it and withdrawn from it, issued periodically to the holder of the account. Please submit statements for all banking and investment accounts. Include all statement pages, even if they are blank.
Balloon mortgage: A loan that has regular monthly payments which amortize over a stated term but call for a final lump sum (balloon payment) at the end of a specified term, or maturity date, such as 10 years.
Basis points: 1/100th of 1 percent. If an interest rate changes 50 basis points, for example, it has moved 1/2 of 1 percent.
Borrower: A mortgagor who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.
Broker (Real Estate): One who receives a commission or fee for bringing buyer and seller together and assisting in the negotiation of contracts between them. In most states a license is required.
Buy down: The process of trading money for a lower mortgage rate. The borrower “buys down” the interest rate on a mortgage by paying discount points up front. It can also be a mortgage in which an initial lump-sum payment is made to temporarily reduce a borrower’s monthly payments during the first few years of a mortgage.
Caps: The maximum amount the interest rate can change annually or cumulatively over the life of an adjustable-rate mortgage. For example, if the caps are 2 percent annual and 6 percent life of loan, a mortgage with a first-year rate of 10 percent could rise to no more than 12 percent the second year, and no more than 16 percent over the entire loan term.
Certificate of title: A statement provided by a title company or attorney stating that the title to the real estate is legally held by the current owner.
Clear title: A title that is free of liens or legal questions as to ownership of a piece of property.
Closing: The meeting at which the sale of a property is finalized. The buyer signs the lender agreement for the mortgage and pays closing costs and escrow amounts. The buyer and seller sign documents to transfer ownership of the property. Also known as the settlement.
Closing costs: Expenses incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney’s fee, taxes, escrow payments, and charges for title insurance. Lenders or Realtors provide estimates of closing costs to prospective home buyers.
Closing statement: A financial disclosure accounting for all funds changing hands at the closing. See also HUD-1 statement.
Cloud on title: Any fact or condition that could adversely affect the title.
Collateral: Property pledged as security for a debt, such as the real estate as security for a mortgage.
Collections: The efforts a mortgage company takes to collect past due payments.
Commission: In real estate, the broker or salesperson’s fee for assisting the transaction, usually expressed as a percentage of the total paid by the buyer.
Commitment letter: A formal offer by a lender stating the approved terms for lending money to a home buyer.
Common area assessment: A levy against individual unit owners in a condominium or planned unit development to pay for upkeep, repairs and improvements to the property’s common areas, such as corridors, elevators, parking lots, swimming pools and tennis courts.
Comparables or “comps”: Refers to “comparable properties,” which are used for comparative purposes in the appraisal process. Comps are recently sold properties that are similar in size, location and amenities to the home for sale. Comps help an appraiser determine the fair market value of a property.
Condominium: A real estate project in which each unit owner has title to a unit of the project, and sometimes an undivided interest in the common areas.
Conforming loan: A loan that conforms to the standard rules for purchase by Freddie Mac or Fannie Mae.
Contiguous: Adjoining or touching.
Contingency: A condition that must be met before a contract is legally binding. For example, home buyers often include a contingency that specifies that the contract is not binding until after a satisfactory report from a qualified home inspector. See home inspection.
Contract: In real estate parlance, the contract is the legal document by which buyer and seller make offers and counter-offers. The real estate contract describes the property, includes or excludes items in the property, names the price, apportions the closing costs between the parties and sets forth a closing date. When buyer and seller agree on terms and sign the same document, the property is said to be “under contract.” More formally known as agreement for sale, purchase agreement or earnest money contract.
Conventional mortgage: Usually refers to a fixed-rate, 30-year mortgage that is not insured by the FHA, Farmers Home Administration (Amah) or Veterans Administration.
Convertible ARM: An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative, or co-op: A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Covenant: A written restriction on the use of land, most commonly in use today in homeowners associations.
Credit report: A report on a person’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s record for paying debts in a timely manner.
Debt-to-income ratio: The percentage of a consumer's monthly gross income that goes toward paying debts.
Disability Award Letter: The percentage of a person’s monthly earnings used to pay off all debt obligations. Lenders consider two ratios, constructed in slightly different ways. The first, called the front-end ratio, the ratio of the monthly housing expenses – including principal, interest property taxes and insurance (PITY) is compared to the borrower’s gross, pretax monthly income. In the back-end ratio, a borrower’s other debts, such as auto loans and credit cards, are also figured in. Lenders usually take both into account and set an acceptable ratio, which might be expressed as 33/39. Some lenders, and some lending qualifying agencies such as FHA, take only the back-end ratio into account.
Deed: The legal document conveying title to a property.
Deed-in-Lieu of Foreclosure: The transfer of title from a homeowner to the mortgage company to satisfy the mortgage debt and avoid foreclosure, also called a Deed-in-Lieu of Foreclosure or a voluntary conveyance.
Default: A borrower is in default when they fail to meet the terms of their loan agreement. Usually this is based on failure to make payments on time.
Deficiency Balance: The difference between what a foreclosed home sold for and the remaining mortgage balance. The mortgage company may require you to pay the amount of the deficiency balance.
Deferred Payments: Payments that are authorized to be postponed as part of a workout process to avoid foreclosure
Delinquency: Failure to make a payment when it is due. A loan is generally considered delinquent when it is 30 or more days past due.
Depreciation: A decline in the value of property; the opposite of appreciation.
Down payment: The amount of a property’s purchase price that the buyer pays in cash and does not finance with a mortgage.
Earnest money deposit: A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property.
Easement: The right of another to use property. The most common easements are for utility lines.
80-10-10 loan: A combination of an 80 percent loan-to-value first mortgage, a 10 percent down payment and a 10 percent home equity loan. It would eliminate the need for private mortgage insurance, and for expensive homes it could eliminate the need for a jumbo mortgage by reducing the first mortgage to the conventional $453,100 limit.
Encumbrance: A lien, charge or liability against a property.
Equal Credit Opportunity Act: A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
Eminent domaint: The right of public agencies to take land for public use.
Equity: The value of a homeowner’s unencumbered interest in real estate. Equity is the difference between the home’s fair market value and the unpaid balance of the mortgage and any outstanding liens. Equity increases as the mortgage is paid down or as the property enjoys appreciation.
Escrow: An account (held by the mortgage company) where a homeowner pays money toward taxes and insurance of a home.
Escrow Account: An account set up by the lender into which the borrower makes periodic payments, usually monthly, for taxes, hazard insurance, assessments, and mortgage insurance premiums. The funds are held in trust by the lender who pays the sums as they become due.
Escrow Analysis: A periodic review of escrow accounts to make sure that there are sufficient funds to pay the taxes and insurance on a home when they are due.
Escrow payment: The portion of a homeowner’s monthly mortgage payment that is held by the loan servicer to pay for taxes and insurance. Also known as reserves. The loan servicer holds the escrow funds separately from money meant to pay off principal and interest.
Fair Credit Reporting Act: A consumer protection law that regulates the disclosure of consumer credit reports by credit reporting agencies and establishes procedures for correcting mistakes on a person’s credit record.
Fair market value: A fair price for a home based on recent sales of properties of similar size and quality in the neighborhood.
Fannie Mae: Nickname for Federal National Mortgage Association. It is a government-chartered non-bank financial services company and the nation’s largest source of financing for home mortgages. It was started to make sure mortgage money is available in all areas of the country.
Federal Housing Administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD) that insures residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money.
FHA mortgage: A mortgage insured by the Federal Housing Administration (FHA).
First mortgage: A mortgage that is the primary lien against a property.
Fixed-rate mortgage: A mortgage in which the interest rate does not change during the entire term of the loan, most often 15 years or 30 years.
Flood insurance: Insurance that compensates for physical property damage resulting from rising water. It is required for properties located in federally designated flood areas.
Forbearance: An agreement to temporarily suspend or reduce monthly mortgage payments for a specific period of time. The mortgage company will then postpone legal action when a homeowner is delinquent. A forbearance is usually granted when a homeowner makes satisfactory arrangements to bring the overdue mortgage payments up to date.
Foreclosure Prevention: Steps by which the mortgage company works with the homeowner to find a permanent solution to resolve an existing or impending loan delinquency. **Available steps are determined by a number of factors and may not be available to all borrowers**
Freddie Mac: Nickname for Federal Home Loan Mortgage Corp. A financial corporation chartered by the federal government to buy pools of mortgages from lenders and sell securities backed by these mortgages.
Ginny Mae: Nickname for the Government National Mortgage Association.
Good Faith Estimate: A written estimate of closing costs that a lender must provide a prospective home buyer within three days of submitting a mortgage loan application. The best approach is to request this list before choosing a loan.
Government National Mortgage Association (GNMA): A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress in 1968, GNMA has responsibility for the special assistance loan program known as Ginny Mae.
Gross Monthly Income: The amount of consistent and stable income that an individual receives each month, averaged over a period of time. This amount may include overtime pay, bonuses, commissions and income from dividends or interest, provided that the individual can show consistent history of receiving such income.
Hardship: A hardship is the reason why a homeowner is having trouble making their mortgage payments, such as job loss, medical emergency or illness, divorce, etc. A hardship may be short term (less than 6 months) or long term (more than 6 months). When contacting your mortgage company or a housing counselor for assistance, homeowners may be required to demonstrate/explain any hardship they are experiencing.
Hazard insurance: Coverage that compensates for physical damage to a property from natural disasters such as fire or other hazards. Depending where a piece of property is located, lenders may also require flood insurance or policies covering windstorms (hurricanes) or earthquakes.
Home Equity Line of Credit: A way of borrowing money against the equity or assets that the homeowner has in the home to pay for things such as home repairs, college education, or other personal uses.
Home inspection: An inspection by a building professional that evaluates the structural and mechanical condition of a property. The inspection may reveal the need for repairs that the seller may have to complete before the sale of the house will go through. The buyer may also make the house sale contingent on a satisfactory inspection.
Homeowners association: A nonprofit association that manages the common areas of a condominium or planned unit development (POD). Unit owners pay to the association a fee to maintain areas owned jointly. See common area assessment.
Homeowner’s insurance: An insurance policy that combines personal liability insurance and hazard insurance coverage for a residence and its contents.
Housing expense ratio: The percentage of gross monthly income that goes toward paying a mortgage or rent on a home.
HUD-1 statement: A document with an itemized listing of closing costs payable at the closing or settlement meeting when buying property. The closing costs can include a commission, loan fees and points, and sums set aside for escrow payments, taxes and insurance. It is signed by both the buyer and the seller, who may be paying some of the closing costs. The statement form is published by the Department of Housing and Urban Development (HUD).
Index: A published measure of the cost of money that lenders use to calculate the rate on an adjustable rate mortgage (ARM). The most common indexes are the one-year Treasury Constant Maturity Yield and the FLAB 11th District Cost of Funds.
Indexed rate: The sum of the published index plus the margin. For example, if the index were 9 percent and the margin 2.75 percent, the indexed rate would be 11.75 percent. Often, lenders charge less than the indexed rate the first year of an adjustable rate mortgage (ARM).
Interest: Money paid for the use of money.
Interest-Only Mortgage: A mortgage where the homeowner pays only the interest on the loan for a specified amount of time.
Interest tax deduction: Most mortgage holders can deduct all the interest paid on the loan in filing income tax. The deduction applies to people with just one mortgage on a primary residence, as well as those with a combination of loans. Within certain limits set by the IRS, points paid up front on a mortgage are usually deductible in the year the house was purchased.
Investment Property: A property not considered to be a primary residence that is purchased by an investor in order to generate income, gain profit from reselling or to gain tax benefits.
Investor: The owner of the loan on a property.
Joint Tenancy: An undivided interest in property, taken by two or more joint tenants. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Lease-purchase mortgage: A financing option that allows a potential home buyer to lease a property with the option to buy. Often constructed so the monthly rent payment covers the owner’s first mortgage payment, plus an additional amount as a savings deposit to accumulate cash for a down payment. A seller may agree to a lease-purchase option if the housing market is saturated and the seller is having difficult selling the property.
Lien: A legal hold or claim from one person on the property of another. The lien placed by a first mortgage is special; it is called the first lien and takes precedence over others.
Lifetime rate cap: In an adjustable rate mortgage (ARM), it limits the amount that the interest rate can increase or decrease over the life of the loan. See also caps.
Livery of seizing: Under common law, the process of transferring title.
Loan origination: The process by which a mortgage lender obtains a mortgage secured by real property. An origination fee is charged by the lender to process all the forms involved in obtaining a mortgage.
Loan-to-value (LTV) ratio: The ratio of the mortgage loan amount to the property’s appraised value or selling price, whichever is less. For example, if a home is sold for $100,000 and the mortgage amount is $80,000, the house has an 80 percent LTV.
Lock or lock-in: Lender’s guarantee that the mortgage rate quoted will be good for a specific amount of time. The home buyer usually wants the lock to stay in effect until the date of the closing.
Lock-and-float: Rate programs offered by companies that allow borrowers to lock in the current interest rate on a mortgage for a specified period of time, while also letting them “float” the rate down if market conditions improve before closing.
Loss Mitigation: When the homeowner and the mortgage company are working together to determine the appropriate option/workout solution to bring the mortgage current and avoid foreclosure.
Low-down mortgages: With a low down payment, usually less than 10 percent. Fannie Mae and Freddie Mac design loan programs that spell out a set of standards for lenders. In recent years these government-chartered agencies have made low-down mortgages more available through programs such as Fannie Mae’s Flexible 97 and Freddie Mac’s Alt 97. The “97” refers to the amount of the home’s value a lender will cover in a mortgage, leaving a low 3 percent down payment required.
Margin: The number of percentage points added to the index on a one-year adjustable rate mortgage (ARM). For example, if the index rate is 9 percent and the margin is 3 percent, then the fully indexed rate is 12 percent.
Maturity: The date on which the principal balance of a loan becomes due and payable.
Modification: Any change to the terms of a mortgage loan, including changes to the interest rate, loan balance or loan term.
Mortgage: A legal document that uses property as collateral to secure payment of a debt.
Mortgage banker: The lender that originates the mortgage loan; the one making the loan directly and closing the loan.
Mortgage broker: An individual or company that brings borrowers and lenders together for the purpose of loan origination. Unlike a mortgage banker, brokers do not fund the loan but work on behalf of several lenders. Brokers typically require a fee or a commission for their services. See broker premium.
Mortgage Company: Mortgage companies may originate (i.e., your lender) as well as service the loan. The lender who originated your mortgage may or may not service your loan. When the mortgage company services your mortgage, they do the following: collect the homeowner’s mortgage payments, pay taxes and insurance, generally manage your escrow accounts (i.e., they “service” your loan), and provide customer service and support.
Mortgage insurance: A policy that insures the lender against loss should the homeowner default on a mortgage. Depending on the loan, the insurance can be issued by a government agency such as the Federal Housing Administration (FHA) or a private company. It is part of the monthly mortgage payment. See also private mortgage insurance (PHI).
Mortgage Release (Deed-in-Lieu of Foreclosure): The transfer of title from a homeowner to the mortgage company to satisfy the mortgage debt and avoid foreclosure, also called a Deed-in-Lieu of Foreclosure or a voluntary conveyance.
Mortgagee: A lender to whom property is conveyed as security for a loan.
Mortgagor: One who borrows money, giving as security a mortgage or deed of trust on real property.
Negative amortization: A gradual increase in mortgage debt that happens when the monthly payment does not cover the entire principal and interest due. The shortfall is added to the remaining balance to create “negative” amortization.
Note: The document giving evidence of mortgage indebtedness, including the amount and terms of repayment.
Origination fee: A fee paid to a lender for processing a loan application.
Owner financing: A transaction in which the seller of a house provides all or part of the financing. Sellers may provide financing because they need to sell the property right away or they are having difficulty selling the house and want to provide financing as an incentive to a buyer.
Periodic rate cap: In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease during any one adjustment period. See caps.
PITI: Stands for principal, interest, taxes, and insurance, which are the usual components of a monthly mortgage payment.
PITI reserves: A cash amount that a home buyer must have on hand after making a down payment and paying all closing costs. The reserves required by the lender must equal the amount a home buyer would pay for PITI for a specified number of months.
Public Assistance Award Letter: Benefit statement or a letter from the provider showing the amount of your public assistance benefit payments, how often you receive them, and how long they will continue.
Planned Unit Development (PUD): A type of real estate project that gives each unit owner title to a residential lot and building and a nonexclusive easement allowing access to the project’s common areas. See common area assessment.
Plat: A map that shows a parcel of land and how it is subdivided into individual lots. Plat maps also show the locations of streets and easements.
Pre-approval: This process goes a step further than pre-qualification. It means the lender has contacted the borrower’s employer, bank and other places to verify all claims of earnings and assets. In return, the borrower receives a letter stating the lender is willing to grant a mortgage for a specified amount, within a limited period of time.
Pre-foreclosure Sale or Short Sale: The process in which a mortgage company works with a delinquent homeowner to sell the house by a real estate agent prior to the foreclosure sale. The sale price is less than what is owed on the mortgage.
Pre-payment penalty: A fee imposed by certain lenders if the first mortgage is paid off early.
Pre-payment plan: Similar to a biweekly mortgage, but operated by a third party. In it, the borrower pays to the third party half the monthly mortgage payment every two weeks. At the end of the year, the plan operators typically take the extra money that results from the process and send lump sum payments to the participants’ lenders. Instead of 12 monthly payments of $665, or $7,980 a year, on the 30-year mortgage, the borrower would make 26 biweekly payments of $332.50, or pay $8,645 annually. As a result, total interest would shrink by $34,130 and the loan term would shorten to less than 24 years.
Pre-qualification: An early evaluation by a lender of a potential home buyer’s credit report plus earnings, savings and debt information. The home buyer gets a nonbonding estimate of the mortgage amount the borrower would qualify for, or how much house the borrower can afford. Buyers who pre-qualify can go a step further and seek pre-approval.
Principal: The original balance of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest.
Private mortgage insurance, or PMI: Insurance that protects mortgage lenders against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. PMI is usually required if the down payment is less than 20 percent of the sale price. Home buyers pay for the coverage in monthly installments. PMI is usually terminated when the home buyer has built up 20 percent equity in the property.
Quit claim deed: The formal document by which a claim in property is denied. Often used to clear a cloud on title.
Rate lock: A commitment issued by a lender to a home buyer or to the mortgage broker guaranteeing a specific interest rate for a specified amount of time. See also lock.
Real estate agent: A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires lenders to give home buyers advance notice of closing costs, which are payable at the closing or settlement meeting.
Realtor: A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
Refinancing: Securing a new loan in order to pay off the existing mortgage or to gain access to the existing equity in the home.
Reelection: An increase in the amount of land that occurs when a river or sea permanently withdraws.
Repayment Plan: A homeowner promises to pay down past-due amounts on a mortgage over a specified time period while still making regular monthly payments.
Restrictive covenant: A homeowner promises to pay down past-due amounts on a mortgage over a specified time period while still making regular monthly payments.
Roll-in loans: A refinance loan that rolls any closing costs or fees into the loan. These programs best serve people who have a reasonable amount of equity, want to reduce their overall interest expense and plan to stay in their homes. Most refinance programs also cap the allowable LTV at 97 percent, which means some borrowers won’t have the option of rolling their costs in no matter what.
Rural Housing Service (RHS): This agency of the U.S. Department of Agriculture provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. It offers low-interest-rate loans with no down payment to borrowers with low-to-moderate incomes who live in rural areas or small towns.
Sale agreement: A written contract signed by the buyer and the seller of a house stating the terms and conditions under which the property will be sold.
Second mortgage: A mortgage on property that has a lien position behind the first mortgage.
Secondary mortgage market: The buying and selling of existing mortgages.
Servicer: An organization that collects monthly mortgage principal and interest payments from home owners and manages escrow accounts for paying taxes and homeowners’ insurance premiums. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
Sub prime mortgage: A mortgage granted to a borrower considered sub prime, that is, a person with a less-than-perfect credit report. Sub prime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.
Title: A legal document proving a person’s right to claim entitlement to a property, including the history of the property’s ownership.
Title binder: Written evidence of temporary title insurance coverage.
Title company: A company that specializes in examining and insuring titles to real estate.
Title insurance: That protects against loss from disputes over ownership of a property. A policy may protect the mortgage lender and/or the home buyer.
Title search: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims against the property.
Transfer tax: State or local tax levied when title passes from one owner to another.
Treasury index: An index used to determine interest rate changes for certain adjustable rate mortgages (Arms). It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury’s daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
Truth-in-Lending: A federal law that requires lenders to disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
Underwriter: A company or person undertaking the responsibility for issuing a mortgage. Underwriters analyze a borrower’s credit worthiness and set the loan amount.
VA mortgage: A loan backed by the Veterans Administration. It requires very low or no down payments and has less stringent requirements for qualification. Members of the U.S. armed forces are eligible for the loans under certain qualifying conditions. Contact the local VA office for information.
Warranty deed: The gold standard in deeds for home buyers: It proclaims that the grantor warranties (guarantees) that the property has clear title and is being conveyed free of liens or encumbrances.
Workout: Options to resolve or restructure a loan or prevent someone from going into foreclosure