Glossary of Distressed Real Estate – T
TARP (Troubled Asset Relief Program) – A federal financial bailout program enacted as a part of the Emergency Economic Stabilization Act of 2008. It was established to manage up to $700 billion in Treasury funds [later reduced to $475 billion by Dodd-Frank] intended to address the bank financial crisis of 2007-2008. The purpose of TARP was to create bank liquidity. Essentially, what began happening to financial institutions in 2008 was that they were so highly leveraged they were unable to continue the daily borrowing they needed for their own operations. Credit froze up. Bear Stearns collapsed and was acquired for pennies on the dollar; Lehman Bros. filed for bankruptcy; Fannie and Freddie were taken over by the federal government in receivership. The TARP funds were intended to “deleverage” the banks, so they could survive. There is much criticism about the program, but in reality, it kept the U.S. financial crisis, and world economy, from becoming much worse.
Title – One’s right of ownership to real or personal property. A deed is the physical document evidencing one’s title to real property and a bill of sale is evidence of one’s title to personal property. Upon each successive conveyance of title a new deed or bill of sale is given from current owner to the new owner. The successive chain of conveyances of title from sellers to buyers is referred to as the “chain of tile.”
Title Insurance Company – In Oregon, title insurance companies specialize in the examination and insuring of title to real estate. Attorneys are not usually involved in the process as they are in some states. Most title companies in Oregon also have an escrow department that provides closing, aka “settlement” services to the parties.
Title Defect – Anything affecting the marketability of title to real estate, such as a gap in the chain of title where there is no evidence in the deed records showing that one transferring title ever received the same title from someone else. Sometimes title defects occur because an owner died and the estate was never probated, so it is unclear whether any of the heirs still have an interest in the property. A title defect is also referred to as a “cloud” on the title.
Title Insurance – A policy of insurance that that is typically issued by a title company to buyers and lenders, effective as of the date of closing and funding of the loan. The buyer’s policy is called an “owner’s policy” and it guarantees the marketability of the title subject to two sets of exceptions. The first set are called “standard exceptions” as they are regularly found in all owner policies, and exclude from coverage title defects that do not appear on the public record, such as boundary encroachments, unrecorded mechanics liens and persons in possession of the property. The second set of exceptions are called “special exceptions” because they are unique to the specific land being sold. Banks require that their borrowers pay for a “lender’s policy” of title insurance to insure them against certain risks up to the face amount of the loan. Lender policies provide extended coverage beyond that found in owners’ policies.
Title Search – An investigation of the public records, in the county where the property is located, to determine whether title is marketable and can be transferred to a buyer free and clear of objectionable liens and encumbrances. In Oregon, such searches are provided by title companies, not lawyers. The results of the search are first disclosed in a “preliminary title report” that is distributed to the parties, the lender and the real estate agents. The standard statewide OREF Sale Agreement form contains a contingency period for buyers to review the preliminary title report and indicate whether they have any objections to the matters disclosed in the report and for sellers to try to cure any title defects.
Title Theory States – [See, Lien Theory States]
Townhome – Generally refers to side-by-side multiple residential units sharing a common wall, common roof line, and having two-story construction. Each owner has deeded title to their property which includes the underlying land representing the foundation footprint. It may include a strip in front and/or back of the units. Maintenance of all common areas [and often any of the owner’s land], is governed by the CC&Rs. Some “townhome developments” are actually condominiums, in which the owners merely own the interior of their units, and the rest of the property consists of either limited and/or general common elements. In either case, there is a “homeowners association” or “unit owners association” to maintain the common areas and assess dues to pay for the expense.
Transfer Tax – A tax levied at the time of each recorded transfer of real estate within the county. Of Oregon’s 36 counties, only Washington County has a transfer tax, which is $1.00 per $1,000 of stated consideration. There are many exceptions to this tax, such as conveyances to clear title, adjust boundary lines, transfers between related companies, etc. In Oregon, it is customary that the buyer and seller equally split the cost of the tax for transfers in Washington County.
Truth-in-Lending Act (“TILA”) – A federal law enacted to promote the informed use of consumer credit by requiring disclosures about loan costs and terms. TILA gives consumers the right to cancel certain credit transactions, regulates certain credit card practices, and provides a method for the resolution of credit billing disputes. The Act prohibits certain practices in connection with credit secured by a consumer’s principal residence.
Trust Deed – The name of the instrument used by Oregon lenders to secure a borrower’s repayment of the loan. The repayment obligation is described in the promissory note that is signed by the borrower. The trust deed, once recorded in the public records, acts as notification to the world that the lender holds a secured position on certain real property for repayment of a debt. The trust deed sets forth the lender’s legal rights of foreclosure should the borrower default under the terms of the note. Mortgages and trust deeds serve exactly the same purpose; they differ only in the terminology and the methods of foreclosure. Many people use the term “mortgage” generically to apply to trust deeds as well. [See, ORS Chapter 86.]
Trustee – A person who is appointed by a court or designated in a written document, such as a will or trust, to take control of property for the benefit of another. Under Oregon’s trust deed law, the trustee is the third party named in the trust deed who is designated to hold the property “in trust” pending the default or payoff of the loan. If the borrower (called the “Trustor” or “Grantor”) pays off the loan, the lender (called the “Beneficiary”) instructs the Trustee to issue a “Deed of Reconveyance” which is the same as a satisfaction of mortgage, and removes the lien from the borrower’s record title. If the borrower defaults in the repayment of the loan, the lender instructs the Trustee to commence the foreclosure process. [Note: Contrary to how it sounds, the borrower is the true and legal title holder of the property secured by a trust deed. The lender merely has a lien on the property. There is no real “conveyance” of title in the property to the Trustee. The trust deed is essentially the same as a mortgage – that is, they are both documents used by lenders to secure repayment of the promissory note. The major difference between mortgages and trust deeds is in the lender’s foreclosure rights. In Oregon, trust deeds are almost exclusively used to secure loans, although mortgage terminology continues to be used, especially among lay people. – PCQ]