Glossary of Real Estate Terms (Oregon) – H
HAFA – Home Affordable Foreclosure Alternatives. This program is a part of the Making Home Affordable Program and gives servicer guidance for expediting certain pre-foreclosure events such as short sales or deeds-in-lieu of foreclosure. It is reserved for borrowers who did not qualify or were unsuccessful under a HAMP modification. (See below). It remains to be seen if HAFA will have any significant effect in speeding up the short sale process.
HAMP – Home Affordable Modification Program. This is a loan modification program under the umbrella of the Making Home Affordable Program. HAMP is designed to facilitate and implement practices and procedures in the modification of home loans for owners of distressed properties.
HARP – This is a loan refinance program under the umbrella of the Making Home Affordable Program. It is designed to facilitate and implement practices and procedures in the refinancing of home loans for owners of distressed properties.
Hard Money Loans – Loans made at high interest rates to borrowers who may have credit issues or other constraints that make it difficult or impossible for them to obtain a standard conventional loan. Hard money loans focus less on the buyer’s credit and more on the value of the security. They are usually processed and made within a short period of time.
HASP – This housing rescue plan (“Housing Affordability and Stability Plan“) targets homeowners who are having difficulty paying their mortgage, by permitting them to refinance their homes even if they owe more on their mortgage than the home is worth. Unfortunately, the maximum amount of indebtedness over the market value is only 5%, which would translate to $210,000 on a $200,000 home. In today’s depressed real estate market, many, many homes are far over the 5% cap, so the ability of the program to help many homeowners is problematic, at best.
Hazard Insurance – Insurance designed to cover an insured’s loss such as fire, wind or other casualties. Lenders usually require as a condition to making a loan that the borrower/homeowner maintain hazard insurance naming the lender as an additional insured to the extent of the lender’s remaining principal balance under the loan.
Highest and Best Use – An appraisal or valuation term meaning the best use for the property that results in the highest present value yielding the greatest net return over a given period of time or the foreseeable future. Considerations of neighboring uses, physical and financial potential, and applicable zoning and land use laws are important factors in arriving at “highest and best use.”
Home Equity Line of Credit (“HELOC”) – A line of credit loan available up to a certain limit and secured by the borrower’s equity in their property. There is generally no restriction on the use of the proceeds and the homeowner can draw the funds out as he or she wishes, with repayment of principal and interest tied to the sums drawn out. Interest is usually based upon an indexed rate. HELOCs permitted some homeowners to live beyond their incomes and due to massive defaults of these loans in 2008 and thereafter, are much more tightly controlled than in the past. HELOC loans were typically in a second or third position behind superior loans, so when the borrower defaulted on a superior loan, foreclosure also wiped out the HELOCs security position. Seeing this, many lenders froze borrowers’ HELOCs based not on poor repayment performance, but out of concern that home depreciation in the borrower’s particular neighborhood (such as their zip code) would jeopardize the lender’s security should a default ever occur.
Home Equity Loan – Any loan secured by the borrower’s equity in their home.
Home Inspections – Generally refers to “professional” inspections of a home, in most cases imposed by the buyer as a contingency to their closing the purchase. Normally the inspector contractual limits his or her liability for errors to the cost of the inspection, which can range from $300 and up, depending upon the size of the home and other factors. In Oregon home inspectors are regulated and licensed by the Construction Contractor’s Board (“CCB”) and are prohibited from contracting to perform the repairs noted in their report. Home inspection contracts in Oregon specifically exclude an evaluation of building code compliance. The scope of such inspections are usually limited to visible physical structure (often excluding the roof) and the operation of such systems as heating, cooling, plumbing, electrical, etc.
Home Warranty – A policy of insurance that covers the repair costs due to the failure of certain appliances and mechanical systems. Coverage can be limited in many ways and the contract should be reviewed closely. Home warranties do not provide insurance against losses for damage to the residential structure itself – only to the performance of the system insured.
Homeowner Association (“HOA”) – An association of owners of property within a particular development such as condominiums (sometimes called a “Unit Owner’s Association”), or planned communities with common areas. HOA’s are required to be formed under many state laws with a primary purpose to oversee, manage and maintain common areas, enforce violations of the CC&Rs, and collect HOA dues.
Homeowner Insurance – Hazard insurance (see above) covering losses due to certain listed risks such as fire, wind, etc. Normally requires the occurrence of a spontaneous “event” and does not insure against losses due to mold, mildew, termites, or other casualty that results in loss to the homeowner over a period of time. Unless required by the lender, homeowner insurance does not normally include damage resulting from floods. Homeowner insurance can and should be obtained with additional coverage against (non-auto related) liabilities claimed against the homeowner for negligence or other acts.
Homestead Exemption – A “homestead” refers to the primary home in which one actually lives. Most states set a figure – in Oregon it is $40,000 for a single debtor and $50,000 for joint debtors – that is “exempt” from execution in the event of a forced sale of a home by a judgment creditor. This does not mean the home cannot be sold, but merely that a portion of the debtor(s’) equity up to the exemption may be retained from the sale proceeds. (See, ORS 18.395)
Housing and Urban Development (“HUD”) – A federal agency whose mission it is “…to increase homeownership, support community development and increase access to affordable housing free from discrimination. To fulfill this mission, HUD will embrace high standards of ethics, management and accountability and forge new partnerships–particularly with faith-based and community organizations–that leverage resources and improve HUD’s ability to be effective on the community level.” (See, http://hud.gov)
HUD-1 Statement – The document required to be completed and given to buyers and sellers at the time of closing. Also known as the “settlement sheet” or “closing statement.” It itemizes all costs related to the closing of the transaction, such as (on the buyer’s sheet) the costs related to the loan, points, fees, prorated taxes, etc. On the seller’s sheet the HUD-1 discloses the funds received and disbursed, such as real estate commissions, escrow fees, title insurance premium (if paid by the seller as is customary in Oregon), etc. The HUD-1 form was substantially revised effective January 1, 2010 and replaces all prior such forms. It now shows buyer the actual loan costs compared with those disclosed on the Good Faith Estimate (“GFE”).
HVAC – Acronym for “Heating, Ventilation and Air Conditioning.” Essentially, this is the property’s heating and cooling system.
Hybrid Loans – Any loan with terms that combine fixed rate and adjustable rates. Typically, they commence with a low fixed rate and within a three to ten year period, change to an adjustable rate. While the initial terms can seem attractive, they should be closely reviewed before commitment in order to evaluate their longer term affordability.