Glossary of Real Estate Terms (Oregon) – I
Impound Account – An account into which funds are placed as a reserve for payment to a third party for a given purpose. The most common impound accounts are required by lenders for taxes and insurance, into which the borrower pays on a monthly basis so that there will be sufficient funds for the lender to pay the annual insurance premium and yearly property taxes.
Indemnification – The duty of being responsible to a third party for the debt or default of another. Indemnification can occur through a formal voluntary contractual arrangement or be based upon Common Law concepts where one person’s active conduct creates liability for another who did not cause that liability but is held – or threatened to be held – financially responsible for it. For example, the seller of a swing set might be held financially liable for an injury to a child using it, but if the real cause was a construction or design defect, the seller might seek indemnification from the manufacturer or designer.
Index – When used in reference to interest rates or any other payment obligation, the term usually refers to an independent table of figures whose accuracy is not in dispute, which is used to calculate the increase or decrease in the rate or other payment obligation. A common example is the consumer price index (“CPI”). Many adjustable rate mortgages contain provisions tying the applicable interest rate to a certain index such as LIBOR (London Inter Bank Offering Rates). (See, http://mortgage-x.com/general/mortgage_indexes.asp)
Inflation – An increase in the cost of goods and services. As inflation increases the value of the dollar decreases, since it take more dollars to purchase the same goods and services.
Inflation Endorsement – A provision in a hazard insurance policy, such as fire insurance, that provides for a gradual increase in the amount of the coverage (from the initial date of the policy) to adjust for the effect of inflation and appreciation.
Ingress and Egress – Terms frequently associated with easements, such as an access easement. They refer to the right to enter (“ingress”) and exit (“egress”).
Insolvency – A financial condition in which one’s liabilities exceed their assets.
Interest – A charge for the use of another’s money. Interest must be “earned” in that it only becomes due after the lapse of time. Interest is typically not paid in advance except in the case of discount points paid by a borrower to reduce the offered interest rate at the commencement of the loan. Such points are essentially the prepayment of interest so that the lender’s yield is made comparable to what it would have been with the higher offered rate.
Interest Rate – The charge stated as an annual percentage of the unpaid principal balance due on a loan. For example, an interest rate of 5.00% on $100,000 is $5,000 annually if no principal is paid back during that year. If the loan called for 12 equal monthly payments of principal and interest, the 5.00% would be charged first to the interest due on principal balance and the remainder would be applied to reduce the principal. (PCQ Note: Taxes and insurance are excluded from this example.)
Interpleader – A legal action in court brought by a neutral third party (sometimes called a “stakeholder”) who is holding property or funds of another. In most cases, there is a dispute over the funds between competing parties, and the third party wants direction from the court for disbursement. Escrow companies are a common example of such a neutral, and they will file an interpleader action if they are holding funds and the seller and buyer have made competing demands for disbursement. The stakeholder is entitled to attorney fees from one or both of the parties seeking disbursement.