Glossary of Real Estate Terms (Oregon) – N

National Association of Realtors® (“NAR”) – The national Realtor® association to which all Realtors® throughout the country belong. It is headquartered in Washington, DC.

Negative Amortization – A process whereby the monthly interest payment on a loan is insufficient to pay the monthly interest due under the promissory note. The result is that the interest shortfall is added back to the principal balance thus increasing the principal amount due under the loan. During the credit bubble, when housing prices skyrocketed, some lenders offered loan programs that permitted borrowers to pay less than the total interest due for a period of time. They were sometimes referred to as “Neg-Am Loans.” These programs were attractive to borrowers who could not afford a fixed rate, fully amortizing, loan and believed that housing prices would continue to rise so that eventually they could refinance out of their current loan – or sell the property to extricate themselves from the compounding effect of the negative amortization process. When housing prices dropped, many of these borrowers found themselves “underwater” – meaning that they owed more on their loan than the home was worth. Negatively amortizing loans were outlawed by the 2009 Oregon Legislature.

Negative Equity – This term refers to the difference between the current balance of all unpaid mortgages on a property (residential or commercial) and its current fair market value. For example, if the mortgage(s) total(s) $300,000 and the current fair market value is $200,000, the negative equity is $100,000. In today’s vernacular, that property is “underwater.”

Net Income – The total income from all sources, less all expenses for the same period.

Net Present Value (“NPV”) or NPV Test – Ignoring the terminology, formulas, and acronyms used, the NPV Test is basically a number-crunching analysis of the underlying investment (e.g. the borrower’s loan) based upon two opposite scenarios: (1) What is the net present value of the loan if the pre-foreclosure event (loan mod, short sale, deed-in-lieu) is approved, versus (2) The net present value of the investment if it is foreclosed. If the NPV figure is higher under the pre-foreclosure scenario, the result is declared “positive” and the requested pre-foreclosure solution will be approved – since it is in the economic interest of the investment’s owner (e.g. the bank or investor) to do so. If the NPV analysis is higher under the foreclosure scenario, the test results are deemed “negative” and the borrower’s requested pre-foreclosure solution will be denied.

Net Worth – One’s financial worth arrived at by deducting all liabilities from all assets including cash.

No Cash-Out Refinance – A refinancing of the unpaid principal balance of an existing loan where the borrower does not receive any of the funds from the refinancing.

No Cost Loan – A broad term referring to any of several types of loans that do not include typical borrower costs such as title insurance, escrow fees, closing cost, appraisal fees, recording fees, etc. No points may be charged, as well. The purpose of such loans is to reduce the upfront cost to the buyer. The interest rate may be higher to make up for the fact that the lender is initially absorbing these costs.

No Doc Loans – These loans were a staple of the lending industry during the easy credit years of 2004 – 2007. They were usually based upon the borrowers’ “stated income” or “stated assets.” Often referred to as ‘liar loans,” since by their nature, they encouraged or resulted in borrowers misstating their financial qualifications to obtain the loan. Lenders demanded little or no documentation for the loans made to borrowers, so long as the borrowers’ credit met the lender’s guidelines. The reason for this lax or non-existent underwriting was due, in part, to the widely held belief that property values would continue to rise, so neither borrower nor lender were at much risk. The other reason for the poor underwriting practices was that at the mortgage origination level, no one really cared. In fact, higher risk loans were encouraged since due to their higher yield, investors would pay more for them. (See definition of “yield spread premium” below.) Mortgage brokers got paid for making the loans – they didn’t have to service them. And banks got paid in full once their loans were either resold or packaged into securitized pools that investors scooped up.

Non-Judicial Foreclosure – In Oregon, trust deeds are primarily foreclosed non-judicially. That is, the process occurs without the filing of a foreclosure complaint in court. Instead, the trust deed foreclosure process is conducted by advertising in a newspaper of general circulation and by mailing of the appropriate documentation to all persons whose interest is being foreclosed or who may have some recorded interest in the property.

Nonperforming Asset – A term frequently used today to refer to loans being carried on a bank’s books that are significantly delinquent and not being repaid.

Note – See Promissory Note.

Note Rate – The interest rate stated on a promissory note that is secured by a trust deed or mortgage.

Notice of Default – A formal written notice informing one obligated under a contract that they are in default. A Notice of Default (“NOD”) is usually required under most contracts, especially a note and mortgage or trust deed. The Notice of Default typically gives one a limited period of time, such as ten days, within which to cure the default.

Non-Conforming loan – A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits. (See Conforming Loan.)

Notary Public – One who is licensed by a public body to certify the authenticity of a signature. Under Oregon law, recording a document on the deed records and other public records requires notarization. Before such certification, the notary is required to verify the identity of the signer and actually observe them signing the document. It is illegal to notarize a document that was pre-signed outside the presence of the notary.