Glossary of Real Estate Terms (Oregon) – P
PITI – Stands for “Principal, Interest, Taxes, and Insurance” which make up the bulk of most borrowers’ monthly installments to the lender for repayment of the residential purchase loan. The taxes and insurance are frequently held by the lender in an “impound account” and paid on an annual basis.
Partial Payment – The payment of less than the total amount owed. Partial payments normally do not have to be accepted by lenders where the loan documents specify a minimum monthly installment.
Partition – A legal action available to co-owners of real property, such as tenants in common, designed to either physically divide the property, or more commonly, force a sale of the property and divide the proceeds, based upon the co-owners’ respective interests.
Payment Cap – A limit or ceiling on the amount of any single increase on an adjustable rate mortgage (“ARM”) due to an increase in the index to which the interest rate is tied. The payment cap refers to the size of any installment payment due upon adjustment in the interest rate. A payment cap (referring to dollars) is not the same as an interest rate cap (referring to the percentage interest rate charged for the loan at any given time). Typically, ARMS do not have both an interest rate cap and a payment cap.
Payment Change Date – The date when monthly installments on an adjustable rate mortgage (“ARM”) or a graduated-payment mortgage (“GPM”) will change. Generally, the payment change date occurs in the month immediately following the interest rate adjustment date.
Payment Due Date – The date in the promissory note and mortgage (or trust deed), when periodic payments, usually monthly, are due. Most loan agreements have a payment due date, followed by a grace period of a few days, and a date after which a late charge is assessed to the borrower.
Personal Property – Any property that is not real property. The only exception is when personal property becomes a “fixture” (that is, it becomes affixed to the land or structure) and is then deemed to become a part of the real property. Fixtures (except trade fixtures used in a trade or business) are legally included the conveyance of real property, unless specifically carved out of the transaction.
Personal Representative Deed – A deed given by the personal representative of an estate in order to transfer the decedent’s interest to one or more heirs or third –party purchasers from the estate. The deed makes no warranties by the personal representative, but merely transfers the decedent’s interest.
Plaintiff – One who brings a claim in court seeking some remedy or relief. If the claim is brought in arbitration, the plaintiff is called the “claimant.”
Planned Unit Development (PUD) – Refers to a planned residential development that is constructed as a part of a single development. PUDs have common areas owned by the homeowner’s association (“HOA”) which oversees their management and maintenance, as well as certain other community facilities and services that may be provided as a part of the development. The homeowners pay periodic dues to support the activities and responsibilities of the HOA. PUDs normally have recorded deed restrictions.
Plat – A recorded map of multiple parcels of property, displaying the surveyed dimensions of the lots, the location, purpose, and measurements of easements and streets, and frequently certain limitations on the use of common areas.
Points – A lender charge made to the borrower for a loan. A point is equal to one percent of the principal amount of a mortgage or trust deed. For example, one point on a $300,000 loan is $3,000. Lenders may charge points for many reasons, such as to increase the yield (that is, the return) on the loan, to cover closing costs, to charge for loan processing, to issue a loan lock beyond a fixed period of time, or other reasons. Points may be charged at the borrower’s request to “buy down” the interest rate so that the monthly payments are lower. Points are typically paid at the time of closing. Sometimes the points are shared between the seller and the buyer/borrower.
Pooling and Servicing Agreement (“PSA”) – PSAs act as the governing document when a large pool of loans is sold into the marketplace as securities. Many such pools took the form of REMICS (see definition below). The PSA acts as a trust document, defining the rights of the investors (the “beneficiaries”) and the duties of the trustee and servicer.
Portland Metropolitan Association of Realtors® (“PMAR”) – The local Realtor® organization to which all Portland-Metro Realtors® belong, excepting only those who are exclusively members of the East Metro Association of Realtors®. PMAR is headquartered in Portland, Oregon.
Power of Attorney – A legal document recognized in Oregon and most states, granting certain authority to one person to take binding legal action on behalf of another. The person receiving the power is called the “attorney-in-fact.” In Oregon, powers of attorney must be recorded if they deal with land. A limited power of attorney grants only limited powers to the attorney-in-fact. A general power of attorney gives nearly unlimited powers. The authority granted under a power of attorney ceases upon death or incapacity of the person granting it. However, a “durable power of attorney” intended to survive incapacity in order to make major end of life decisions is recognized in most states, including Oregon.
Pre-Approval Letter – A written letter from a lender, mortgage broker, or other loan originator, stating that based upon verification of certain information from the applicant, including such things as a credit check, debt to income analysis and verification of down payment, they would process the loan for the borrower. Pre-approval letters contain significant limitations such as appraisal review, and are not a lender’s binding commitment to make the loan. Final loan commitment can only be made by the loan underwriter, which normally does not occur until very late in the loan process, shortly before closing of the purchase transaction.
Pre-Qualification Letter – This document is far less reliable than a pre-approval letter. In the pre-qualification letter the loan originator is making a representation concerning the borrower’s capacity to qualify for a loan without actually reviewing any of their financial data. The originator is simply relying upon the prospective borrower’s oral representations.
Predatory Lending – A term used to describe any unscrupulous loan practices by lenders and others involved in loan origination. Most states have regulations and statutes against such tactics, especially in light of the events of 2005 – 2008 when loans were made to borrowers who did not understand the terms and were not capable of repayment under the terms of the loan documents.
Prepayment – The payment of all or a part of a loan balance prior to the end of the term. A partial prepayment does not eliminate the obligation to pay the regular monthly installments. A full prepayment satisfies the borrower’s entire obligation under the note and mortgage or trust deed. Some lenders have restrictions and limitations on full prepayment. A typical prepayment penalty fee consists of a significant charge, usually stated as a percentage of the amount being prepaid. The reason for such penalties is because the loan terms may contain a low “teaser” interest rate early in the term and prepayment would deprive the lender (or the investors who buy the loan package in the secondary market) from receiving their expected yield. (PCQ Note: If a loan has a prepayment penalty, it may also apply if the lender is forced to accelerate the loan balance due to default.)
Prepayment Penalty – See “Prepayment”.
Prime Rate – The interest rate a bank charges its preferred customers. The rates are published in the business media and are frequently used as the index for interest rate adjustments on ARMs or lines of credit. The Prime Rate is usually adjusted in correlation to the adjustments of the Federal Funds Rate.
Principal – The amount initially borrowed from a lender. As the loan is paid back, the borrower’s monthly installments are applied first toward interest and then to reduce the principal balance of the loan. On a fixed rate fully amortizing loan the principal balance is gradually reduced over the life of the loan.
Principal, Interest, Taxes, and Insurance – See “PITI.”
Private Label Market – The secondary market in 2004 – 2008 that purchased residential mortgages from conventional lenders such as Countrywide (now B of A), Washington Mutual (now JPMorgan-Chase), and others. It is called “private” because (a) it consisted primarily of investment trusts that were created to purchase these loans; and (b) to distinguish it from the two major government sponsored enterprises (“GSEs”), Fannie and Freddie. During this time, a lot of lending was virtually unregulated, and many of the loans generated for this market were poorly underwritten. Since the loans didn’t conform to Fannie’s and Freddie’s underwriting guidelines, they were sold into the private label market. Today, there is no viable private label market for residential loans.
Private Mortgage Insurance (“PMI”) – This is a form of lender insurance normally required for loans where the borrower is paying less than a 20% down payment. PMI insures the lender for a portion of the loan should the borrower default. The premiums are paid by the borrower as a part of the loan repayment. A federal law, the Homeowner’s Protection Act (HPA) of 1998, requires lenders to provide certain disclosures and information to borrowers about PMI including the lender’s duty to notify the borrower when the PMI may be cancelled.
Probate – The judicial process that occurs when someone dies leaving assets. If there is a will it is said they died “testate” and if there is not a will, it is said they died “intestate.” In either case, if the decedent owned property at the time of death, especially real property, the estate must be probated to legally distribute the property to those persons designated in the will, or if there was no will, then in accordance with the statutory laws of the state. [PCQ Note: If one’s property is jointly owned by husband and wife – known as “tenants by the entirety – they both automatically have a “right of survivorship” meaning that at the time of death of the first spouse, all property jointly owned with the right of survivorship automatically transfers to the survivor at the moment of the first spouse’s death. This means that such property does not become subject to probate, since technically, it was owned by the survivor at the time of the spouse’s death.]
Promissory Note – The legal instrument that sets forth the amount of a debt due on a loan including the repayment terms such as the interest rate, monthly payments and due dates. If the promissory note is accompanied by a trust deed or mortgage recorded on the borrower’s real property, it is said to be a “secured” note.
Property Disclosure – The law in many states requiring that in one to four family residential housing, the seller must answer a series of required questions dealing with the condition of the property, the existence of any material defects from multiple sources, such as mold, mildew, dry rot, water, etc, as well as the condition of all operating systems such as heating, cooling, plumbing and electrical. In Oregon the Seller Property Disclosure Law is found at ORS 105.462 to 105.490.
Property Tax – In Oregon, the charge imposed by the county government to fund public services such as schools and law enforcement. The total amount of property tax is determined annually through a budgeting process and then assessed based upon a percentage per $1,000 (“the millage rate”) of assessed value of the property located in the county.
Public Record – Information contained in the records of all public institutions such as the courthouse, the Secretary of State, the Corporation Commissioner, the Department of Justice, etc. These records pertain to certain events such as court filings, recorded liens for loans, taxes, court judgments, bankruptcies, criminal convictions, corporate filings, etc. Under Oregon law, certain public record information (particularly that contained in the county courthouse records dealing with land) imparts what is known as “constructive knowledge” to the world as to the information contained in those records – even though one may have no actual knowledge of the event recorded. It is for that reason that title insurance is important when real property is purchased, since the title insurer checks the public records for status of the title being conveyed and informs the buyer of that information before closing of the transaction. The information provided is then listed on a policy of title insurance, essentially guaranteeing to the insured the correctness of the title information contained on the public record.
Punch List – A list of items that must be completed by a particular time. In real estate transactions – especially in new construction, buyers frequently create such a list following a final walk-through shortly before closing, in order to determine what corrections and/or repairs must be performed by the seller as a condition of closing.