Asset to Attachment

 

Asset

Mortgage loan underwriting requires most applicants to disclosure all their liabilities and sufficient assets to qualify. Assets refer to a person’s real and personal properties, all of which may be used to satisfy that person’s debts.

Assets are typically divided between hard and liquid assets. Liquid assets, in particular, are very important for most residential loan applications, as are revenue-producing assets such as rental property and investment securities. Asset qualifications vary according to the lender and the program, but lenders want to be sure that there are sufficient liquid assets to cover reserve, closing costs and down payment requirements.

Asset Statement

The periodic itemization and review of accounts, provided by investment and depository institutions to its clients. Many lenders will request copies of the applicant’s asset statements (including bank statements) to document existence and source of sufficient funds, as well as to provide an alternative method for documenting income.

Asset Turnover

A measurement of the relationship between a business’ or venture’s assets and revenues. For an annualized calculation, it is usually calculated as the total revenue divided by the average total assets.

Asset-Backed Securities

See the Commercial Mortgage-Backed Securities entry.

Asset-Based Lender

A lender that primarily focuses on the collateral’s or asset’s value — over and above the borrower’s credit, income or personal asset qualification. Most hard-money lenders and many subprime lenders are considered asset-based lenders.

Assigned Lease

There are two meanings to this term. The term “assigned lease” may refer to the lease agreement that is transferred from one lessor (landlord) to another, usually during the course of a property sale.

But an assigned lease may also refer to a funding arrangement, in which the lessor or property owner assigns the lease (and its cash flow or collection rights) in exchange for immediate cash now. In such cases, it is sometimes called a “discounted lease” because the upfront cash is much less than the rent that would normally be collected.

Assignee

The individual, entity or party who receives the transfer of title, rights or interest to a property or contract.

Assignment of Contract

The transfer of all title, rights and interest that a contract entails to another party from the individual or entity who currently owns such title, rights or interests.

For example, you sign a purchase contract to buy a building for $200,000. You find an investor willing to pay $300,000 for that same building. Although you can complete your purchase and then turn around and sell it to the investor, it would be more efficient to just assign your rights to the purchase contract — in exchange for the net $100,000 profit. In addition to saving time, you’ll save money by avoiding closing costs and taxes.

Assignment of Rent

A provision found in many mortgage deeds, promissory notes and deeds of trusts, especially when the underlying collateral is an investment property. It is triggered by a default notice and allows the lender (mortgagee) or trustee to step in and begin collecting the rents directly from the tenants.

The mortgagee or trustee will then use the rental proceeds to pay the debt servicing, as well as necessary taxes and fees. The borrower will only receive the surplus proceeds — if there are any.

Assignor

The individual, entity or party who is surrendering and transferring the title, rights or interest to a property or contract.

Assisted Living

A type of senior housing, designed for seniors who are still generally active but need help with their daily activities and personal care, such as meal preparation, transportation, medication management, hygiene, cleaning, personal security and access to health services.  Senior housing categories range from assisted living to skilled nursing and critical care.

Associate Broker

A classification used in some states, applied to real estate brokers who works for another (senior) broker.

Association Dues

The charge levied by a condominium or homeowners’ association on unit owners. The association dues or assessments cover maintenance and management of the condominium structure, as well as insurance coverage and any necessary improvements.

Assumable Loan

A loan program that allows a third party to legally assume the loan obligation from the original borrower. With a legal assumption, the new borrower assuming the loan also assumes all of the loan’s legal obligations. The original borrower is legally and fully cleared from all obligations for the loan.

Assumption (Loan)

Taking over responsibility for a loan. Most residential loans are no longer assumable. A legal loan assumption transfers all loan obligations from the original borrower to the assuming borrower. More importantly, a legal assumption removes the original borrower from any or all future obligations. Informal loan assumptions are dangerous because the original is still on the hook for the loan.

Assumption Agreement

A contract by which a buyer undertakes, or assumes, the obligations of an existing mortgage. The few residential loans that still allow assumptions require the prospective buyer-assumer to satisfy certain guidelines, before the loan can be legally assumed. A legal assumption will officially place the loan’s account into the name and credit history of the buyer-assumer. If the assumption is not official (but rather simply a private agreement between the buyer and seller) then any payments and delinquencies made to the assumed loan will still appear on the credit report of the original owner (seller).

Atrium

An enclosed courtyard, with or without a roof. Many modern office buildings include an atrium to provide more sunlight and better air circulation.

Attachment

Legal terminology referring to the taking of a property to force repayment of a debt obligation. However, it is also a real estate term referring to the processing of converting personal property into real property. For example, when raw bricks are delivered to a property, they are considered personal property or chattel; when those bricks are used to create a pathway, they become real property. The opposite of attachment is severance.