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Private lending glossary

STANDARDIZING DEFINITIONS IN PRIVATE LENDING

As the private lending industry evolves and matures, establishing a set of standardized terms and definitions becomes increasingly important. A comprehensive glossary helps ensure uniformity in communication, understanding, and interpretation across diverse stakeholders, including legislators, the general public, and lenders themselves.

This glossary serves as a living document, continuously updated to reflect changes in the business and legal landscapes of the private lending industry. It aims to keep all industry participants aligned and up-to-date, supporting the ongoing growth and success of the Private Lending sector.

If you have suggestions for term additions or edits, please contact us at borrow@youland.com.

LENDER TYPES
  • LENDER TYPES

    Broker

    An intermediary who connects borrowers with lenders, facilitating loan transactions and negotiating terms.
  • Correspondent Lender

    A financial institution that originates and funds loans on behalf of a larger lender, with the larger lender purchasing the loans shortly after closing.
  • Direct or Retail Lender

    A lender that originates and funds loans directly to the borrower, without intermediaries such as brokers or other financial institutions.
  • Private Lender

    An individual, group, or company that provides loans for 1-4 family properties and/or small balance multifamily/commercial properties. These lenders generally do not make loans directly to consumers for personal use; all loans are made to a formal corporate entity on non-owner-occupied real estate.
  • Table Funder

    A lender that provides the funds for a loan at the closing table, without requiring the originator to secure financing from another source.
  • White Label Lender

    A company that provides loan products or services under its own branding but relies on a third-party provider for underwriting, closing, funding, and servicing.
  • Wholesale Lender

    A lending institution that provides loan programs through brokers or other financial institutions, rather than directly to individual borrowers.
  • PROPERTY TYPES

    Commercial

    Properties primarily used for business activities, such as office buildings, retail centers, warehouses, and industrial facilities. These properties are typically leased to businesses or investors.
  • Ground-Up

    Projects where construction starts with undeveloped land or involves complete demolition of an existing structure, building new structures from the ground up.
  • Mixed Use

    Properties combining multiple real estate uses within a single building or development, such as residential, commercial, and retail spaces.
  • Multifamily

    Residential properties with 5 or more units, designed to accommodate multiple separate housing units within a single building or complex.
  • Real Estate Owned (REO)

    Properties that have been foreclosed upon and are now owned by a private lender, bank, or other financial institution as a result of borrower default.
  • Single Family Residence (SFR)

    1-4 unit residential properties designed to accommodate individual families or households. These properties include detached homes with individual yards and separate entrances for each unit.
  • LOAN TYPES

    Blanket/Portfolio Loans

    Single loans that cover multiple properties, allowing borrowers to consolidate their debt under one mortgage.
  • Bridge Loan

    Short-term loans, generally with terms of 2 years or less, used to finance property purchases or short-term construction or rehabilitation projects before obtaining long-term financing or selling another property.
  • Ground Up Construction Loan

    Loans specifically designed for new construction projects, providing funds for land acquisition and/or construction costs.
  • Mezzanine Loan

    Hybrid financing that combines debt and equity features, usually secured by a subordinate lien on the equity interest of the borrower entity.
  • Non-Performing Loan (NPL)

    Loans that fail to make principal and/or interest payments as required by the loan agreement.
  • Private Loan

    Loans typically used in commercial real estate transactions, offered and held by non-institutional lenders.
  • Rehab Loan or Fix-n-Flip

    Specialized loans designed for financing the renovation or rehabilitation of existing properties.
  • Residential Transitional Loan (RTL)

    Short-term financings used to facilitate the transition of a property from one phase to another, such as from distressed to stabilized or from vacant to occupied.
  • Second Lien Loan

    Subordinate mortgages or loans secured by properties already encumbered by a first lien.
  • Small Balance Commercial

    Commercial real estate loans or properties characterized by smaller loan amounts, typically ranging from $1 million to $5 million.
  • Term Loan

    Loans with set repayment schedules and maturity dates, generally used for long-term financing.
  • LOAN SERVICING RELATED

    Amortization Schedule

    A table detailing the breakdown of each loan payment into principal and interest components over the life of the loan.
  • Debt Service

    Scheduled payments due on a loan, including principal, interest, and other fees required by the loan agreement.
  • Default

    The failure of a borrower to meet their loan obligations, such as making timely payments or complying with other terms and conditions of the loan agreement.
  • Delinquency Rate

    The percentage of loans within a financial institution's portfolio whose payments are delinquent.
  • Escrow Account

    An account held by the loan servicer or lender, where a portion of the borrower's monthly payments is deposited for paying property taxes, insurance premiums, or other recurring expenses.
  • Forbearance

    A temporary arrangement where the lender agrees to reduce or suspend the borrower's loan payments for a specified period to help them overcome financial hardships.
  • Foreclosure

    The legal process through which a lender or loan servicer takes possession of a property to recover the outstanding loan balance when the borrower defaults.
  • Late Fees or Default Interest

    Fees or additional interest assessed by the loan servicer if the borrower fails to make a payment by the due date.
  • Loan Assumption

    A process where a buyer takes over the existing mortgage on a property, assuming responsibility for the remaining loan balance and terms.
  • Loan Delinquency

    Occurs when a borrower misses a loan payment according to the agreed-upon terms.
  • Loan Extension

    An agreement between a borrower and lender to extend the term of a loan, often in exchange for additional fees or an increased interest rate.
  • LOAN DOCUMENTS

    Allonge

    A document used to add, modify or extend the terms of a promissory note or mortgage note when there is insufficient space on the original document for additional endorsements or assignments.
  • Assignment of Mortgage (AoM)

    A legal document transferring the mortgage lien, including the rights and obligations associated with the loan, from one party to another.
  • Deed of Trust

    A legal document used in some states that secures a mortgage loan by transferring the title of a property to a neutral third party, called a trustee, who holds the title in favor of the lender until the loan is repaid in full.
  • First Lien

    A mortgage or loan that has priority over all other liens on a property.
  • Mortgage

    A legal agreement where a borrower pledges a property as collateral for a loan.
  • Mortgage Note

    A legal document signed by a borrower evidencing the borrower's debt to a lender.
  • Prepayment Premium or Prepayment Penalty

    Language in loan documents requiring a borrower to pay a premium or penalty for any prepayments made on a mortgage loan.
  • Promissory Note

    A written, legally binding agreement between a borrower and a lender, evidencing the borrower's debt to the lender.
  • OTHER TERMS

    Adjustable Rate Mortgage (ARM)

    A mortgage loan where the interest rate adjusts periodically. Also known as a variable rate mortgage.
  • Asset-Based Lending

    Financing that relies on the value of a borrower's assets, such as real estate, as collateral for the loan.
  • Bad Boy Personal Guaranty

    A limited personal guaranty of the guarantor to the lender if the borrower commits certain "bad acts" as defined by the loan documents.
  • Business Purpose Loan

    A mortgage loan where the borrower is a corporate entity, and the borrower does NOT occupy the property.
  • Capitalization Rate (Cap Rate)

    The net operating income (NOI) for the year divided by the value of the property. Used as a measure for a property's value based on current performance.
  • Dry Funding

    A mortgage loan where the closing and loan proceeds are made available to the borrower after all required loan documentation has been signed and reviewed/approved by the lender.
  • Due Diligence

    The process of conducting research and analysis to assess the risks and potential benefits of a real estate investment or loan transaction.
  • Dutch Interest

    Interest charged by the lender on the full loan amount approved, including the construction holdback not yet disbursed to the borrower.
  • Loan Aggregator

    A financial institution, company, or investor that acquires and combines multiple loans into a single pool or portfolio.
  • Mark-to-Market

    Periodic adjustments of estimated value of an asset to reflect current market levels.
  • Non-Dutch Interest

    Interest charged by the lender on only the funds disbursed to the borrower.
  • Non-Recourse

    A loan that does not carry any personal liability of a guarantor excluding "bad acts."
  • Rating Agency

    An agency that examines securities and assigns credit ratings based on its benchmarks.
  • Securitization

    The creation of a new financial instrument representing an undivided interest in a segregated pool of assets.
  • Title Insurance

    Protects real estate owners and lenders against property loss or damage from title defects.
  • Wet Funding

    A mortgage loan where the closing and availability of loan proceeds occur once the original loan documents are signed by the borrower and delivered to the lender.
  • LOAN TAPE DATA ITEMS

    As-Is Value

    As-Is Value
  • As-Repaired Value

    The estimated market value of a property after repairs or improvements have been completed.
  • Construction Reserve

    An account set aside by the lender to fund construction or rehab costs as the project progresses.
  • Cross Collateralization or Blanket Loan

    A provision in a mortgage where the collateral for one mortgage also serves as collateral for other mortgages.
  • Cross Default

    A provision in a mortgage where a breach of terms under one loan triggers a default under other mortgages.
  • Day 1 Loan Amount

    The initial disbursement of loan funds on the first day of the loan term.
  • Debt Service Coverage Ratio (DSCR)

    The ratio of a property's net operating income to the debt service payments on the loan backed by the property.
    Example: If a business has a net operating income of 100K and a total debt of 60K, its DSCR would be 1.67.
  • Foreign National

    A person who is not a citizen or permanent resident of the country where the property is located and is seeking a loan for a real estate transaction.
  • Interest Reserve

    An account set aside by the lender to cover interest payments on the loan.
  • Loan-to-Cost Ratio (LTC)

    The ratio of the loan amount to the total cost of the project or property.
  • Loan-to-Value Ratio (LTV) or Loan to As-Repaired Value (LTARV)

    The ratio of the principal amount on a mortgage to the appraised value of the collateral property.
  • Net Operating Income (NOI)

    Total revenues earned by a property minus operating expenses.
  • Personal Guaranty

    A legally binding commitment by an individual to repay a loan if the borrowing entity fails to do so.
  • Rehab Budget

    The estimated cost of repairs or improvements to a property.
  • Seasoning

    The length of time elapsed since the origination of a mortgage loan.
  • Total Loan Amount

    The entire principal amount of the loan, including any additional disbursements for construction or rehab costs.
  • Weighted Average Coupon (WAC)

    The average interest payment on a set of mortgages, weighted by the size of each mortgage in the pool.
  • Weighted Average Life (WAL)

    The average time until all scheduled principal payments are expected to have been made, weighted by the size of each mortgage in the pool.