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
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.

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Private lending glossary

STANDARDIZING DEFINITIONS IN PRIVATE LENDING

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