Term:  The length of time a loan runs.  Example:  A 5-year term.

Terms:  The main features of a loan:  principal amount, interest rate, payment schedule, and due date.

Trust Deed:  Or Deed of Trust.  A deed given by the borrower to a trustee to be held tending fulfillment of an obligation.  This is the security instrument, which pledges the property to insure payment on the note.

Trustee:  One who holds property in trust for another to secure the performance of an obligation.  An example of a trustee would be a title company or attorney.

Trustor:  The person who conveys property in trust.  One who deeds his property to a trustee to be held as security until he has performed under the terms of a deed of trust.

Truth in Lending Laws:  Legislation that pertains to fair dealing and full disclosure in making new loans.  It does not apply to the sale of existing notes.

Uneven Payments:  The payments of a loan vary from time to time.  They are said to be “uneven” payments.  Example:  $100/month the first year, then $200/month the second year, and then $300/month thereafter.  See IRR

Unmarketable Note:  A note which has such soft terms that it cannot be sold for cash.  It might be used in trade as part of the down payment on real estate, however.

Unsecured Loan:  An unsecured note or personal note.  It is secured only by the maker’s written promise to pay.  No specific security has been pledged to back up the promise to pay.

Unsecured Note:  See Unsecured Loan.

Usury:  There are “usury” laws, which specify the maximum rate private parties can charge each other on loans.  Above that rate, it is “usury” and the loan would be “usurious.”  This involves stiff legal penalties.  There is absolutely no limit as to how much yield a person can get when they buy a note at discount, however.

Value:  What one party is willing to pay for something.  There are as many values for something as there are parties considering owning it.  When there is widespread agreement of value, we have a market value (generally agreed-upon price such as the price of gasoline).  On the other hand, notes have a less well-defined market.  Therefore, negotiation has a large part in determining value or price.

WAC:  Weighted Average Coupon – this formula is used to weigh the average yield on a portfolio of two or more notes.  To calculate WAC, multiply each note’s coupon (interest) rate by its individual remaining balance; add the products; then divide the result by the total remaining balance.  That gives you the approximate existing yield for a package of notes with varied interest rates.

WAM:  Weighted Average Maturity – Allows you to calculate the overall maturity rate of a note portfolio, reflecting a truer measure of where the weight falls on a time line.  More accurate than an average maturity calculation when dealing with many notes, or where you have the bigger notes for longer terms and a couple of smaller notes on real short terms.  A simple average would be extremely distorted in bias toward the low side in remaining months to maturity.

Walking Backwards:  A note whose payments are less than Interest Only.  This means the amount owed increases with time.  See also Negative Amortization, Straight Note.

Without Recourse:  The way of endorsing a note to an assignee.  This protects the assignor from any further liability on the sale, even in the event the Maker fails to pay on the note.  This is the way to sell a note to protect yourself.  See also Recourse.

Wrap-Around Contract:  A Land Contract that wraps around earlier existing financing.  See Wrap-Around Mortgage.

Wrap-Around Mortgage:  A larger mortgage that “wraps around” a smaller senior lien.  The debtor pays to the holder of the “Wrap-Around” and the holder of the “Wrap” pays on the included senior lien.

Yield:  The true rate of return on investment on a note bought at discount, taking into account the actual amount invested and the remaining payments and their timing.  The yield is often greater than the interest rate specified in the note itself when the note is bought at discount.