Washington State Department of Financial Institutions

Glossary of Terms

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Earnest Money Deposit - money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

Endorsement - the payee's signature on back of the check which shows that the payee has received payment for the amount of the check, and is responsible for recourse if necessary.

Energy Efficient Mortgage (EEM) - an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase.

Equal Credit Opportunity Act (ECOA) - prohibits discrimination in lending. ECOA prohibits any creditor from discriminating against an application with respect to any aspect of a credit transition based on sex, race, color, religion, national origin, disability or parental status.

Equity Stripping - the lender makes a loan based upon the equity in your home, whether or not you can make the payments. If you cannot make payments, you could lose your home through foreclosure.

Equity - the difference between the market value of a property and the homeowner's outstanding mortgage balance plus all other liens on the property. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.

Equity - in real estate, the difference between fair market value and current indebtedness; also referred to as the owners interest.

Escheat - the process whereby a credit union is required to turn over unclaimed members' account balances to the state for safe keeping. Unclaimed balances are determined by the length of time (varies by state) the account has been in a dormant status.

Escrow Account - the segregated trust account in which funds are held by the lender for payment of taxes, insurance, mortgage insurance, lease payments, etc.

Escrow Agent - the person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also called Escrow Company.

Escrow Closing (settlement) - the occasion where sale of a home is finalized, the buyer pays the mortgage, and closing costs are paid.

Escrow Company - an organization established to act as an escrow agent.

Escrow - the holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance over the life of the loan. An escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

Executor - an individual or a bank named in a will whose function is to distribute the funds and property in an estate to the rightful heirs.