Investment Glossary:

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P

Participation Loan:  A mortgage made by one lender, known as the lead lender, in which one or more other lenders, known as participants, own a part interest; A mortgage originated by two or more lenders.

Passive investor:  An investor who has no active role in operation or construction; participates only to earn a return on and of his investment.

Penalty:  Money one will pay for breaking a law or violating part or all of the terms of a contract.

Perfecting Title:  The elimination of any claims against a title.

Permanent Financing:  A mortgage loan, usually covering development costs, interim loans, construction loans, financing expenses, marketing, administrative, legal, and other costs.  This loan differs from the construction loan in that the financing goes into place after the project is constructed and open for occupancy.  It is a long-term obligation, generally for a period of ten years or more.

Personal Liability:  Personal liability arises when the borrower's assets are pledged or subject to claim in addition to a primary security.

PITI:  The shorthand way of stating the most usual elements of a residential mortgage payment this may consist not only of the Principal and Interest (PI) but the property taxes (T) and hazard insurance (I) as well. In the case where all four elements are part of the payment, the lender escrows the T and I and pays them on behalf of the borrower when they come due. Some loans are written such that the payment to the lender consists only of the P and I in which case the borrower pays the taxes and insurance directly.

Planned Unit Development (PUD):  A highly designed residential project that features relatively dense clusters of houses, which are usually surrounded by areas of commonly owned open space maintained by a nonprofit community association.

Plat: A map, drawn to scale showing the divisions of a piece of land, including streets, boundaries and easements.

Population density: The ratio between the total land area and the number of residential or commercial structures to be placed upon it.  Density usually is regulated by local ordinances.

Portfolio Loan:  A non-conforming loan that is held by the original lender rather than being sold on the secondary market.

Preferred Return:  Sometimes referred to as "opportunity cost" preferred return is the amount of return from a real property investment that is distributed entirely to preferred investors until these investors have received a specified return on their investment.

Prepayment Penalty:  fee charged for paying off a loan within a relatively short period of time after the loan has closed, time period is usually one to three years.  This is also known as prepayment penalty or reinvestment fee.

Prepayment Privilege:  The right given a borrower to pay all or part of a debt prior to its maturity.  The mortgagee cannot be compelled to accept any payment other than those originally agreed to.

Present Value:  Today's worth of monies to be received in future.

Principal Balance:  Outstanding dollar amount owed on a loan exclusive of accrued interest

Principal, Interest, Taxes, Insurance (PITI):  Monthly payments required by an amortizing loan that includes escrow deposits for taxes and insurance in addition to the principal and interest

Private Mortgage Insurance (PMI):  Insurance premium paid by a borrower to protect lenders against losses from loans with loan-to-value ratios higher than 80%, default insurance for lenders of property as directed by the will or as authorized by the court to settle any financial obligations.

Pro Forma:  Refers to the presentation of data, such as a balance of income statement, where certain amounts are hypothetical. For example, a pro forma balance sheet might show a debt issue that has been proposed but has not been consummated.

Probate:  The process of establishing the validity of a will before a duly authorized court or person. Once validity is confirmed, the probate court then administers the sale

Promissory Note:  Promise to pay a specified sum to a specified person under specified terms

Purchase Money Mortgage:  A mortgage which secures a note written on a loan used in the purchase of real estate

Purchase Subject to Mortgage:  A purchase in which a buyer agrees to make the monthly mortgage payments on an existing mortgage and the original borrower remains liable if the purchaser fails to make the payments as agreed.

Purchase-Money Mortgage (PMM):  A mortgage obtained by a borrower as partial payment for a property.

Put: An option to sell a specific security at a specified price within a designated period.