REAL ESTATE LENDING AND INVESTMENT TERMS

Adjustable-rate mortgage (ARM): A mortgage with an interest rate and payment that change periodically over the life of the loan based on changes in a specified index.

Callable debt: A debt security whose issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity.

Charge-off: The portion of principal and interest due on a loan that is written off when deemed to be uncollectible.

Common stock: A security that represents ownership in a company but gives no legal claim to a definite dividend or to a return of capital.

Conventional mortgage: A mortgage loan that is not insured or guaranteed by the federal government.

Commercial mortgage: A mortgage loan.

Credit enhancement: A method to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, or other agreements to provide an entity with some assurance that it will be recompensed to some degree in the event of a financial loss.

Credit loss ratio: The ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation.

Credit scoring: A process that uses recorded information about individuals and their loan requests to assess, in a quantifiable, objective, and consistent manner, their future performance regarding debt repayment.

Credit-related expenses: The sum of foreclosed property expenses plus the provision for losses.

Credit-related losses: The sum of foreclosed property expenses plus charge-offs.

Debt security: A security in which the issuing company generally agrees to repay the principal (typically, the original amount borrowed) and make interest payments according to an agreed schedule.

Default: The failure of a borrower to comply with the terms of a note or the provisions of a mortgage.

Delinquency: A mortgage loan on which a payment has not been made by the due date.

Derivative: A financial instrument which derives its value from an underlying security or notional amount.

Duration: The weighted-average life of the present value of all future cash flows, both principal and interest, of a security. It is used as a measure of the sensitivity of the value of a security to changes in interest rates.

Earnings per share (EPS): The net earnings of a corporation divided by the average number of shares of its common stock outstanding during a period. A common method of expressing a corporation's profitability.

Financing options: Choice of a number of ways by which financing can be structured to facilitate a property purchase.

Fixed-rate mortgage: A mortgage loan in which the interest rate does not change during the entire term of the loan.

Forbearance: The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.

Foreclosure: The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower's loan.

Interest Income: Earnings on investments such as savings accounts, certificates of deposit, and mortgages. Interim mortgage: A mortgage loan with a contractual maturity at time of purchase normally equal to or less than 1 year.

Investment: Money or capital that is invested with an expectation of profit.

Investment Manager: A firm that specializes in the offer of real estate based investment opportunities to individuals and corporate or institutional investors. JayFund specializes in the practice of mortgage investment management as a mortgage investment corporation (MIC), primarily within Western Canada.

Lender option commitments: An agreement giving a lender the option to deliver loans or securities by a certain date at agreed-upon terms.

Loan servicing: The tasks a lender performs to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.

Loan-to-value (LTV) ratio: The relationship between the dollar amount of a borrower's mortgage loan and the value of the property.

Loss mitigation: Activities designed to reduce either the likelihood of the corporation suffering financial losses on a loan or the final dollar value of those losses in the event of a borrower default.

Mandatory delivery commitment: An agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.

MIC: See Mortgage Investment Corporation.

Modification: Any change to the original terms of a mortgage.

Mortgage: A legal document that pledges property to a lender as security for the repayment of the loan. The term also is used to refer to the loan itself.

Mortgage-backed security (MBS): A JayCap security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS holders.

Mortgage Broker: The matchmaker between a property buyer and a lender with the goal of originating a mortgage loan. The broker draws from a pool of various lenders to find the right match. There is a difference between a mortgage broker and a mortgage banker. A mortgage broker brings together both the parties of a loan but does not actually originate or service the loan, while a mortgage banker originates and services the loan.

Mortgage Investment Corporation: A mortgage investment corporation (MIC) is an organization designated for special tax consideration in accordance with Canada Customs and Revenue Agency guidelines, and designed specifically for funding first and second mortgages.

Mortgage pool: A group of mortgage loans with similar characteristics such as type of interest rate or duration, designed for sale to investors as mortgage-backed securities.

Multifamily housing: A building with more than four residential rental units. Nonperforming asset: An asset such as a mortgage that is not currently accruing interest or on which interest is not being paid.

Notional principal amount: The hypothetical amount on which interest rate swap payments are based. The notional principal amount in an interest rate swap generally is not paid or received by either party.

Preferred shares: Shares that takes priority over common shares with regard to dividends and liquidation rights. Preferred shareholders typically have no voting rights.

Preforeclosure sale: A procedure in which the borrower is allowed to sell his or her property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower's debt.

Private lender: Also known as a “private banking firm”, a private lender provides mortgage financing solutions to borrowers for new development, redevelopment, acquisition, and refinancing projects. In general, clients are mortgage brokers, developers, real estate owners, and builders, whose projects include commercial, retail, multi-family residential, and light industrial.

Repayment plan: An agreement between a lender and a borrower who is delinquent on his or her mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.

Return on average common equity: Net income available to common shareholders, as a percentage of average common shareholders' equity.

Risk-based capital: The amount of capital necessary to absorb losses throughout a hypothetical ten-year period marked by severely adverse circumstances.

Security: A financial instrument showing ownership of equity (such as common shares), indebtedness (such as a debt security), a group of mortgages, or potential ownership (such as an option).

Serious delinquency: A mortgage that is 90 days or more past due.

Shareholders' equity: The sum of proceeds from the issuance of shares and retained earnings less amounts paid to repurchase common shares.

Syndication: Syndication is where a group of investors pool their money to lend to one specific borrower. Unlike a mortgage pool or a Mortgage Investment Corporation (MIC) where a number of different mortgages may be held, syndicated mortgages fund one project at a time. Like a mortgage pool or a MIC, all administration is handled by Jaycap Financial Ltd.

Transfer agent: A bank or trust company charged with keeping a record of a company's stockholders and canceling and issuing certificates as shares are bought and sold.

Underwriting: The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's ability and willingness to repay the debt and the value of the property.