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Fast Facts and Quick Definitions

Check out our reference guide for definitions and descriptions of commonly used structured settlement, annuity, and mortgage terms.

Fast facts and quick definitions.

Check out our reference guide for definitions and descriptions of commonly used structured settlement, annuity and mortgage terms.
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By checking this box I am providing J.G. Wentworth with express written consent to contact me regarding product offerings by SMS/text messages or by using an auto dialer (or automated means) at the phone number(s) provided and such consent is not a condition of a purchase.

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Accelerated Death Benefits

A benefit of some life insurance policies that provides payments to policy holders who have a long-term, catastrophic or terminal illness, while the policy holder is alive. Accelerated death benefit provisions vary from insurance policy to insurance policy and from company to company. Also know as “living benefits.”

Accumulated Value

The full value of the annuity contract, principal plus gain.

Adjustable Rate Mortgage (ARM)

A type of home loan whereby the interest rate automatically adjusts or fluctuates with certain market indexes. Typically, an ARM begins with an introductory or initial interest rate for one to five years and then may rise or fall annually.

Amortization

The process of a loan's value over a period of time. Often amortization is laid out on an amortization schedule or measured by an amortization calculator.

Annual Percentage Rate (APR)

The true cost of a home loan. According to the Truth in Lending Act, all mortgage lenders must disclose their APR. In the mortgage industry, APR may include fees such as documentation fees, private mortgage insurance and more.

Annuitant

The individual on whose life the annuity is based and generally the person receiving or entitled to the annuity payments.

Annuitization

A transaction that changes an annuity from accumulation phase to payout phase. When an annuity begins to pay out periodic income payments to the payee.

Annuity

A contract that provides periodic payments for a specified time period, such as for a number of years or for the life of the annuitant.

Annuity Benefits

The guaranteed periodic payments that will be paid to the payee during the payout period.

Annuity Contract

The agreement between the annuity owner and the insurance company that stipulates the features of the annuity and the responsibilities of each party.

Annuity Issuer

The insurance company that issues the annuity.

Annuity Owner

The individual(s) or company that purchased the annuity. Depending on the terms of the annuity contract, the owner or owners may have the right to make withdrawals, surrender or change the designated beneficiary, or make other changes to the terms of the contract.

Annuity Payment Period

The period of time that the annuity payments are designated to last.

Annuity Start Date

The date designated for annuity payments to begin.

Appraisal

An appraiser's report estimating the value of a property.

Appreciation

The measurable and increased value of a home. Market improvements and home renovations increase appreciation value.

Assignment (of Policy)

The legal transfer of one person’s interest in an item, such as annuity, to another.

Balloon Mortgage

A loan that offers lower monthly payments for a specific period of time, normally from three years to 10 years. Then a borrower must pay off the principal balance in a lump sum, or balloon payment. Under certain conditions, the mortgages can be converted to fixed-rate or adjustable-rate loans.

Bankruptcy

A federally regulated process, whereby individuals or entities that have liabilities greater than assets, seek judicial protection from creditors.

Bankruptcy – Chapter 7

A type of bankruptcy in which an individual’s debt is eliminated, but his or her assets are liquidated to repay creditors.

Bankruptcy – Chapter 13

A type of bankruptcy in which an individual keeps some of his or her assets and pays creditors according to an approved plan

Bench Trial

A trial where the judge serves as the fact finder, rather than the jury.

Beneficiary

The person(s) or entity(ies) who receives the death benefit when the insured dies.

Cash Out Refinance

A cash-out refinance is the refinancing of an existing mortgage loan, where the new mortgage loan is for a larger amount than the existing mortgage loan, and the borrower receives the difference between the two loans in cash.

Cash Surrender Value

The amount that the owner of an annuity or cash value life insurance policy is entitled to receive upon surrendering the policy to the issuing insurance company. This amount may be reduced by surrender charges or policy loans, if applicable. Also may be known as the policy’s “surrender value.”

Cash Value

The cash amount payable to a life insurance policy owner in the event of termination or cancellation of the policy before its maturity or the insured event.

Child Support

Court-ordered support paid by one spouse to the other who has custody of the children after the parents are separated, or divorced.

Child Support Payoff Letter

A letter identifying the amount necessary to pay off outstanding support obligations.

Closing

The formal sale of a home or property that includes signing all paperwork associated with the exchange and payment of required closing fees.

Closing Costs

Expenses incurred by buyers and sellers when transferring ownership of property. Closing costs normally include an origination fee, attorney's fee, taxes, escrow payments, title insurance and possibly discount points.

Court Order

A legally binding ruling issued by a judge or properly empowered administrative officer.

Court Order Attorney

The attorney that files a petition for court approval of a structured settlement payment transfer.

Credit Score

A single numerical score, based on an individual's credit history. The credit score measures credit worthiness.

Death Benefit

The amount to be paid out to the beneficiary(ies) when the person insured under the policy dies.

Debt Consolidation

This can occur when an individual rolls debt into a mortgage, either at the time of home purchase or later.

Deduction

An expense allowed by the Internal Revenue Service. This is deducted from income to establish taxable income.

Defendant

An individual, company or institution sued in a civil case.

Deferred Annuity

An annuity in which periodic payments are delayed until the annuity owner elects to start receiving them.

Deferred Income Annuity

A type of income annuity, which enables you to purchase, with after tax cash today, a defined amount of income to start at a future date. The annuitant benefits from tax deferral on the interest earned on the consideration placed in the deferred income annuity.

Dependents

A person dependent upon another person for care and/or financial support, including: domestic partner, natural children, stepchildren, legally adopted children and any other individual for whom a person is the legal guardian.

Discount Points

Homebuyers may pay points up front to lower their overall interest rate and mortgage payment. One point equals 1 percent of the home loan value.

Discounted Present Value

The net present value of future payments, this is determined by discounting the future payments to the present.

Discount Rate

The interest rate used to compute the present value of future cash flows.

Divorce Decree

A divorce decree is a ruling that summarizes the rights and responsibilities of the divorced parties. It is a document that states the basic information regarding the divorce, case number, parties, date of divorce and terms the parties have agreed upon.

Earnest Money

A sum of money usually provided by the buyer when an offer on a home is submitted. Earnest money is as a token of good faith or that the buyer is serious about the purchase.

Estate

A person’s property (including money), entitlements and obligations. It is often used in the context of will and probate. It may also be used in reference to real estate or in a bankruptcy.

Estate Planning

Preparing for the orderly administration, management and distribution of a person’s assets and liabilities during one’s lifetime and upon death. This can include wills, trusts, and insurance policies.

Estate Taxes

A progressive tax assessed on the transfer of a deceased’s asset to his or her heirs.

Face Amount

The amount that will be paid in case of death (life insurance) or at maturity (bond or other investment).

Federal Tax Liens

A claim against property for the amount of the owner’s tax obligations owed to the federal government.

Federal Tax Liens

A claim against property for the amount of the owner’s tax obligations owed to the federal government.

Financial Affidavit

A sworn statement of income, expenses, property (assets) and debts (liabilities).

FHA mortgage

A mortgage whereby the lender, through the Federal Housing Administration, is insured against loss. The borrower pays the mortgage insurance premium. With an FHA loan the required down payment is low, but the maximum loan amount is also low.

Fixed Annuity

An annuity in which the annuity issuer makes fixed dollar payments to the annuitant or designated payee for a fixed period of time.

Fixed Rate Mortgage

A mortgage whereby the interest rate and monthly mortgage payment remain unchanged throughout the mortgage term.

Flexible Premium Deferred Annuity

An annuity that accepts additional premium payments prior to annuitization.

Foreclosure

The legal process by which a lender acquires possession of the property securing the mortgage loan when default by the borrower occurs.

Full Purchase

A transaction in which the customer sells their entire annuity or structured settlement payment stream.

Funds Transfer

Money that is withdrawn from one account and placed into a different account.

Gift Tax

Tax imposed by federal or state government on an asset transferred as a gift to individuals.

Good Faith Estimate

The form listing settlement charges the borrower must pay at closing. The home loan agent is obliged to provide the refund to the borrower within three business days of receiving a loan application.

Gross Purchase Price

The sum payable to the payee or for the payee’s account as consideration for a transfer of structured settlement or annuity payment rights, before any reductions for transfer expenses or other deductions to be made from such consideration.

Guaranteed Payments

Payments made regardless of whether the annuitant is living or deceased.

Guardian

A person who has the power and duty to take care of another person and/or to manage the property and rights of another person, who is either a minor or deemed incapable of taking care of his or her personal affairs.

HARP

The Home Affordability Refinance Program (HARP) was initiated by Fannie Mae and Freddie Mac in 2010 to provide refinancing to borrowers with loan-to-value ratios too high to be eligible for standard programs.

Home Equity Line of Credit (HELOC)

A home equity line of credit is a form of revolving credit in which the home serves as collateral. With a home equity line, the borrower will be approved for a specific amount of credit. Many lenders set the credit limit on a home equity line by taking a percentage, (for example 75 to 80 percent) of the home’s appraised value and subtracting the balance owed on the existing mortgage.

Immediate Annuity

An annuity in which the annuity payout period begins immediately or within one year of the annuity purchase date.

Insurer

The party that provides insurance coverage typically through a contract of insurance.

Insurance Settlement

The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy.

Insured

The person who is insured under the policy.

Interest Rate Adjustment Period

The frequency of rate adjustments on an adjustable rate mortgage after the initial rate period. The rate adjustment period is sometimes, but not always the same as the initial rate period. For example, a 3/3 ARM is one in which both periods are 3 years, while a 3/1 ARM has an initial rate period of three years after which the rate adjusts every year.

Interested Parties

For a structured settlement payment transfer, the payee, any beneficiary designated under the annuity contract to receive payments following the payee’s death, and any other party that has continuing rights or obligations under the contract.

Joint Annuitants

Two or more recipients of the same monthly benefit payment or a joint and survivor option.

Jumbo Mortgage

Any single loan amount above the conforming loan limit (currently at $417,000) as set by Federal Housing Finance Agency. Jumbo mortgages represent a higher risk for the lender, and as a result, borrowers typically must have excellent credit and provide larger down payments.

Key Employee/Key Man Insurance

Protection of a business against financial loss caused by the death or disability of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.

Lapse

The termination of an insurance policy when an individual fails to pay his or her premiums on time. If you allow a policy to lapse, you typically cannot collect any cash surrender value that would otherwise be available.

Late payment

A payment received after the grace period, normally 10 to 15 days.

Legal Representative

A person acting for and legally authorized to execute a contract for an individual.

Lender Fees

Fees associated with closing costs, sometimes called processing fees. These fees cover costs incurred by lenders during the loan process.

Life Expectancy

The number of years a person is expected to live based on the average of a number of factors.

Life Settlement

The sale of a life insurance policy by the policy owner covering a person (the insured). It allows the seller of an unneeded or unwanted life insurance policy to obtain more funds than surrendering the policy back to the insurance company.

Lifetime Payments

An annuity income option that makes monthly payments of equal amounts for the remainder of the annuitant’s life, regardless of the length of time.

Liquidity

The ability to have ready access to invested money.

Lump Sum / Lump Sum Payment

A sum of money paid in a single installment.

Lump Sum Annuity

An annuity designed to make a single payment on a specified future date or a series of lump sum payments on specified future dates.

Margin

At the time of the adjustment, these are the percentage points added to the index to determine your rate for an adjustable-rate mortgage.

Mortgage Escrow Account

A separate account held by a mortgage lender out of which required property bills, separate from the loan payment, are made. Property taxes and insurance are examples of escrow paid costs.

Net Death Benefit

The benefit amount specified in an insurance policy minus any unpaid premiums, outstanding loan balances or other withdrawals that are due.

Net Present Value

The amount of cash today that is the equivalent in value to cash to be received in the future based on a specific discount rate.

Net Purchase Price

The sum payable to the payee or for the payee’s account as consideration for a transfer of structured settlement or annuity payment rights after any reductions for transfer expenses or other deductions to be made from such consideration.

Net Value

The value of an estate after all debts have been paid.

Notarize

The act of a notary witnessing a person signing a document. Many legal documents require a notarized signature.

Non-Qualified Annuity

An annuity contract you buy individually, rather than as part of an employer-sponsored qualified retirement plan. The premium is paid with after-tax dollars.

Origination Fee

An upfront fee charged by some lenders, usually a percent of the loan amount. Unlike points, an origination fee doesn't vary with the interest rate.

Partial Purchase

When a customer sells only a portion of their structured settlement or annuity payment stream.

Payee

The person to whom the annuity issuer makes annuity payments.

Payment Stream

Payments received periodically from a structured settlement, annuity or lottery winnings.

Payout Phase

The phase of an annuity during which periodic payments are made to the payee.

Period Certain Payments

The time period during which structured settlement or income annuity payments will be paid, whether or not the annuitant dies prior to the completion of the period.

Periodic Payments

Payments that are paid or received regularly, typically on a monthly or quarterly basis.

Personal Injury

An injury to a person’s body or mind, as the result of an accident.

Plaintiff

The aggrieved party in a civil case.

Premiums

The periodic payment required to keep a life insurance policy in force.

Premiums Tax

A tax assessed by certain states on the premiums paid into an annuity investment.

Preapproval

A commitment by a lender to make a home loan to a specified borrower, prior to finding the house or property. It is designed to make it easier to shop for a house. Unlike a pre-qualification, the lender checks the applicant's credit.

Present Value

The current worth of an amount to be received in the future. In the case of an annuity, present value is the current worth of a series of equal payments to be made in the future.

Prequalification

The process in which a homebuyer may learn the amount of a home loan he or she is approved for with a lender.

Principal

The amount of debt, excluding interest, left on a loan.

PMI or Private Mortgage Insurance

An insurance policy that protects the lender against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. PMI, a part of the monthly mortgage payment, is usually required if the down payment is less than 20 percent of the sale price.

Purchase Price

This is the amount that the purchaser is offering to pay for the asset.

Qualified Assignment

An assignment of the obligation to make future settlement payments, which satisfies the requirements of the Internal Revenue Code for favorable tax treatment of a structured settlement. Typically, the insurance carrier for the defendant assigns its obligation to make the future payments called for in the settlement agreement to an assignee, which then takes on such obligations, often through the purchase of an annuity.

Quote

A stated price for assets or services.

Refinance

Process by which a borrower/homeowner may negotiate a lower interest rate on a mortgage, thereby lowering monthly payments.

Remaining term

The current amount of time remaining on the length of the loan.

Responsible Administrative Authority

With respect to a structured settlement, any governmental authority vested by law with exclusive jurisdiction over the settled claim resolved by such structured settlement.

Reverse Mortgage

A type of mortgage created for homeowners over 62 years of age. It offers access to the home's equity subsequently providing cash payments for retirement living or for home repairs.

Second Mortgage

Also known as a home equity loan, a second mortgage gives borrowers flexibility to access the cash equity in their home, which be used for major purchases.

Separation Agreement

A contract between a husband and a wife, signed when a legal separation has been granted or when they have agreed to live apart in contemplation of a divorce. The agreement is designed to settle any property, debt, alimony, child custody, visitation, insurance, tax, and child support issues that may lie between them.

Settled Claim

When the original tort claim or workers’ compensation claim is resolved by a structured settlement or otherwise.

Settlement Agreement

An agreement between two parties to actual or potential litigation, under which the parties agree to a resolution of the dispute.

Special Power of Attorney

Gives another person legal authority to act on your behalf under defined circumstances.

Spouse

A person’s partner in marriage.

State Tax Lien

A claim against property for the amount of the owner’s unpaid state taxes.

Stipulation

An agreement or concession made by parties in a judicial proceeding (or by their attorneys) relating to the business before the court.

Stream of Payments

Payments received periodically from a structured settlement or an annuity.

Structured Settlement

Settlement of claims or lawsuits by means of periodic payments.

Structured Settlement Agreement

The agreement, judgment, stipulation or release embodying the terms of a structured settlement, including the right of the payee to receive periodic payments.

Structured Settlement Obligor

The party that has the continuing periodic payment obligation to the payee under a structured settlement agreement or a qualified assignment agreement.

Surrender Charges

Penalties assessed for withdrawals made in excess of the free withdrawal privilege during the surrender charge period of an annuity contract.

Surrender Schedule

The number of years and percentage amount of surrender charges applied to withdrawals from an annuity contract or life insurance policy.

Survivorship Life Insurance

A method of life insurance coverage that pays a benefit upon the death of the last surviving insured person. Also known as second-to-die or last-to-die

Tax Deferral

A postponement of current income taxes until a later date.

Tax-Deferred Interest

Interest that is not currently subject to income taxation.

Term

The period used to calculate the monthly mortgage payment. The term is usually the same as the maturity.

Term Life Insurance

An insurance policy in effect for a specific period of time.

Term of Policy

Period for which the policy runs. For term insurance, this is the length of time the death-benefit protection is available.

Terms of the Structured Settlement

Includes, with respect to any structured settlement, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement and any order or approval of any court or responsible administrative authority or government authority authorizing or approving such structured settlement.

Title Insurance

Insurance taken out on the property title to protect the borrower and lender.

Tort

A body of the law which permits an injured person to recover compensation from the injuring party. When one person injures another, either intentionally or by negligence, a court may award money damages to the injured party.

Underwriter

The insurance company receiving premiums and accepting responsibility for fulfilling the policy contract.

Universal Life Insurance

A life insurance policy that combines term insurance with a side investment fund.

USDA Loan

A loan offered by the U.S. Department of Agriculture for rural borrowers who meet certain income requirements. This mortgage loan is offered to rural residents who have a steady, low or modest income.

VA Loans

Department of Veterans Affairs (VA) loans are special, often discounted, home loans designed exclusively for military veterans, members of the military or surviving spouses of veterans.

Variable Annuity

A type of annuity where payments to the annuitant vary according to the changing value of the underlying investment.

Variable Life Insurance

This type of life insurance lets individuals invest their cash reserves in securities, such as stock and bond portfolios, that may offer fluctuating rates of return. J.G. Wentworth does not purchase variable insurance policies.

Viaticate

To sell a life insurance policy.

W-9 Form

A tax form for the United States which certifies an individual’s taxpayer identification number.

Warranty Deed

Indicates no past liens or disputes against a property and therefore, the holder of the property deed has the right to sell the property.

Wrongful Death

When a person’s death is caused by the negligent or intentional act of a wrongdoer.

Workers Compensation

A type of compensation that covers the medical expenses and lost income of employees if they are hurt in the course of their employment.