Definitions Flashcards
Allows an employee to make contributions from his income into a retirement plan.
403(b) Tax Sheltered Annuity
A qualified employer-established plan to which employees may make salary deferral (salary reduction) contributions on a post-tax and/or pre-tax basis.
401 (k) Plan
A loan offered to low risk borrowers who show a strong likelihood of repayment due to high credit scores, low loan-to-value, and available assets.
“A” Paper (Prime Loan)
A person who prepares and certifies the history of ownership of a property (known as title). They are typically an employee of a title company, or an attorney, and perform the title search.
Abstractor(Abstractor of Title)
A common provision of a
mortgage or note providing the holder with the right to demand that the full outstanding balance is immediately due if the borrower defaults.
Acceleration Clause
To get larger
Accrue (accrual)
Something that is done. A notice of action taken may tell the consumer whether or not they have been approved or denied for a mortgage loan — the action in this case would be approval or denial.
Action
A method of payment where a payment is first applied to the accumulated interest and any remainder is subtracted from, or any deficiency (due to default) is added to, the unpaid balance of the loan.
Actuarial Method
A thing that is added. This could be a supplement to a document such as a purchase agreement or appraisal
Addendum
A mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as “Adjustable Mortgage Loans (AMLs)” or “Variable-Rate Mortgages (VRMs).”
Adjustable Rate Mortgage (ARM)
The date that an Adjustable-rate mortgage is set to adjust.
Adjustment Date
Any or all tasks performed in relation to the receipt, collection, and distribution of any information needed for the processing or underwriting of a loan.
Administrative or clerical tasks
A decision by a lender to deny the extension of credit to a consumer, terminate an existing account, or make any unfavorable change
Adverse Action
A legal statement or document that affirms something. This is typically seen in the phrase, lid “affidavit of affixture,” which denotes something is or isn’t part of real property.
Affidavit
A type of inter-company relationship in which one of the companies owns less than a majority of the other company’s stock. Affiliation can also describe a type of inter-company relationship in which at least two different companies are subsidiaries of a larger company.
Affiliate
Settlement service providers are allowed to refer business to each other as long as they do not charge a fee or receive anything of value in exchange. There is one exception to this rule the existence of an affiliated business arrangement where the referring party receives a return of ownership interest in the other company based on referrals. In such an arrangement, the referring party must provide a disclosure concerning the business arrangement to the borrower at the time the referral is made.
Affiliated Business Arrangement:
The collective amount, sum, or mass arrived at by adding or putting together parts of a whole.
Aggregate
When two or more parties acknowledge to offer things of value in exchange for referrals.
Agreement or Understanding
This is a loan on a property that does not exist. In this scheme, loan documents are completed with real or fabricated information for an applicant with no intentions for repayment. This scheme is typically done by a financial institution insider or external parties such as loan originators, appraisers,
and title companies. It is also known as a Fictitious Loan.
Air Loan
A false or assumed identity.
Alias
A clause that protects the lender by preventing the borrower from assigning a debt to another person without the lender’s approval.
Alienation Clause
Payments made to a spouse or former spouse under a separation or divorce agreement.
Alimony
A correction or alteration proposed or affected by this process.
Amendment
Periodic payments on a loan requiring payment of enough principal and interest to ensure complete repayment of the loan by the end of the loan term. As payments continue more money is allocated to the principal and less to interest and the total owed on the loan decreases.
Amortize (amortization)
Providing necessary support to the primary activities or operation of an organization, institution, industry or system.
Ancillary
This is a measure of the cost of credit, including interest and other charges, expressed as a yearly rate.
Annual Percentage Rate
The average of annual percentaage rates offered to highly qualified mortgage borrowers. APOR is used to help determine market rate thresholds for high cost and higher priced mortgage loans under TILA (Regulation Z), as well as for compliance with HMDA (Regulation C).
Average Prime Offer Rate
This is an investment, typically used as a start retirement to receive account. payments. After investing for a while, are usually given monthly or yearly and are a fixed amount. It is a form of passive income.
Annuity
Fee charged by an appraiser to estimate the market value of a property.
Appraisal Fee
Estimation of the current market value of a property.
Appraised Value
A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appraiser
An increase in property value or any other assets.
Appreciate
This means no repairs will be performed as a condition of the sale. Most homes are sold as is.
As-is Condition
The price a home is listed on the market for by the seller.
Asking Price
To evaluate something. In the mortgage industry, to evaluate a property, or a claim made against a property.
Assess
The method of placing value on an asset for taxation or insurance purposes.
Assessments
Any item with measurable value.
Assets
A legal process that helps to settle disputes among different parties
Arbitrate (arbitration)
The first step in the official loan approval process. This form is used to record important information about the potential borrower necessary to the underwriting process.
Application
The act of a qualified appraiser giving an estimate of a property’s fair market value based on recent sales of comparable homes in the area and the features of property. An appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
appraisal
A mortgage is assumable when a home is sold and the seller may be able to transfer the mortgage to the new buyer.
Assumable Mortgage
A debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrowers the funds for a defined period of time at a variable or fixed interest rate.
Bond
A clause in the mortgage contract that allows the mortgage to be assumed by another. It contains the conditions on how assumption can take place.
Assumption clause
A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms. Also known as a “debtor” or a “mortgagor.”
Borrower
A ratio that compares the total of all monthly debt payments (mortgage, real estate taxes and insurance, car loans, and other consumer loans) to gross monthly income.
Back-End Ratio
Advertising goods which are an apparent bargain with the intention of substituting it for an inferior option.
Bait and Switch
The amount left over.
Balance
A mortgage that typically offers low rates for an initial period of time, usually 5, 7, or 10 years. After that time period, the balance is due or the loan is refinanced by the borrower. These are similar to ARMs but are riskier, since the future loan rate may be higher.
Balloon Loan or Balloon Mortgage
The final lump sum payment due at the end of a balloon mortgage.
Balloon Payment
A detailed record of all income earned and all expenses paid for during a specific period of time.
Budget
Includes all calendar days, except Sundays and legal holidays.
Business Day
A mortgage loan that is paid in full upon the lender’s demand and many times called a demand loan. It often has no set date of maturity.
Call Loan
A limit, such as one placed on an ARM, on how much a monthly payment or interest rate can increase or decrease, either at each adjustment period or during the life of a mortgage. Payment caps do not limit the amount of interest the lender is earning, so they may cause negative amortization.
Cap
The ability to make mortgage payments on time, depending on your assets and amount of monthly income after paying housing costs, debts, and other obligations.
Capacity
An individual’s savings, investments, or assets. Also known as “cash reserves.”
Capital
An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold.
Capital Gain
A short-term loan that helps to secure financing for transitional periods. It is normally used until a long-term loan can be processed, for example,
Bridge Loan
Quick loan processing completed through a computer-based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer; though, it is subject to later verification.
Automated Underwriting
A federal law that states a person’s assets are turned over to a trustee and used to pay off outstanding debts. This usually occurs when someone owes more than they are able to repay
Bankrupt (bankruptcy)
Action done with all honesty. It literally means, “in good faith.”
Bona Fide
When a real estate agent or broker does a valuation on a home using a similar process to an appraisal. It is many times used as a valuation tool to see if PMI can be removed
Broker’s price opinion
An additional person who’s listed on the title and also responsible for loan repayment.
Co-Borrower
Occurs when a borrower refinance a mortgage at a higher principle amount in order to get additional money. Usually an alternative to taking out a home equity loan
Cash out refinance
An order given by a government administrative agency to stop illegal or suspicious activities
Cease and desist
A savings account with a fixed maturity date
Certificate of deposit
A reproduction that is confirmed to be authentic
Certified copy
A list of those who have had ownership in the property
Chain of title
An act of god, war, or another emergency
Changed circumstances
A bankruptcy that requires assets to be liquidated in exchange for the cancellation of debt
Chapter 7 bankruptcy
The portion of principle and interest due on a loan that is written off when deemed uncollected
Charge off
Required by TILA used to educate consumers on the risks and advantages associated with adjustable rate mortgages
CHARM booklet ( consumer handbook on adjustable rate mortgages)
A deposit account held at a financial institution that allows withdrawals and deposits
Checking account
Monetary payments from one ex spouse to another after divorce proceedings have been finalized to the one who has custody of the child
Child support
Financial obligation is imposed by a government authority for breaking a law or rule
Civil penalty
A requirements or stipulation in a legal agreement
Clause
A property title that has no defects or encumbrances
Clear title
A type of loan in which the terms and maturity date of the mortgage loan cannot change
Closed end loan
The day all documents have been signed, recorded and all monies have been accounted for. also known as a settlement
Closing
A third party that performs loan closings on behalf of a lender
Closing agent
Fees for a final property transfer not included in the price of the property like origination fees, discount points, appraisal fees survey, title insurance
Closing costs
Gives a consumer an explanation of all costs associated with their loan. It must be delivered 3 business days before consummation for all forwards closed end mortgages
Closing disclosure
A person who signed a credit application with another person
Co-signer
Security in the form of money or property pledged for the payment of a loan
Collateral
A loan that relies on the sale or refinance of a property as collateral. This type of underwriting is deemed unfair or abusive
Collateral dependent
Receive monies that are due
Collect
State where property is considered to be owned jointly by both spouses and divided upon divorce
Community property state
Factors such as equity, assets, credit score etc that reflect a borrower’s ability to repay a loan from sources other than monthly income
Compensation factors
The ability of an asset to generate earnings which are then reinvested in order to generate their own earnings
Compound
A form of ownership in which individuals purchase and own a unit of housing in a multi unit complex
Condominium
A loan that does not conform to Fannie Mae and Freddie Mac’s loan limits and guidelines
Conforming loan
A short term open end loan that finances the cost of building a new home
Construction loan
An individual who has or will obtain financial services from a financial institution for any reason
Consumer
A loan extended to a natural person for personal or family use
Consumer credit
Time that a consumer becomes contractually obligated on a credit transaction
Consummation
Usually a part of a legal agreement that says for “a” to happen”b” must be in place
Contingency
A written or spoken agreement between two or more parties
Contract
A private sector loan not guaranteed or insured but the government
Conventional loan
The act of transferring any ownership interest in real property from one party to another
Convert
Residents purchase stock in a cooperative corporation that owns a structure and is then entitled to live in a specific unit of the structure
Cooperative (co-op)
Occurs following a violation ofECOA when the creditor must identify the practices leading up to the violation
Corrective action
An index is used to determine interest rate changes for some arms
Cost of funds index (COFI)
Formal advisor
Counsel
A limitation to the use of one’s property also referred to as a deed restriction (example restriction of height of a fence in a neighborhood
Covenants
An agreement that a person will borrow money and pay it back to lender
Credit
An agency that provides financial information and payment history to lenders about potential borrowers. Also known as a credit depository
Credit bureau
A card issued by a financial company given the holder an option to borrow funds
Credit card
Education on how to improve bad credit and how to avoid having more debt than can be repaid
Credit counseling
Describes the possibility of a default on a loan by a borrower
Credit risk
Calculated by using a report to determine the likelihood of a loan being repaid on time
Credit score
A federally regulated non profit financial institution owned by the members of people who use their services
Credit union
An individual or entity that regularly extend closed-end or open-end credit. Also known as a credit grantor
Creditor
The method in which a lender measures the ability of a person to qualify and repay a loan
Creditworthiness
A consumer who has a continuing relationship with a financial institution
Customer
An amount of money borrowed by one party to another
Debt
A comparison or ratio of housing and non housing expenses to gross income
Debt to income ratio
The cash payment made by the insured to cover a portion of a damage or a loss. Sometimes called an out of pocket expense
Deductible
A legal document that transfers ownership of property from one person to another or grants, the deed is recorded on public records with the property description
Deed
A document used in place of a mortgage to secure the payment of a note
Deed of trust
A deed given to the lender to avoid a foreclosure and fulfill the obligation to repay the debt
Deed-in-lieu
The inability to Maltese timely monthly mortgage payments or otherwise comply with mortgage terms
Default
A clause in the mortgage that allows for reconvene once the mortgage debt is paid in full
Defeasance clause
Failure of a borrower to make any payment on time under a loan agreement
Delinquency
Any bank, credit Union or savings and loan association covered under the federal deposit insurance act
Depository institutions
A decrease in the value of price of a property and its contents due to changes in the market condition
Depreciation
The automated underwriting system for Fannie Mae loans
Desktop originator (DO)
Desktop underwriter (DU)
