FM Flashcards
The voluntary surrender of property, whether owned or leased. Abandonment does not relieve obligations associated with ownership or lease.
Abandonment
A reduction in amount or intensity. Usually relates to a decrease in taxes or to a decrease in continuing payments such as rent.
Abatement
A potential borrower’s ability to afford the purchase of a home. Consideration of a borrower’s ability to repay involves the review of income, assets, liabilities, the type of product, and other factors. The federal Ability to Repay Rule sets forth the specific underwriting factors that mortgage professionals must examine when determining a borrower’s ability to repay.
Ability to repay
A title that is clear of any liens, judgments, or other encumbrances.
Absolute Title
Making current an existing Title Abstract.
Abstract update
A professional in the title industry (sometimes an attorney) who conducts a title search and produces an abstract.
Abstractor
A clause in a mortgage or deed of trust that allows the lender to demand immediate repayment of the balance of a loan under certain conditions, such as default by the borrower.
Acceleration Clause
A declaration by a person signing a document that such signature is a voluntary act, made before a duly-authorized person.
Acknowledgment
A term used in FHA loans meaning the total cost to close the loan.
Acquisition Cost
An unpreventable destructive occurrence of the natural world.
Act of God
An addition or supplement to a contract.
Addendum
A mortgage in which the interest rate is adjusted periodically based on a pre-determined margin, index, and adjustment interval.
a.k.a.: Variable-rate mortgage
ADJUSTABLE-RATE MORTGAGE (ARM)
The cost of a property, plus the value of any capital expenditures for improvements to the property and minus any depreciation.
ADJUSTED BASIS
The date on which the interest rate for an ARM may change.
ADJUSTMENT DATE
The period elapsing between adjustment dates for an ARM. The interval can apply to interest or payment adjustments and is typically one, three, or five years.
a.k.a.: Adjustment period, change frequency
ADJUSTMENT INTERVAL
The dollar value that is added to or subtracted from the sale price of a comparable property used to provide an indication of value of the subject property.
ADJUSTMENTS (IN APPRAISAL)
A partial disbursement of funds under a note, usually made as part of a construction loan or a reverse mortgage.
Advance
A refusal to grant credit as requested; a termination of an account or an unfavorable change in the terms of an account; or a refusal to increase the amount of credit available to a person who has applied for an increase.
ADVERSE ACTION
A legal relationship created by law or contract in which the agent performs certain acts on behalf of the principal. See also Principal.
AGENCY
An instance where a fictitious borrower obtains a mortgage loan “secured” by fictitious property.
Air loan
Scheduling the periodic payments on a loan so that each installment requires enough principal and interest to ensure complete repayment of the loan by the end of its term.
AMORTIZATION
A table showing the portion of each payment that will be applied to interest and to principal, and the balance remaining after each payment has been applied.
AMORTIZATION SCHEDULE
The length of time required to amortize a mortgage loan, expressed as a number of months.
AMORTIZATION TERM
A fee paid for mortgage insurance on an FHA-insured loan. Annual MIP is paid on a monthly basis. See also Mortgage Insurance Premium.
ANNUAL MORTGAGE INSURANCE PREMIUM (ANNUAL MIP)
A uniform measurement of the cost of a loan, including interest and financed costs of closing, expressed as a yearly percentage rate.
ANNUAL PERCENTAGE RATE (APR)
Payments made at specified intervals, such as with insurance contracts or certain types of investments.
ANNUITY
A program established in an effort to detect and guard against money laundering. These programs involve safeguards including internal procedures and controls, designated compliance officers, ongoing employee training, and independent audits. Anti-money laundering programs are required for certain institutions under the Bank Secrecy Act (BSA). See also Money Laundering.
ANTI-MONEY LAUNDERING PROGRAM (AML PROGRAM)
The method by which a consumer formally applies to obtain a mortgage loan. The application form is known as the Uniform Residential Loan Application (URLA) or Form 1003.
Application
A fee charged for processing a mortgage loan application. An application fee may be a flat fee or a percentage of the loan amount.
Application fee
An opinion of the fair market value of a property, based on the appraiser’s knowledge and experience and on an analysis of the property utilizing recent comparable sales and market conditions.
a.k.a.: Valuation
APPRAISAL
An estimate of the fair market value of real or personal property.
APPRAISED VALUE
A person qualified through state licensing procedures to estimate the value of real property.
Appraiser
An increase in the value of property that occurs over time.
Appreciation
One of several standards used to identify high-cost mortgage loans. If the APR of a loan meets or exceeds the threshold established under the law, the loan qualifies as a high-cost mortgage and must comply with corresponding regulations and requirements. See also High-Cost Mortgage.
APR THRESHOLD
A transaction in which the buyer(s) and seller(s) each act in their own best interest and do not have a relationship to one another.
ARM’S LENGTH TRANSACTION
A local tax levied against a property for a specific purpose, such as for sewage or street lights.
Assessment
Things that a person owns and that can be converted to cash, such as property, investments, savings, etc.
Asset
The transfer of the rights and obligations under a mortgage loan from one person to another.
Assignment
A provision in a mortgage loan that allows for the transfer of the mortgage from one party to another.
ASSUMABILITY CLAUSE
A mortgage that a seller can transfer to a new buyer, with the buyer taking over the payments on the seller’s existing mortgage. Lenders may require a credit review of the new borrower and payment of a fee for the assumption. If a mortgage contains a due-on-sale clause, the mortgage is not assumable by a new buyer.
ASSUMABLE MORTGAGE
The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.
Assumption fee
A legal seizure of property to force repayment of a debt. An attachment creates a lien on real property.
ATTACHMENT
To witness by observation and signature.
Attest
A written statement by an attorney, made after examining public records and/or abstracts of title, that in his or her judgment, the title to a particular property is free of unsettled claims and liens.
ATTORNEY’S OPINION OF TITLE
An annual percentage rate that is based on average interest rates, fees, and other terms on mortgages that are offered to qualified borrowers. The APOR is used as a benchmark rate in identifying high-cost home loans and higher-priced mortgage loans under federal law.
AVERAGE PRIME OFFER RATE (APOR)
Comparison of a person’s total monthly obligations to his or her gross monthly income.
a.k.a.: Total debt ratio
BACK-END RATIO
A condition where complete real estate ownership is impaired by unsettled claims and liens. a.k.a.: Cloud on title
BAD TITLE
The amount due, including principal, interest, and any fees or penalties owed.
BALANCE
A mortgage with periodic payments including a final payment that is considerably larger than preceding payments.
BALLOON MORTGAGE
The final lump sum paid on the maturity date of a balloon mortgage.
BALLOON PAYMENT
The financial inability to pay one’s debts when due, resulting in application to the courts for relief through the restructuring or erasing of the debt.
BANKRUPTCY
One 100th of 1% of the loan amount (0.0001 x loan amount = 1 basis point).
BASIS POINT
The person who receives or is to receive the benefits from a specific act or action.
BENEFICIARY
A plan to reduce debt by making payments every two weeks instead of every month. This is equivalent to making one additional monthly payment each year.
BI-WEEKLY PAYMENT MORTGAGE
A written instrument given to pass title of personal property from the seller to the buyer.
BILL OF SALE
In good faith and without fraud.
BONA FIDE
One who applies for and receives a loan in the form of a mortgage. See also Mortgagor.
BORROWER
Credits at closing that are subtracted from the final closing costs. These might include fees or points paid by the seller, a yield spread premium, or fees paid by the borrower prior to closing, such as the appraisal fee. See also Yield Spread Premium (YSP).
BORROWER CREDIT
A short-term loan collateralized by the borrower’s present home and used to close on a new house before the present home is sold.
a.k.a.: Swing loan
BRIDGE LOAN
A limit on the amount by which the interest rate can increase during the first adjustment period for an ARM.
Initial Rate Cap
A limit on the amount by which the interest rate can change during any adjustment periods.
Periodic Rate Cap
A limit on the amount by which an interest rate can change over the life of an ARM.
a.k.a.: Rate Ceiling
Lifetime Rate Cap
A limit on the amount by which the payment can change during an adjustment period on an ARM. Payment caps can result in negative amortization.
Payment Cap
The amount of cash derived from an income-producing property over a period of time.
CASH FLOW
The document that qualified veterans must obtain from the VA in order to apply for a VA guaranteed home loan.
CERTIFICATE OF ELIGIBILITY
A statement issued by the VA showing the property’s current market value based on a VA-approved appraisal.
CERTIFICATE OF REASONABLE VALUE (CRV)
A statement provided by an abstract company, title company, or attorney, stating that the title of real estate is legally held by the current owner.
CERTIFICATE OF TITLE
Acts of God, war, disaster, or other emergency; information particular to the borrower or transaction relied on in providing a GFE/Loan Estimate and subsequently found to be inaccurate; new information particular to the borrower or transaction that was not relied on in providing the GFE/Loan Estimate; or other circumstances particular to the borrower or transaction. See also Act of God, Good Faith Estimate, Loan Estimate.
CHANGED CIRCUMSTANCE
A disclosure booklet used to educate consumers on the risks associated with adjustable-rate mortgages.
CHARM BOOKLET
Anything owned that is not real property – i.e., personal property.
CHATTEL
Generally, a title that is clear of liens, judgments, and other encumbrances. This term is defined with some differences under the marketable record title laws of various individual states.
CLEAR TITLE
The receipt, collection, distribution, and analysis of information for the processing or underwriting of a residential mortgage loan. “Clerical or support duties” also include communicating with a consumer to obtain information necessary for loan processing or underwriting, as long as that communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.
CLERICAL OR SUPPORT DUTIES
A transaction in which the creditor disburses all funds at closing and demands repayment within a specified period of time. During the repayment period, the borrower cannot request an increase in the principal amount of the loan. An example of a closed-end loan would be a traditional mortgage loan.
CLOSED-END LOAN
A meeting between the buyer, seller, and lender, or their agents, where funds for the purchase of real estate legally change hands.
a.k.a.: Settlement
CLOSING
Expenses, over and above the price of the property, incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area of the country and the lenders used.
CLOSING COSTS
A federal disclosure that must be provided to loan applicants no later than three business days prior to consummation. This disclosure provides a statement of the costs of a mortgage lending transaction. Effective October 3, 2015, the Closing Disclosure replaces the HUD-1 Settlement Statement and the Final TIL Disclosure previously required under RESPA and TILA.
CLOSING DISCLOSURE
An outstanding claim or encumbrance on the title.
CLOUD ON TITLE
A statement of principles concerning the behavior of those who subscribe to the code.
CODE OF ETHICS
Property pledged as security for a debt.
COLLATERAL
A comparison, expressed as a percentage, of the combined cost of all mortgages on a home and the value of the home used to secure the loans.
COMBINED LOAN-TO-VALUE RATIO
A pledge or promise; a firm agreement.
COMMITMENT
A non-judicial determination that a property is unfit to occupy, made by a municipal building or health inspector. OR
An exercise of eminent domain to take ownership of a private property for public use. See also Eminent Domain.
CONDEMNATION
A loan that meets the lending limits and other criteria established by Fannie Mae or Freddie Mac.
CONFORMING LOAN
An interim loan used to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses.
CONSTRUCTION LOAN
An organization that prepares reports used by lenders to determine an applicant’s credit history.
CONSUMER REPORTING AGENCY (CRA)
The time at which the consumer becomes contractually obligated by a transaction. Consummation typically occurs at closing, and the two terms are frequently used interchangeably. See also: Closing.
CONSUMMATION
A contract between a purchaser and a seller of real estate to convey title after certain conditions have been met.
CONTRACT OF SALE OR CONTRACT FOR DEED
A mortgage that is not insured by the FHA or guaranteed by the VA.
CONVENTIONAL LOAN
A provision in an ARM allowing the loan to be converted to a fixed rate at some point during its term.
CONVERSION CLAUSE
The transfer of the title of real estate from one person to another.
CONVEYANCE
The rate charged to banks for borrowing money from a Federal Reserve Bank. Each district office sets its own rate. The 11th District COFI is the rate most often used as an index for an ARM.
COST OF FUNDS INDEX (COFI)
A promise that is written into deeds and other instruments, used to agree to the performance or non-performance of certain acts or to prevent certain uses of the property.
COVENANT
A declining term life insurance policy used to ensure repayment of a loan should the borrower die.
CREDIT LIFE INSURANCE
A report documenting the credit history and current status of a borrower’s credit standing.
CREDIT REPORT
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
CREDIT REPOSITORY
A statistical summary of the information contained in a consumer’s credit report. With this form of credit scoring, a numerical value is assigned to various pieces of information in the credit report, then a summary score is produced.
CREDIT RISK SCORE
A person or entity to whom an obligation is owed, such as a loan. See also Lender.
CREDITOR
A report that must be filed for each transaction in currency of more than $10,000 by or through a bank. These reports are required in an effort to detect and prevent instances of fraud and money laundering. See also Money Laundering.
CURRENCY TRANSACTION REPORT (CTR)
A hasty, rushed, or otherwise brief and inadequate inspection of property in an attempt to conceal flaws, undisclosed information, inflated appraisals, or other misrepresentations or omissions. Cursory inspections are a common tactic in fraudulent transactions. See also Fraud.
CURSORY INSPECTION
The relationship, expressed as a percentage, between a borrower’s monthly obligations on long-term debts and his or her gross monthly income. See also Back-End Ratio, Front-End Ratio.
DEBT-TO-INCOME RATIO
A person who owes a debt to a creditor or lender. See also Borrower.
DEBTOR
A written instrument, properly signed and delivered, that conveys title to real property.
DEED
An arrangement in which the mortgagor (borrower) conveys all interest in the property to the mortgagee (lender) in an effort to satisfy a loan that is in default and avoid foreclosure proceedings. See also Conveyance, Foreclosure.
DEED-IN-LIEU OF FORECLOSURE
In many states, a document that is used in place of a mortgage to secure the payment of a note.
DEED OF TRUST
Failure to meet legal obligations in a contract; specifically, failure to make the monthly payments on a mortgage.
DEFAULT
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See also Negative Amortization.
DEFERRED INTEREST
A reverse mortgage loan that provides a lump sum used to repair or improve a house.
DEFERRED PAYMENT LOAN (DPL)
The state of having failed to make payments on time. This can lead to foreclosure.
DELINQUENCY
Past due.
DELINQUENT
The federal agency responsible for housing programs in the United States. Also has regulatory authority for a number of housing-related federal statutes.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
An independent agency of the federal government which oversees programs and services for veterans. The VA guarantees long-term, low-, or no-down payment mortgages to eligible veterans.
DEPARTMENT OF VETERANS AFFAIRS (VA)
Funds that are given in advance to show committed interest in the purchase of a property. See also Earnest Money.
DEPOSIT
A decrease in the value of a property over time.
DEPRECIATION
A fee paid to a lender at closing and used to prepay a portion of the interest on a loan. Discount points are charged so that the note rate can be lower than the prevailing market rate.
DISCOUNT POINT
An oral or written statement in advertising or communicated by any other means that discourages an individual from applying for credit on a prohibited basis. See also Prohibited Basis.
DISCOURAGEMENT
In mortgage lending, treating an applicant less favorably than other applicants on a prohibited basis. See also Discouragement, Prohibited Basis.
DISCRIMINATION
A list of consumers who have placed their names on the Registry to avoid receiving telemarketing or similar unwanted commercial communications.
DO-NOT-CALL REGISTRY
In mortgage lending, the term refers to those who make gifts of money for use in the purchase of a home, with no expectation of reimbursement.
DONOR
Money that is paid towards the purchase price of a home and that is not financed.
DOWN PAYMENT
A loan settlement in which loan funds are not made available on the same day as closing. In many states, dry settlement is prohibited, unless the loan is subject to the right of rescission.
DRY SETTLEMENT
The prohibited practice of receiving direct compensation from a consumer and additional indirect compensation from a creditor that funds mortgage loans.
DUAL COMPENSATION
A provision of a mortgage or deed of trust that allows a lender to demand immediate payment of the balance of the loan if specific criteria relating to fraud and misrepresentation are met.
DUE-ON-DEMAND CLAUSE
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.
DUE-ON-SALE CLAUSE
Money paid by a buyer to a seller at the time of entering a contract to indicate the buyer’s intent and ability to carry out the contract.
EARNEST MONEY
The right to use part of another person’s property. A common example would be a right of way (the right of one person to access their own property by traveling through someone else’s property).
EASEMENT
The right of a government or municipality to acquire private property for public use, even if the property owner objects.
EMINENT DOMAIN
A claim against real property, such as a lien, judgment, security interest, unpaid taxes, or an easement, which may affect the ability to transfer ownership of the property.
ENCUMBRANCE
The loan amount that the VA guarantees when extending a loan to a veteran.
ENTITLEMENT
The difference between the fair market value of a property and the current balances of any liens against the property. a.k.a.: Home equity
EQUITY
A lending decision that is based on the equity a borrower currently has available in the home, rather than on the borrower’s creditworthiness and repayment ability.
EQUITY-BASED LENDING
An account held by the lender into which the homebuyer deposits money for taxes and/or insurance payments. Escrow accounts may also hold other funds related to a real estate purchase, such as earnest money.
ESCROW ACCOUNT
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other expenses as they become due.
ESCROW DISBURSEMENTS
The part of a mortgagor’s monthly payment that is held by the loan servicer to pay for taxes, hazard insurance, mortgage insurance, and other expenses related to the loan.
ESCROW PAYMENT
A contract for which all terms have been completely fulfilled.
EXECUTED CONTRACT
A government-sponsored enterprise created by Congress that purchases conforming mortgage loans and resells them in the secondary market.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FREDDIE MAC)
A division of the Department of Housing and Urban Development. Its main activity is insuring residential mortgage loans made by private lenders.
FEDERAL HOUSING ADMINISTRATION (FHA)
A government-sponsored enterprise created by Congress that purchases conforming mortgage loans, as well as those insured by the FHA, and resells them in the secondary market.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FANNIE MAE)
A federal agency with responsibilities that include enforcing compliance with federal lending laws.
FEDERAL TRADE COMMISSION (FTC)
Any kind of money that is paid in conjunction with a mortgage loan, other than the actual loan amount and interest. Might include third-party fees, such as those for credit reports or appraisals, or origination/broker fees. Fees affect the total cost of credit when obtaining a loan.
FEES
The credit score obtained from the use of software developed by Fair Isaac Corporation. Though each major CRA ultimately developed its own formula for credit scoring, the term “FICO Score” is widely used today to refer to any credit score.
FICO SCORE
A duty of loyalty, good faith, and the obligation to prioritize the interests of the principal over the interests of the agent. Some state laws provide that mortgage professionals owe a fiduciary duty to borrowers; other states do not. See also Agency, Principal.
FIDUCIARY DUTY
