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
Any kind of fees or charges associated with obtaining credit, expressed in a dollar amount. Finance charges can include many items, including loan fees, miscellaneous fees, per diem interest, escrows for mortgage insurance, etc.
FINANCE CHARGE
A promise by the FHA to insure a mortgage loan for a specified property and borrower.
OR
A promise from a lender to make a mortgage loan.
FIRM COMMITMENT
The oldest lien against a property, or the lien with first priority.
FIRST MORTGAGE
The monthly payment due on a mortgage loan, including payment of both principal and interest.
FIXED INSTALLMENT
A mortgage with an interest rate that will remain the same for the entire term of the loan.
FIXED-RATE MORTGAGE
The opposite of locking an interest rate. Following formal application and identification of a loan program, a mortgage loan applicant may elect to wait to lock an interest rate in anticipation of interest rates falling. See Rate Lock.
FLOAT
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally-designated flood zones.
FLOOD INSURANCE
When a lender delays a foreclosure action in order to allow a borrower to make good on overdue payments.
FORBEARANCE
A legal process by which a lender forces the sale of a mortgaged property because the borrower has not met the repayment terms of the mortgage.
FORECLOSURE
An intentional misrepresentation or concealment of a fact that deceives another and causes him/her to act upon the false representation or concealment, to his/her detriment.
FRAUD
An alert placed in a consumer’s credit report file at his or her request to notify any user of the information that the consumer is or is believed to be a victim of fraud. A fraud alert must be kept in the consumer’s file for 90 days.
FRAUD ALERT
A type of fraud in which an individual misrepresents his or her employment history, credit history, intention to occupy a property as a primary residence, or income in order to improve his or her chances of securing a mortgage.
FRAUD FOR HOUSING
The focus of most anti-fraud efforts. Fraud for profit typically involves the conspiratorial involvement of individuals throughout the mortgage industry, such as bankers, brokers, loan originators, processors, underwriters, appraisers, and others.
a.k.a.: Industry insider fraud
FRAUD FOR PROFIT
A comparison of a person’s income to the monthly housing expenses that he or she will be taking on through the mortgage loan.
a.k.a.: Housing debt ratio.
FRONT-END RATIO
A requirement to reveal all information pertinent to a transaction.
FULL DISCLOSURE
An ARM with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
FULLY-AMORTIZED ARM
In an ARM, the interest rate indicated by adding the current index value and the margin. For example, if the index were 7% and the margin 2.75%, the fully-indexed rate would be 9.75%.
FULLY-INDEXED RATE
Funds provided by the lender at settlement. The act of disbursing the cash for a loan.
FUNDING
An estimate of closing costs, made in compliance with RESPA requirements, that must be given to mortgage applicants within three days after loan application is complete. Effective October 3, 2015, this disclosure is replaced by the Loan Estimate. See also Loan Estimate.
GOOD FAITH ESTIMATE (GFE)
An agency within HUD which guarantees securities backed by the FHA, VA, or RHS. Ginnie Mae is often discussed alongside government-sponsored enterprises Fannie Mae and Freddie Mac, but unlike those entities, it does not issue mortgage-backed securities.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GINNIE MAE)
An agency within HUD which guarantees securities backed by the FHA, VA, or RHS. Ginnie Mae is often discussed alongside government-sponsored enterprises Fannie Mae and Freddie Mac, but unlike those entities, it does not issue mortgage-backed securities.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GINNIE MAE)
The period during which one party may fail to perform without being considered in default.
GRACE PERIOD
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off.
GRADUATED PAYMENT MORTGAGE (GPM)
For qualifying purposes, the income of the borrower before taxes and expenses are deducted.
GROSS INCOME
A fixed-rate mortgage that provides scheduled payment increases over an established period of time. The increased amount of the monthly payment is applied directly toward reducing the remaining balance of the mortgage.
GROWING EQUITY MORTGAGE (GEM)
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to the contract.
GUARANTY
A mortgage that is guaranteed by a third party.
GUARANTEED MORTGAGE
A form of insurance that indemnifies the insured against fire, burglary, and other specified losses. a.k.a.: Homeowners insurance
HAZARD INSURANCE
A loan that meets or exceeds one or more of several thresholds set forth under the federal Home Ownership and Equity Protection Act (HOEPA). High-cost mortgages are subject to specific borrower education and disclosure requirements, as well as strict restrictions on loan terms that can be used
HIGH-COST MORTGAGE
A loan that meets or exceeds the threshold set forth under federal law for identifying higher-priced mortgage loans. HPMLs are subject to specific disclosure and appraisal requirements, as well as certain other restrictions.
HIGHER-PRICED MORTGAGE LOAN (HPML)
A reverse mortgage insured by the FHA. See Reverse Mortgage.
HOME EQUITY CONVERSION MORTGAGE (HECM)
A HELOC is a type of mortgage loan that establishes a credit line that can be drawn upon as needed until the borrower reaches the maximum credit amount allowed.
HOME EQUITY LINE OF CREDIT (HELOC)
A document, due on the day of closing, that provides an itemized listing of all costs associated with a real estate transaction including the fees of the lender, mortgage broker, and other settlement service providers. The HUD-1A is another version of this form that is used for refinance transactions. Effective October 3, 2015, the HUD-1 Settlement Statement and the HUD-1A Settlement Statement are replaced by the Closing Disclosure.
a.k.a.: Settlement Statement
HUD-1 SETTLEMENT STATEMENT
The fraudulent use of another individual’s personal identifying information without his or her knowledge or consent.
IDENTITY THEFT
The portion of a borrower’s monthly payments that is held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
a.k.a.: Escrows, reserves
IMPOUNDS
A published interest rate that, when combined with a margin, is used as the basis upon which the note rate of ARM will adjust.
INDEX
The interest rate of an ARM at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). a.k.a.: Start rate, teaser rate
INITIAL INTEREST RATE
The regular periodic payment that a borrower agrees to make to a lender.
INSTALLMENT
A legal document provided to a lender by a title company, promising to abide by closing instructions. It protects the lender from misuse of funds by the title company.
INSURED CLOSING LETTER
A mortgage that is insured by the Federal Housing Administration (FHA) or by private mortgage insurance.
INSURED MORTGAGE
The fee charged for borrowing money.
INTEREST
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
INTEREST ACCRUAL RATE
A loan program in which the borrower’s payments are directed only toward the interest due on the loan, and are not used to repay principal.
INTEREST ONLY (I-O)
An arrangement that allows a party to deposit money to an account. That money is then released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage. See Temporary Buy-Down.
INTEREST RATE BUYDOWN PLAN
Short-term financing made to cover costs while waiting for the requirements of a permanent loan to be met. A construction loan is a common example of an interim loan.
INTERIM FINANCING
An arrangement in which two or more people hold equal ownership of a property, and the interest of any deceased tenant(s) is subsequently transferred to the surviving tenant(s).
JOINT TENANCY
A foreclosure process that is initiated by the lender filing a suit in a court of law. See also Lien Theory State.
JUDICIAL FORECLOSURE
A loan that exceeds the lending limits established by Fannie Mae and Freddie Mac for conforming loans. a.k.a.: Nonconforming loan
JUMBO LOAN
A mortgage that is subordinate to the claims or lien positions of other mortgages recorded against a property.
JUNIOR MORTGAGE
The payment of money or a thing of value as compensation or reward for completing certain actions
KICKBACK
The penalty that is charged to a borrower when a payment made is overdue by a specified number of days after the due date.
LATE CHARGE
An alternative financing option that allows low- and moderate-income homebuyers to lease a home with an option to buy. Each month’s rent payment consists of principal, interest, taxes, and insurance (PITI) payments on the first mortgage, plus an extra amount that accumulates in a savings account for a down payment.
LEASE-PURCHASE MORTGAGE LOAN
A form of real estate property rights. When a buyer acquires leasehold property, they purchase the improvements but lease the land for a certain term. At the end of the term, they may or may not have the opportunity to purchase the land or renew the lease.
LEASEHOLD
An entity that makes funds available for others to borrow. See also Creditor.
LENDER
Insurance that protects the lender against loss from title defects or liens that should have been cleared up prior to issuance of a title policy.
LENDER’S TITLE INSURANCE
A person’s financial obligations. Liabilities include both long- and short-term debt.
LIABILITIES
Part of a homeowner’s insurance policy that covers bodily injury or property damage occurring on the homeowner’s property as a result of negligence.
LIABILITY INSURANCE
A fraudulent loan transaction in which the applicant inflates, enhances, or otherwise misrepresents qualifying information.
LIAR LOAN
The London Interbank Offered Rate. The LIBOR is a type of index that is used to determine interest rates for adjustable-rate mortgages.
LIBOR
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.
LIEN
States in which mortgages are secured by a lien. Homeowners hold the title to the home during the loan term. In lien theory states, foreclosure is a judicial process. See also Judicial Foreclosure, Title Theory State.
LIEN THEORY STATE
A sum of borrowed money (principal), generally repaid with interest.
LOAN
The form that is used for reporting data required to be collected under the Home Mortgage Disclosure Act.
LOAN APPLICATION REGISTER (LAR)
A federal disclosure that must be provided to loan applicants no more than three business days after receiving the completed application. This disclosure provides an estimate of the costs of the loan for which the borrower has applied. Effective October 3, 2015, the Loan Estimate replaces the Good Faith Estimate (GFE) and the Early TIL Disclosure previously required under RESPA and TILA.
LOAN ESTIMATE
The repeated refinancing of the same loan within a short period of time.
LOAN FLIPPING
A permanent change in the terms of a loan in response to a borrower’s long-term inability to make payments.
LOAN MODIFICATION
Uniquely defined with specific differences under the mortgage lending laws of each state, a loan originator is generally an individual that arranges funding or negotiates mortgage loans for a potential borrower. The term may also be applied generally to any individual or entity that initiates the process for obtaining a mortgage loan. A loan originator may work under the supervision of a mortgage broker, mortgage banker, or a lender.
a.k.a.: Loan officer
LOAN ORIGINATOR
The relationship between the amount of the mortgage loan and the lower of the appraised value of the property or the purchase price. Loan-to-value ratio is expressed as a percentage.
LOAN-TO-VALUE RATIO (LTV)
A single disbursement of the total amount due.
LUMP SUM
A provision in a contract that requires all parties to submit to arbitration to resolve disputes instead of seeking action in court.
MANDATORY ARBITRATION AGREEMENT
The amount that a lender adds to the index on an ARM to establish the adjusted interest rate.
MARGIN
A service provider increasing the charges of another provider collected from a borrower, then retaining the additional fees.
MARKUP
The date on which the principal balance of a loan becomes due and payable.
MATURITY
A consumer credit report that contains information from two or more of the three credit repositories. A tri-merge report contains all three.
MERGED CREDIT REPORT
The process of using financial transactions to distance illegally-obtained funds from their original, unlawful source.
MONEY LAUNDERING
That portion of the total monthly payment applied toward principal and interest.
MONTHLY FIXED INSTALLMENT
A legal document that pledges a property to the lender as security for repayment of a debt.
MORTGAGE
The lender.
MORTGAGEE
Any plan, program, or service offered, in exchange for compensation, to assist in stopping, preventing, or postponing foreclosure or repossession of a dwelling. This can include a number of services, such as negotiating or arranging for modification of loan terms or time extensions, obtaining forbearances, obtaining waivers of acceleration clauses or balloon payments, or other services. See also Loan Modification.
MORTGAGE ASSISTANCE RELIEF SERVICE (MARS)
A group of loans that have been bundled together for sale in the secondary mortgage market. See also Secondary Mortgage Market.
MORTGAGE-BACKED SECURITY (MBS)
Uniquely defined with specific differences under the mortgage lending laws of each state, a mortgage banker is generally an individual or entity that makes and funds mortgages, services mortgages, and sells mortgages in the secondary market.
MORTGAGE BANKER
Uniquely defined with specific differences under the mortgage lending laws of each state, a mortgage broker is generally an individual or entity that arranges funding or negotiates mortgage loans for a potential borrower, and charges a fee for these services.
MORTGAGE BROKER
Insurance that indemnifies the lender against default by the borrower. This may be in the form of Mortgage Insurance Premiums (MIP), which is used on FHA-insured loans, or Private Mortgage Insurance (PMI), used for other loan types. See also Mortgage Insurance Premium, Private Mortgage Insurance.
MORTGAGE INSURANCE (MI)
The fee paid by borrowers for mortgage insurance on an FHA loan. MIP is paid in two ways: annual MIP and upfront MIP (UFMIP). See also Annual Mortgage Insurance Premium, Upfront Mortgage Insurance Premium.
MORTGAGE INSURANCE PREMIUM (MIP)
An amortization method in which the monthly payments are not large enough to pay all of the interest due on the loan. This unpaid interest is then added to the balance of the loan, causing the balance to increase rather than decrease over time.
a.k.a.: Deferred interest
NEGATIVE AMORTIZATION
The borrower’s gross income minus federal income tax.
NET EFFECTIVE INCOME
A test that allows lenders and loan servicers to determine if it is more profitable to allow a loan modification or to proceed with foreclosure.
NET PRESENT VALUE TEST (NPV TEST)
A statement in a mortgage contract that forbids the assumption of the mortgage without the lender’s approval.
NON-ASSUMPTION CLAUSE
Foreclosure that occurs outside of the court system. A notice of default is mailed to the delinquent borrower, who is given a period of time in which to cure the default. If unable to cure the default, a notice of sale will be issued. See also Title Theory State.
NON-JUDICIAL FORECLOSURE
A transaction that is covered by the Dodd-Frank Act and that is an ARM with an introductory fixed rate of one year or more; an interest-only loan; or a negative amortization loan. See also Standard Mortgage.
NON-STANDARD MORTGAGE
Personally-identifiable financial information that is provided by a consumer to a financial institution, results from any transaction with the consumer or any service performed for the consumer, or that is otherwise obtained by the financial institution. Examples include information that a consumer provides to obtain a loan or information from a credit report.
NONPUBLIC PERSONAL INFORMATION
Any loan other than a 30-year fixed-rate mortgage loan.
NONTRADITIONAL MORTGAGE LOAN
A legal document that obligates a borrower to repay a mortgage loan and specifies the terms of repayment.
NOTE
The stated interest rate on a mortgage or loan agreement.
NOTE RATE
An ARM with a rate that adjusts each year.
ONE-YEAR ADJUSTABLE
A transaction in which the borrower and creditor anticipate repeat transactions. The creditor establishes a limit on the amount of funds that the borrower may withdraw, and the borrower has the ability to request cash advances. Borrowers may also request an increase in available credit. An example of an open-end loan would be a home equity line of credit (HELOC). See also Home Equity Line of Credit.
OPEN-END LOAN
The process of taking and processing an application for a mortgage loan.
ORIGINATION
The fee charged by a lender to make the loan; usually computed as a percentage of the face value of the loan.
ORIGINATION FEE
Voluntary insurance which protects a homeowner from third-party rights affected on the property over the course of its past ownership, such as mechanic’s liens, un-released mortgages, etc.
OWNER’S TITLE INSURANCE
Used to denote fees paid by the borrower before closing/settlement.
PAID OUTSIDE OF CLOSING (P.O.C.)
The retail interest rate that a borrower may receive without paying discount points.
PAR RATE
The date on which a new monthly payment amount takes effect on an ARM or a GPM. Generally, the payment change date occurs in the month immediately after the adjustment date.
PAYMENT CHANGE DATE
An issue faced by some borrowers of nontraditional mortgages when their payments change as a result of interest rate resets, expiration of interest-only payment periods, or negative amortization. See also Nontraditional Mortgages, Payment Shock Refinance.
PAYMENT SHOCK
The refinancing of a non-standard mortgage to a standard mortgage as a means of shielding consumers from payment shock. See also Payment Shock, Refinance.
PAYMENT SHOCK REFINANCE
The payment of points to permanently lower the interest rate on a loan.
PERMANENT BUY-DOWN
A long-term mortgage, usually of ten years or more, as opposed to a short-term loan, such as a construction loan. a.k.a.: End loan
PERMANENT LOAN
The lawful reason why a person is seeking to obtain a consumer report about an individual. Permissible purpose might include a consumer’s request for a credit report required by a mortgage lender, or for a credit transaction with an existing customer.
PERMISSIBLE PURPOSE
A transaction in which a borrower takes on subordinate financing in order to cover a down payment or to finance closing costs. See also Subordinate Lien.
PIGGYBACK LOAN
Principal, interest, taxes, and insurance (PITI) are the monthly housing expenses that a lender calculates in order to determine a borrower’s housing expense ratio.
PITI
A type of residential development or subdivision that features areas owned in common by the residents and reserved for use by some or all of the residents.
PLANNED UNIT DEVELOPMENT (PUD)
A fee equal to 1% of the loan amount. (0.01 x Loan Amount = 1 point)
a.k.a.: Discount point
POINT
One of several standards used to identify high-cost mortgage loans. If the points and fees of a loan meet or exceed 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.
POINTS AND FEES THRESHOLD
A legal document authorizing one person to act on behalf of another.
POWER OF ATTORNEY
The lender’s approval to make a loan based on verification of a loan applicant’s income and examination of credit history. Pre-approval does not include a commitment by the lender to a particular interest rate or lending terms.
PRE-APPROVAL
Examination of information that a loan applicant has provided about his/her income and financial obligations to estimate how much money the loan applicant might be eligible to borrow.
PRE-QUALIFICATION
The use of illegal and unethical practices to exploit individuals in financial transactions, through deception, discrimination, and/or the use of abusive and oppressive loan terms.
PREDATORY LENDING
Funds collected at closing that are necessary to create an escrow account or to adjust the seller’s existing escrow account. Prepaid expenses can include taxes, hazard insurance, private mortgage insurance, and special assessments. a.k.a.: Prepaids
PREPAID EXPENSES
Any finance charge that is paid before or at consummation. See also Finance Charge.
PREPAID FINANCE CHARGE
A payment that the borrower makes in advance of the due date. A prepayment may be a “partial prepayment” or a “prepayment in full.”
PREPAYMENT
Fees charged for an early repayment of debt. Prepayment penalties are subject to laws that restrict the types of loans for which these penalties can be charged and the amounts that can be collected. Laws also limit the charging of these penalties to the early years of a loan.
PREPAYMENT PENALTY
One of several standards used to identify high-cost mortgage loans. If a loan features a prepayment penalty provision which 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.
PREPAYMENT PENALTY THRESHOLD
The presumption that a person has complied with the requirements of the law if certain conditions are met. See also Safe Harbor.
PRESUMPTION OF COMPLIANCE
Retail lenders, such as banks, savings and loan associations, credit unions, and mortgage companies, who make mortgage loans directly to qualified borrowers.
PRIMARY MORTGAGE MARKET
Loans made to borrowers who have good credit scores, stable income histories, down payments, and low debt ratios.
PRIME LOANS
The individual to whom a fiduciary duty or other duty of loyalty is owed in an agency relationship. See also Agency, Fiduciary Duty.
PRINCIPAL (AGENCY RELATIONSHIP/FIDUCIARY DUTY)
The amount borrowed, and the portion of each monthly payment that reduces the remaining balance of a mortgage.
PRINCIPAL (FINANCIAL)
Mortgage insurance purchased from a private (non-governmental) insurance company. PMI is often required by a lender when the LTV on a conventional loan exceeds 80%. See also: Mortgage Insurance.
PRIVATE MORTGAGE INSURANCE (PMI)
Any of a number of factors which may not be considered in making a lending decision. Includes race, color, religion, national origin, sex, marital status, age (provided that the applicant is of legal age to enter into a contract), the fact that all or part of the applicant’s income derives from public assistance, or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act or a state law granted exemption by the CFPB. See also Discrimination.
PROHIBITED BASIS
A legal agreement for a borrower to repay a loan.
PROMISSORY NOTE
The purchase and resale of a piece of property within a short period of time.
PROPERTY FLIPPING
The forced sale of a property for less than it is worth, followed by resale of the property at its true value.
PROPERTY FLOPPING
A mortgage loan obtained by a borrower for the purchase of a residential property, in which the property serves as collateral for the loan.
PURCHASE MONEY MORTGAGE
A closed-end mortgage loan secured by a dwelling that meets certain specific underwriting requirements set forth by law under the Qualified Mortgage Rule (QM Rule). There are several different categories of qualified mortgages under the rules, and each category has specific eligibility requirements for creditors and borrowers.
QUALIFIED MORTGAGE (QM)
Investor-specific calculations used to determine if a borrower is qualified to obtain a mortgage loan. See also Back End Ratio, Debt-to-Income Ratio, Front-End Ratio, Loan-to-Value Ratio.
QUALIFYING RATIOS
A deed that transfers ownership without any guarantees or warranties. It is used to remove any clouds on a title (for instance, due to unreleased mortgages). Quitclaims are also commonly used in cases of mortgage fraud, such as property flipping.
QUITCLAIM DEED
Safeguards which limit the amount by which the interest rate on an ARM may change in each adjustment period or over the life of the loan. See Caps.
RATE CAP
A lender’s guarantee that the interest rate quoted will be good for a specific number of days from the date on which the lock is applied.
RATE LOCK
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
REAL ESTATE AGENT
Land and any property directly attached to the land.
REAL PROPERTY
A presumption of compliance which may be rebutted or challenged by the consumer. See also Presumption of Compliance.
REBUTTABLE PRESUMPTION OF COMPLIANCE
A process used by lenders to adjust mortgage payments. Usually used in the case of option ARMs and other nontraditional mortgage products where negative amortization has occurred.
RECASTING
A clause in a deed of trust that conveys title to a borrower once the loan is paid in full. This concept also applies to reconveyance contracts where homeowners have the option to repurchase their home pursuant to foreclosure assistance.
RECONVEYANCE
Fees charged by a local recorder’s office for recording a mortgage or deed of trust, thereby making it part of the public record.
RECORDING FEES
The practice of refusing to extend credit in certain geographical areas based on discriminatory factors.
REDLINING
Obtaining a new mortgage loan on a property that the borrower already owns.
REFINANCE
The cancellation of a contract. With respect to mortgage refinancing, the Truth-in-Lending Act gives some homeowners three days after closing to exercise their right to rescind a refinance contract.
RESCISSION
A form of mortgage in which the lender makes scheduled periodic payments to the borrower using the borrower’s equity in the home as security for the loan. Repayment is deferred until the occurrence of certain specified events, such as the death of the last surviving borrower or the sale of the home.
REVERSE MORTGAGE
The predatory lending practice of targeting certain areas populated by subprime borrowers, or other borrowers with inadequate experience or ability to understand loan terms and conditions, and engaging those borrowers in unlawful loan transactions. See also Predatory Lending, Redlining.
REVERSE REDLINING
A type of credit arrangement in which a consumer is pre-approved for a line of credit and may make purchases against that credit. Credit cards are a common form of revolving credit.
REVOLVING DEBT
A clause in a property lease giving the tenant the opportunity, before anyone else, to purchase the property in the event of a sale.
RIGHT OF FIRST REFUSAL
A method of determining an interest rate refund in the event that a borrower pays off a fixed-rate loan prior to its date of maturity.
RULE OF 78
A legal method of lowering or eliminating liability as long as the person has met certain conditions and demonstrated a good faith effort to comply with the law. See also Presumption of Compliance.
SAFE HARBOR
A legally-binding agreement between a buyer and seller, detailing the terms and conditions of the sale of real estate.
SALES CONTRACT
The document issued by the lender when the borrower pays the mortgage loan in full.
a.k.a.: Release of mortgage
SATISFACTION OF MORTGAGE
A mortgage recorded after and subordinate to the first mortgage.
SECOND MORTGAGE
The financial market in which private investors and government-sponsored enterprises, such as Fannie Mae and Freddie Mac, buy and securitize mortgages made by primary mortgage lenders. The secondary market provides primary lenders with a source of cash for making new loans.
SECONDARY MORTGAGE MARKET
A loan that is secured by collateral, such as property. The loan agreement contains a provision stating that the lender has a claim against the property if the debt is not paid according to the terms of the agreement.
SECURED LOAN
The real or personal property pledged as collateral for a loan.
SECURITY
The process of pooling similar types of loans to create mortgage-backed securities for sale in the financial markets.
SECURITIZATION
A purchase transaction, often involving an assumable mortgage, in which the party selling the property provides all or part of the financing.
a.k.a.: Owner financing
SELLER CARRY-BACK
An individual or entity that services a loan by performing responsibilities such as sending statements to borrowers, accepting payments, issuing late payment notices, and managing escrow accounts.
SERVICER
An occurrence in which the lender agrees to a reduced payoff of a loan through the sale of a subject property. The borrower is allowed to sell the property for less than the principal amount due on the mortgage, and the lender releases its lien.
a.k.a.: Pre-foreclosure sale
SHORT SALE
A creditor that meets all of the specific criteria set forth under law to qualify for exemptions from certain provisions. Criteria typically depend on factors such as the dollar amount of transactions, the number of loans held in the entity’s portfolio, or the geographical area(s) served. TILA is an example of a law that creates exemptions from certain requirements for entities that meet its specific small creditor criteria.
SMALL CREDITOR
A means of interaction and exchange between people in which they create and/or share information and ideas via the Internet.
SOCIAL MEDIA
A transaction covered by the Dodd-Frank Act that requires regular periodic payment; and does not provide for negative amortization, deferment of principal, or balloon payments; has points and fees that do not exceed 3% of the total loan amount (with some exceptions); has a term that does not exceed 40 years; has an interest rate that is fixed for at least the first five years of the loan term; and that uses the proceeds of the loan solely to pay off the outstanding balance on a non-standard mortgage and to pay off settlement charges required to be disclosed under RESPA. See also Non Standard Mortgage.
STANDARD MORTGAGE
The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
STANDARD PAYMENT CALCULATION
A law enacted by a legislative body. May include a law established by an act or the rules or regulations which are used to promulgate the law.
STATUTE
Directing or influencing a consumer to consummate a transaction that would provide greater compensation for the loan originator than in other transactions that the originator offered or should have offered to the individual.
STEERING
An individual who accepts a fee to provide his or her name, Social Security Number, and other personal information for use on a mortgage loan application, with no intention of actually owning or possessing the property used to secure the loan. The use of straw buyers is a fraudulent practice.
STRAW BUYER
An individual who accepts a fee to falsely claim ownership to a property. Transactions involving a straw seller may include the use of falsified or fabricated title documents in order to support the fraudulent claim of ownership.
STRAW SELLER
A lien on property that is junior, or subsequent, to another lien or liens. In the event of foreclosure, subordinate financing does not receive priority until prior liens are paid.
a.k.a.: Subordinate financing, junior lien, junior financing
SUBORDINATE LIEN
Below the qualifications set for prime borrowers. Subprime loans are those made available for borrowers with poor credit, an unstable income history, or high debt ratios. Many subprime loan products are no longer available thanks to recent federal legislation.
SUBPRIME
A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any structures or easements on the property.
SURVEY
A document that must be filed when there is evidence that funds involved in a transaction were derived from or intended to disguise an illegal activity, that the transaction was designed to evade the Bank Secrecy Act, or was otherwise suspicious or indicative of criminal activity.
SUSPICIOUS ACTIVITY REPORT (SAR)
Equity created by a purchaser performing work on a property being purchased.
SWEAT EQUITY
A type of involuntary lien placed on a property title due to a homeowner’s failure to pay property taxes.
TAX LIEN
A type of wholesale lending arrangement in which mortgage brokers are permitted to originate, close, and fund a loan using funds provided by a lender. The loan is then immediately assigned to the lender that provided the funds. Table funding may also be used to describe the practice of funding a loan on the same day that it is settled. See also Warehouse Line of Credit, Wet Settlement.
TABLE FUNDING
A financing tool used to temporarily reduce the interest rate and monthly payments on a mortgage. See also Interest Rate Buy-Down.
TEMPORARY BUY-DOWN
An estate that exists between spouses who have an equal right of possession and enjoyment during their lives, with the surviving spouse taking complete possession of the estate upon the death of the other.
TENANCY BY THE ENTIRETY
Ownership of property by two or more persons, each of whom has an undivided interest. If an interest holder dies, their interest is passed on to his or her heir(s).
TENANCY IN COMMON
An individual who poses as a loan applicant to test a creditor’s fair lending policies and procedures.
TESTER
Any payment, advance, loan, or service given. “Thing of value” can include money as well as non-monetary items, such as discounts, special rates, special services, meals, tickets to events or entertainment, office equipment, expense reimbursements, or similar.
THING OF VALUE
When a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages that it plans to deliver to the secondary mortgage market.
THIRD-PARTY ORIGINATION
A method of expressing the cost of financing, it is the difference between the loan amount and the sum of the payments made over time.
TIME-PRICE DIFFERENTIAL
A document that gives evidence of an individual’s ownership of property.
TITLE
A report containing the history of the title associated with a particular property.
TITLE ABSTRACT
Temporary title insurance expected to soon be replaced by a title insurance policy.
TITLE BINDER
A policy, usually issued by a title insurance company, which insures against errors in the title search. A Buyer’s Title Policy protects the homebuyer, and a Lender’s Title Policy protects the lender.
TITLE INSURANCE
An examination of county and/or municipal records to determine the legal status of real property. Usually performed by a title company or an attorney.
TITLE SEARCH
States in which the lender’s interest in a home is secured by a deed of trust. The lender is the beneficiary of the deed of trust, and a third party (“trustee”) holds the title to the property during the loan term. In title theory states, foreclosure is a non-judicial process that occurs outside of the court system. See also Lien Theory State, Non-Judicial Foreclosure.
TITLE THEORY STATE
The current rate that the U.S. Treasury is paying on securities it issues.
TREASURY RATE (T-RATE)
A term used in advertising that triggers the requirement to provide additional specific information required under the federal Truth-in-Lending Act.
TRIGGER TERM
The process of evaluating a loan applicant’s financial information and facts about the real estate used to secure a loan to determine whether a potential loan is an acceptable risk for a lender.
UNDERWRITING
Real estate with free and clear title.
UNENCUMBERED PROPERTY
An exam component set forth by the NMLS as part of testing requirements for individuals to obtain licensure as mortgage loan originators. For those states that chose to adopt the UST, previously-used state-specific exam components were retired and replaced by UST content.
UNIFORM STATE TEST (UST)
An instrument that transfers title from one party (grantor) to another party (grantee), without providing public notice of a change in ownership.
UNRECORDED DEED
A debt that has no collateral or security.
UNSECURED LOAN
Mortgage insurance for an FHA loan that is paid at closing. See also Annual MIP, Mortgage Insurance Premium.
UPFRONT MORTGAGE INSURANCE PREMIUM (UFMIP)
Uniform Residential Appraisal Report. This is the document used to convey information resulting from an appraisal.
URAR
Interest charged in excess of the legal limit as established by state law.
USURY
A long-term, low- or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service.
VA LOAN
A premium of up to 1.875% (depending on the size of the down payment) paid to the VA on a VA-backed loan.
VA MORTGAGE FUNDING FEE
An estimate of the value of the consumer’s principal dwelling. Commonly used interchangeably with the term “appraisal.” See also Appraisal.
VALUATION
A document signed by the borrower’s financial institution, verifying the status and balance of his/her financial accounts.
VERIFICATION OF DEPOSIT (VOD)
A document signed by the borrower’s employer verifying his/her position and salary.
VERIFICATION OF EMPLOYMENT (VOE)
Having no legal force or effect; unenforceable.
VOID
The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege. In mortgage refinance transactions, a borrower with the right of rescission can waive it in certain circumstances.
WAIVER
A fee charged by a lender and used to offset the cost associated with holding a mortgage until it can be sold on the secondary market.
WAREHOUSE FEE
A revolving line of credit used by mortgage brokers in order to fund loans.
WAREHOUSE LINE OF CREDIT
A deed in which the grantor warrants that the title is clear and free of any encumbrances.
WARRANTY DEED
A loan settlement in which the funds for the loan are disbursed on the same day as closing. Wet settlement is generally required in most states for loan transactions not subject to the right of rescission.
WET SETTLEMENT
The fee that a lender pays for a loan with an interest rate higher than the par rate on the day the loan was locked or closed. Previously, this fee was used as a common form of compensation for the broker. This practice has since been declared unlawful, and any YSP must now be paid to the borrower as a credit to reduce closing charges. See also Borrower Credit.
YIELD SPREAD PREMIUM (YSP)
A legal mechanism for local governments to regulate the use of privately owned real property in order to prevent conflicting land use and promote orderly development.
ZONING
