General Terms & Definitions Flashcards
Assigned loan
a loan that is assigned means the debt, and all of the rights and obligations that accompany it, are transferred from a creditor to a third party.
Assumable loan
a type of financing arrangement that allows for the outstanding mortgage loan and its terms to be transferred from the current owner to a buyer. The buyer takes on the current (now previous) owner’s remaining debt, avoiding the need to obtain his or her own mortgage loan.
Conforming loan
a loan that meets the lending limits and other criteria established by Fannie Mae or Freddie Mac.
Consumer credit
credit that is offered or extended to a consumer primarily for personal, family, or household purposes.
Conventional loan
a mortgage that is not made under any federal program (i.e., not insured by the FHA or guaranteed by the VA or the USDA).
Conveyance
the transfer of ownership interest in real property from one person to another
Delinquent
a situation in which a borrower is late or past due on a payment. Delinquency is distinct from default in that delinquency occurs immediately upon the borrower missing a payment. Default occurs when the borrower fails to repay the loan according to the contract. Typically, borrowers are delinquent for a period of time before the delinquency is declared to be a default.
Early payment default
a mortgage loan that becomes seriously delinquent or goes into default within its first year
Mortgage investor
a person that purchases mortgage loans or packages of mortgage loans and sets guidelines for how the loans that are purchased should be underwritten.
Mortgage lender
a person that lends its own funds to borrowers for the purpose of purchasing a home
Payment shock
occurs when a loan’s scheduled future periodic payments increase substantially, often presenting severe financial risk or difficulty to the consumer.
PITI
principal, interest, taxes, and insurance are the monthly housing expenses that a lender calculates in order to determine a borrower’s housing expense ratio.
Prepaids
amounts that the consumer pays in advance of initial scheduled payments
Purchase money mortgage
a mortgage loan obtained by a borrower for the purchase of a residential property in which the property is the collateral for the loan.
Qualifying ratios
investor-specific calculations used to determine if a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense ratio and total debt ratio.
Reconveyance
a clause in a mortgage 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.
Refinance
obtaining a new mortgage loan on a property already owned
Revolving debt
a type of credit arrangement in which a consumer is pre-approved for a line of credit and he/she may make purchases against that credit. Credit cards are a common form of revolving credit.
Subordinate lien
a lien on property that is junior, or subsequent, to another lien, or liens based on the order of recordation or by agreement among the lenders. In the event of foreclosure, subordinate financing does not receive funds until prior liens are paid. Subordinate liens are also referred to as subordinate financing, junior liens, and junior financing.
Subprime
below the qualifications set for prime borrowers. Loans for borrowers who have poor credit, an unstable income history, or high debt ratios.
Table funding
in transactions that involve table funding, mortgage bankers and brokers may close loans in their own names, so that the note and security agreement show them as the lender, but immediately (generally within 24 hours) assign the loan to the creditor that actually funded the loan.
Underwriting
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 (and on what terms) for a lender.
