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Residential Mortgage Lender > Glossary > Flashcards

Glossary Flashcards

1
Q

Acceleration Clause

A

A clause in a security instrument that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

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2
Q

Acquisition Cost

A

In FHA lending, the total amount needed to complete the purchase of a home. It is calculated by adding the sales price to the allowable closing cost, as determined by FHA. In construction lending, it is the cost to construction to construct plus the amount to purchase the land

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3
Q

Actual/actual (A/A)

A

A type of loan servicing remittance requiring the lender to remit to an investor only principal and interest payments actually collected from borrowers.

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4
Q

Adjustment period

A

The period between interest rate adjustments for an ARM loan

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5
Q

Adjustment date

A

The date on which the note interest rate changes for an ARM loan.

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6
Q

Advance commitment

A

A written promise to make an investment or buy a loan or loans at some time in the future if specified conditions are met.

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7
Q

Adverse action

A

Can mean either a straight denial by the lender of the terms applied for, or that the applicant does not accept a counteroffer by the lender.

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8
Q

Allodial System

A

Owner of real estate has title irrespective of the sovereign and thus owes no duty, such as rent or the rendering of military service, to the sovereign,

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9
Q

Amortization

A

Repayment of a debt in regular installments of principal and interest, rather than interest-only payments.

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10
Q

Amortization schedule

A

A timetable for the payment of a mortgage loan that shows the amount of each payment that is applied to interest and to principal; shows the remaining principal balance after each payment.

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11
Q

Annual Percentage Rate ( APR)

A

The cost of a mortgage stated as ayearly rate. The APR includes interest. loan origination points. discount points prepaid fees. mortgage insurance. and other fees that are required to be paid for credit to be granted. APR does not include appraisal fee. credit report cost, an some other third party fees.

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12
Q

Application

A

As defined by RESPA, it requires a minimum of six items, applicant name, income, social security, number (or equivalent), loan amount, property address, property value, and any other information the loan originator deems necessary.

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13
Q

Appraisal

A

A written report for a subject property which provides information on its condition and an estimate of its market value. The report must follow WSPAP standards and be prepared by a qualified appraiser.

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14
Q

Assignment

A

A legal document that transfers mortgage rights from one entity to another.

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15
Q

Assumable Mortgage

A

A mortgage that can be assumed (i.e., taken over ) by a buyer when a home is purchased.

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16
Q

AUS

A

Automated underwriting system

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17
Q

Automated valuation (AV)

A

A method for determining the value of a property that relies on a statistical model. which analyzes various data. Not a traditional appraisal, AV’s do not use the income or sales comparable approach and do not meet USPAP standards. They are sometimes used in conjunction with a property inspection to verify the condition of the property.

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18
Q

Average Pricing

A

An option under RESPA which permits a lender to charge all borrowers in a class of transactions the same amount for one or more settlement services. The charge is based on the average cost of providing the service (s), developed over a one-to- six month period.

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19
Q

Balloon Mortgage

A

A mortgage that has level monthly payments that amortize the loan over a stated term (e.g.,30 years) but has a shorter maturity date, Instead the loan pays off with a lump sum payment due at the shorter maturity date (e.g.,5 years). This limits the lender’s fixed interest rate risk to a five-or seven-year term and keeps the borrower’s payment low by calculating the required payment based on a thirty year amortization

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20
Q

Balloon payment

A

The final payment for a balloon mortgage.

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21
Q

Basis Points

A

A basis point is one hundredth of 1 percent interest; thus, 50 basis points equal one half of 1 percent.

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22
Q

Best efforts

A

A secondary mortgage market transaction for which a seller is obligated to deliver only those loans that actually close according to the terms committed to in the best efforts agreement.

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23
Q

Biweekly payment mortgage

A

A mortgage loan that requires a payment every two weeks that equals half of a regular monthly payment. The resulting 26 (or 27) payments a year produce the equivalent of am additional month’s payment each year, which if amortizing will greatly speed the repayment of the loan.

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24
Q

Bridge Loan

A

A second mortgage that is secured by the borrower’s present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

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25
Q

Building permit

A

A document issued by the local government housing authority that certifies that proposed construction is legally acceptable according to the plans and specifications submitted.

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26
Q

Buydown

A

Money advanced by an individual ( builder, seller or borrower) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years.

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27
Q

Cap

A

A provision of am ARM loan that limits how much an interest rate or payment can increase or decrease.

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28
Q

Capacity

A

An underwriting term referencing the applicant’s ability to pay the mortgage and all other debts.

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29
Q

Capital market security

A

A Financial instrument, including both debt and equity securities. with a maturity greater than one year. Those instruments with maturities of less than a year are traded in the money markets

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30
Q

Capital Markets

A

Markets in which long term funds in the form of mortgages, stocks. and bonds are bought and sold this includes informal markets as well as organized markets and exchanges.

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31
Q

Cash delivery

A

The submission of a whole mortgage or a participation to an investor in exchange for cash rather than a mortgage-backed security.

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32
Q

Cash-out Refinance`

A

A refinance transaction in which the borrower obtains a loan for more than the amount owed on the existing mortgage( including the mortgage, subordinate financing. closing costs. points. etc.). Some investors define a cash-out refinance transaction differently.

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33
Q

Certificate of Eligibility

A

A document issued by the Veteran’s Administration certifying a veteran’s eligibility for a VA mortgage.

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34
Q

Certificate of Occupancy

A

A document issued by the local government housing authority that certifies a dwelling has been built according to local housing code and is legally ready for residential occupancy.

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35
Q

Chain of title

A

The history of all of the documents that transfer title to a specific piece of real property. A history starting with the earliest existing document and ending with the most recent.

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36
Q

Character

A

An underwriting term referencing the applicant’s willingness to repay a debt.

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37
Q

Charge-off

A

The write-off of the portion of principal and interest due on a loan that is determined to be uncollectable.

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38
Q

Collateral

A

The security for a loan. For mortgage loans, the property description contained in the recorded mortgage.

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39
Q

Commitment

A

A written promise to make, insure, or buy a mortgage loan for a specified amount and on specified terms.

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40
Q

Commitment fee

A

Any fee paid by an applicant to a lender for the lender’s promise to lend money at a specified date in the future. The lender may or may not expect to fund the commitment. Or, a fee paid by a lender or an investor in a secondary market transaction.

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41
Q

Compensating Balances

A

Funds left on deposit with a lender as a condition for a loan.

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42
Q

Composite APR

A

A method of APR calculation used for adjustable rate mortgages to reflect the interest rate changes over the life of the loan.

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43
Q

Condominium

A

Real estate in which individual owners own title to a part of the whole (e.g., a unit in a building) and an undivided interest in the common areas. An association manages all the units and common areas according to association by-laws.

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44
Q

Conduits

A

Entities that issue mortgage-backed securities backed by mortgages, which were originated by another, typically one or more of the traditional originators.

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45
Q

Conforming mortgage loans

A

Mortgage that meet all the GSE eligibility and underwriting guidelines ( Fannie Mae and Freddie Mac only)

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46
Q

Construction Loan

A

A short term interim loan for financing the cost of construction.

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47
Q

Construction Loan advance

A

A partial disbursement of mortgage loan funds by a lender to the borrower after verifying a portion of the home construction has been completed. Borrower and lender normally agree to an advance schedule beforehand to formalize the amounts and requirements for each advance.

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48
Q

Construction/permanent loan

A

A type of mortgage loan that includes terms and conditions for both a construction phase )to build the proposed house) and a repayment phase ( to amortize the loan by the maturity date).

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49
Q

Conventional loan

A

A non-government mortgage loan neither insured by FHA nor guaranteed by VA or USDA.

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50
Q

Correspondent

A

A mortgage banker who services mortgage loans as a representative or agent for the owner of the mortgage or for the investor. Also applies to the mortgage banker’s role as originator of mortgage loans for an investor.

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51
Q

Cost of Funds Index

A

An index that is used to determine interest rate changes for some ARMs. It represents the weighted-average cost of savings. borrowings. and advances of members of 11th District of the Federal Home Loan Bank of San Francisco.

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52
Q

Cost of Construct

A

The amount needed to complete the construction of a home. Calculated by adding documented costs involved in the home’s construction( land purchase, labor, materials, permits. fees. etc.

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53
Q

Counteroffer

A

A commitment offered by a lender to an application in which a lender does not accept the original application. Instead, the lender offers the applicant different loan terms than requested.

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54
Q

Coupon Rate

A

The annual interest rate on a debt. The coupon rate on a mortgage is the contract rate stated in the mortgage note. The coupon rate on a mortgage security is the rate stated the face of the security, not the rate of the mortgages in the pool that backs the security.

55
Q

Credit Report

A

A record of a person’s open and repaid debts.

56
Q

Credit score

A

A numerical value that is assigned to a consumer. A credit score is calculated using statistical methods and evaluates a consumer’s use and repayment of credit at a give point in time.

57
Q

Custodial Account

A

An account required by an investor, borrower, or lender to hold funds and /or documents collected by an attorney or loan servicer on behalf of the lender, borrower, or investor.

58
Q

Custodian

A

Usually a commercial ban that holds for safekeeping funds and/or mortgages and related documents backing a loan or an MBS. A custodian may be required to examine and certify documents.

59
Q

Debt\Income Ratios

A

Underwriting ratios used to qualify mortgage applicants. Three common ratios used are for housing expense, total debt and owner-occupant. These monthly payment amounts are divided by the mothly income used for qualification.

60
Q

Deed

A

A legal document that conveys title to real estate from one party to another . Different types of deeds are used in various states and legal

61
Q

Deed of Trust

A

A three party mortgage instrument between a borrower, a lender, and a third party, caleda trustee.

62
Q

Default

A

Failure to make mortgage pauments when due or to comply with other covenants or requirements of a security agreement; an apply to the lender or the borrower.

63
Q

Deficiency judgement

A

A court determination that the mortgagor, who has lost property by foreclosure, is loable for the difference between the sales price of the property at foreclosure and te total amount of costs incurred by the lender (loan principle and interest, taxes, insurance, property maintenance and repair, legal and foreclosure costs, etc.)

64
Q

Delinquency

A

A situation in which borrowe has not made the proper payment on a mortgage loan by its due date.

65
Q

Delivery

A

Sending the required application and loan documents to an investor after lona clsoing in order to obtain funding form the investor.

66
Q

Delivery Risk

A

Broadly refers to amy of the possible issues that the mortgage lender and investor may have after closing and before funding a loan.

67
Q

Discount

A

In loan obligations, an amount withheld from loan proceeds by a lender to lower the note interest rate. In secondary market slaes, it is the amount by whidch the sale price of a note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upware. either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower , and the rate and terms of the note.

68
Q

Discounted Rate

A

the lower note rate as a result of paying a discount fee.

69
Q

Disintermediation

A

The systemic flow of funds out of one sector of the economy (e.g., the withdrawl of more money from financial intermediaries than incoming deposits)

70
Q

Dower

A

The rights of a widow in the property of her husband at his death.

71
Q

Down Payment

A

The difference between the slaes price of real estate and the mortgage amount. It can include savings and gift funds, but not borrowed funds.

72
Q

Draw period

A

That time within which a consumer can take advances form a line of credit. A draw period usually ranges from five to ten years , aluhough it can be for any period up to the maximum period allowed for a mortgage loan in a particular state.

73
Q
A
74
Q

Easement

A

A recorded, nonpossessory interest in the real estate of another, giving hte holder the right to a limited use of that real estate.

75
Q

Equity

A

A homeowner’s financial interest in real estate established by the difference between the market value of the property and the amount owed on its mortgage and other outstanding dobts against the property.

76
Q

Escrow Account

A

Funds held in a separate account by a legally agreed upon party that wil be used to pay a thirdparty at a later date. Mortgage lendinguses escrow accounts for construction, property tax, and hazard, flood, or mortgage insurance.

77
Q

Escrow Analysis

A

The periodic examination of escrow accounts to determine whether current monthly deposits will provide suffucient funds to pay taxes. insurance , and other bills when due, RESPA rules madate how an account must be analyzed,

78
Q

Escrow Payment

A

That portion of a mortgagor’s monthly payment held by the lender or servicer to pay for taxes, hazard insurance, mortgage unsurance, lease payments, and other items as they become due. Known as impounds or reserves in some states.

79
Q

Estate

A

An interest in real property that is measured by its potential duration.

80
Q

Fallout

A

Applications that fail to close under the original terms applied for because the applicant or lender chages them (applicant/lender fallout); also applications that fail to sell in the secondary market because an investor reneges on a commitment (investor fallout).

81
Q

Fallout Risk

A

The risk incurred by the lender and investor that an application will not close and be delivered to the investor under the original terms committed to the investor

82
Q

Federal Home Loan Mortgage Corporation (FHLMC; Freddie Mac)

A

A private corporation originally authorized by congress as a government sponsored enterprise to provide secondary mortgage market support for conventional mortgages. it can buyand can hold all types of loans in its portfolio and also sells particpation certificates secuted by pools of conventional mortgage loans. Popularly known as Freddie Mac, it incurred massive lossesand in 2008 was placed under government conservatorship.

83
Q

Federal Housing Administration (FHA)

A

A divisionof HUD. Its main activity is the insuring of residential mortgage lonas made by private lenders. Historically, it developed innovative standards for construction and underwriting. FHA rarely lends money directly or plans or constructs housing.

84
Q

Federal National Mortgage Association (FNMA; Fannie Mae)

A

A privately owned corporation created by Congress as a government sponsored enterprise to support the secondary mortage market. It purchases and sells residential mortgages insured by the FHA or guaranteed by the VA as well as conventional homemortgages; also issues mortgage backed securitites. Popularly known as Fannie Mae, it incurred massive losses and in 2008 was placed under government conservatorship.

85
Q

Fee Tail

A

An estate of potentially infinite duration, but is inheritable only by the grantee’s lineal decendants, such as children or grandchildren. It was used in feudal times by nobility to ensure land stayed within the family.

86
Q

Fee Tail General

A

Property is inheritable by the issue of the grantee.

87
Q

Fee Option

A

An option allowing lenders to pay a onetime commitment fee in exchange for a reduction in Fannie Mae’s required yield. Also called feel yield tradeoff.

88
Q

Fee Simple or Fee Simple Absolute

A

The highest form of real estate freehold ownership by non goverment entities, givig the estate holder the most unrestricted rights to the property.

89
Q

Fixed Rate Mortgage

A

A mortgage in which the interest rate doe not change during the entire term of the loan.

90
Q

Float

A

The time between collection and disbursement of funds. In mortgage lending, it occurs between a lender’s collection of payments from borrowers and the remittance of those funds to an investor.

91
Q

Forbearance

A

The act of refraining fro taking legal action despite the fact that a mortgage is in arrears. It is usually granted only when a mortgagor makes a satisfactory arrangement by which the arrears woll be paid at a future date.

92
Q

Foreclosure

A

An authorized procedure taken by a mortgagee or lener under the terms of a mortgage or deed of trust for the purpose of having the property sold and the proceeds applied to the payent of a defaulted debt.

93
Q

Forward Delivery

A

The delivery of mortgages or mortgage backed securities to satisfy cash or future market transactions of an earlier date.

94
Q

Forward Sale

A

An agreement in which a lender agrees to sell to an investor a specified amount of mortgages or securities at an agreed upon price at a specified future date. Mandatroy and best dfforts delivery commintments are types of forward sale.

95
Q

Freehold estate

A

Is the highest form of ownership interest possible in real property, as it involves all the rights in real property including use, passing the property to one’s heirs. and selecting who is going to takde it in a transfer.

96
Q

Funding

A

The disbursement of funds to complete transaction. In mortgage finance, it occurs when the lender provides money to close a real estate sale or when an investor transfers funds to the lender to purchase a mortgage loan.

97
Q

Future Contract

A

A contract purchased on an organixed market (e.g., Chicago Board of Trade) either for the purchase of a GNMA certificate at a specified price on a specified future date or for the sale of thecertificate at a specified future date.

98
Q

General Contractor (GC)

A

The person ( or entity) legally responsible for th proposed costruction on a residential property. Can perform all the work or use subcontractors to complete it.

99
Q

General Warranty

A

The most common deed used to transfer interest in real estate. A grantor guarnatees to a grantee thant the title transferred is good and deendable fomthe time of the property’s origin and against the whole world.

100
Q

GNMA Backed bonds

A

a mortgage backed bond using GNMA Certificates as the collateral rather thn the individual mortgages.

101
Q

GNMA futures Market

A

A regulated central market in which standardized contracts for the future delivery of GNMA securities are traded.

102
Q

GNMA Mortgage backed securities

A

Securities guaranteed by GNMA that are issued by mortgage bankers. commercial banks. savings and loan associations. savings banks. an other institutions, The GNMA security holder is protected by the full faith and credit of the U.S government. GNMA securities are backed by FHA, VA, or FmHA mortgages.

103
Q

Government Mortgages

A

Mortgage intended for one of several federal or state government sponsored programs Federal Housing Agency (FHA) Veterans’s Adminstration (VA), USDA/ Rural Housing (RHS) Farmer’s Home adminstration (FmHA) or one of a number of state agencies.

104
Q

Governement National Mortgage Association (GNMA)

A

On September 1, 1968 Congress enacted legislation to partition FNMA into two continying corporate entities. GNMA assumed responsibility for the special assistnace loan progrm and the management and liquidation function of the loder FNMA. Also GNMA administers th mortgage-securities program, which chammels new sources of funds intl residential financing through the sale of provately issued securities carrying a GNMA guarnty. Popularity known as Ginnie Mae.

105
Q

GSEs

A

Government sponsored enterprises ( e.g., Fannie Mae and Freddie Mac)

106
Q

Guarnty fee

A

A guarnators’s fee for guaranteeing to an investor the timely payment of principal and interest from all mortgages underlying an mortgage backed security.

107
Q

Hazard Insurance

A

Insurance coverage on real estatethat compensates the owner for physcial damage to a property from fire. wind, or other hazards.

108
Q

Home equity Line of Credit ( HELOC)

A

A mortgage loan, often in a second lien position, that allows the borrower to obtain multiple advances of funds up to an apprived amount. As the funds are repaid they can be advanced agina during the draw period. Often contains a repayment period where no further draws are allowed.

109
Q

Index

A

A number used to compute the interest rate ona variable rate mortgage (ARM loan or HELOC) that is based on a differnet financial instrument. The index is often based in the sale of U.S Treasuries (T-bill), ost of funds (COFI) bank-to-bank lending (Libor),or business loans ( prime rate). It is added to a marggin to obtain the interest rate.

110
Q

Initial interest rate

A

The orginial interest rate on a variable rat mortgage. Sometimes referred to as a teaser rate if discounted below the fully indexed accrual rate.

111
Q

Insured Risk

A

Defined as the percentage share of each loan that is actually covered by the individual insurance policy.

112
Q

Interest Rate risk

A

The risk of financial loss or gain resulting from changes in moarket rates compared to the mortgage note rate.

113
Q

Inventory

A

The loans a lender has closed but has not yet delivered to an investor.

114
Q

Investor

A

The holder of a mortgage or the permanent ledder for whom a mortgage servicer services the loan. Any person or institution investing in mortgages.

115
Q

Investor risk

A

Risk of an application not being funded under th terms originally committed to by the investor,

116
Q

Involuntary conveyance

A

Occurs when a legal owner of realestate loses title contrary to the owner’s intention.

117
Q

Joint tenancy

A

A form of real estate conownership that gives each tenant undivided and equal interest and right in the property.

118
Q

Judicial foreclosure

A

A type of foreclosure proceeding used in some states that is handled as civil lawsuit and goes through the court process.

119
Q

Jumbo Loan

A

A loan that exceeds the secondary mortgage market’s maximum mortgage amount limits. Also called a nonconforming loan.

120
Q

Lease

A

A type of estate that gives the tenant possession for a period of time through a contract establishing rights and duties for the parties.

121
Q

Late charge

A

The penalty a mortgagor must pay ( usually 5 percent) when a payment is made a stated number of days after a due date ( usually 10 or 15).

122
Q

Legal description

A

A legal property description recorded in government land records. It often appears on schedule “A” of a mortgage to locate and identify real estate being secured as collateral for the loan.

123
Q

London Interbank offering Rate (LIBOR)

A

A base rate at which banks lend to each other and is based on dollar-denominated deposits (Euro-dollars) used as an ARM index.

124
Q

Lien

A

A legally enforceable claim or encumbrance againist real estate that must be paid when the property is sold.

125
Q

Lien theory

A

The legal approach where the mortgagor holds title while the debt is outstanding and not in default.

126
Q

Life Estate

A

Freehold estate like th fee simple absolute, but it is not inheritable and last for the entire life of the named party.

127
Q

Loan administration

A

Describes a larger, more sophisticated loan servicing role in the lender’s overall strategy. It includes a servicing department that handles the repayment of the loan with the borrower and secondary market department that includes servicing and remittance responsibilities for loans sild to secondary market investors or government agencies.

128
Q

Loan Constant

A

The uearly percentage of interest that remains the same over the life of anamortixed loan based on the morthly payment in relation to principal originally loaned

129
Q

Loan Orginator

A

Lender or mortgage broker.

130
Q

Loan Servicing

A

The covenants, responsibilities, functions, and day-to -day operatins that an organixation performs after the closing and over the term or repayment of that loan until the loan is paid in full and released.

131
Q

Loan Submission

A

A package of pertinent papers and documents regarding specific propert or properties. It is derived from the application package and delovered to a prospective lender for revuew and consideration for the purpose of making or selling a mortgage loan.

132
Q

Lock-in

A

A written agreement between a lender and an applicant in which the lender guarnatees the applicant a specified interest rate if the loan closes within a specified period of time.

133
Q
A

Residential Mortgage Lender (4 decks)

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