Mortgage Term Glossary Flashcards
A certificate issued by the VA certifying a veteran’s eligibility for a VA loan.
Certificate of eligibility
A general increase in prices coinciding with a fall in the real value of money.
Inflation
A mortgage used to finance a construction project.
Construction mortgage
The ________ System was put in place to require the prior purchaser to record their purchase so that a subsequent purchaser can search for prior purchases to determine whether they should buy the land.
Recording
The sum of a homeowner’s monthly mortgage principal and interest payments, hazard insurance premiums, property taxes, and homeowner’s association fees, plus monthly debt service.
Monthly Housing Expense
The amount borrowed and therefore the amount the borrower owes the lender on the origination date of the loan.
Original Principal Balance
An increase in an asset’s value, usually because of inflation.
Appreciation
variable rate mortgage
Adjustable Rate Mortgage
For an ARM, a limit on the amount that payments can increase or decrease over the life of the mortgage.
Lifetime Payment Cap
A fee equal to 1 percent of the loan amount that is prepaid interest on the mortgage loan. The more points, the lower the interest rate.
Discount point
The Act also regulates the collection, disclosure, use, and protection of consumers’ nonpublic personal information.
Gramm-Leach-Bliley Act (GLB) 1999
The administration of a mortgage loan, including the collection of payments, release liens, and payment of property insurance and taxes.
Servicing
A mortgage that is subordinate to another mortgage on the same property.
Junior Mortgage
A fee charged by a lender to cover the administrative costs of making a loan.
Loan Origination Fee
The portion of a purchase price paid in cash (or its equivalent) at the time the sale agreement is executed
Down payment
A tenancy with two or more co-owners who are not spouses on the date of acquisition and have identical interests in a property with the same right of possession.
Joint Tenancy
A periodic partial payment of a debt.
Installment
Standard form which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.
HUD-1 Settlement Statement
A fee charged by a lender for preparing and processing a loan.
Origination Fee
Date upon which the rate of interest is subject to change.
Interest Rate Change Date
The process by which a borrower applies for a new loan, and a lender processes that application.
Loan Origination
A statement of a borrower’s account history and status, given by banks.
Verification of Deposit (VOD)
A fixed sum of money payable periodically, usually monthly or annually. These payments terminate upon the death of the designated beneficiary.
Annuity
A 2003 amendment to the federal Fair Credit Reporting Act providing for free annual credit reports to consumers and establishing measures intended to help prevent identity.
Fair and Accurate Credit Transactions Act (FACT Act) 2003
Established in 1965, headed by the Secretary of Housing and Urban Development.
Housing and Urban Development (HUD)
The movement of cash through a business, as a measure of profitability or liquidity.
Cash flow
_______ insurance enables homebuyers and homeowners to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.
Section 203(k) Loans
Aka convertible arm
Conversion Clause/Option
An insurance policy used in FHA loans if your down payment is less than 20 percent.
Mortgage Insurance Premium (MIP)
The union of all elements (ownership, possession, and custody) constituting the legal right to control and dispose of property.
Title
Means any of the fees, costs, obligations, or characteristics of or associated with the product. It also includes any of the conditions on or related to the availability of the product.
Term
A written instrument by which land is conveyed.
Deed
An agency in the U.S. Department of Housing and Urban Development responsible for facilitating mortgage lending by insuring mortgage loans on houses meeting the agency’s standards.
Federal Housing Administration (FHA)
A defect or potential defect in the owner’s title to a piece of land arising from some claim or encumbrance, such as a lien, an easement, or a court order.
Cloud on title
For an ARM, a limit on the amount that the interest rate can increase or decrease over the life of the loan.
Lifetime Rate Cap
The statute affects nearly every federal agency with jurisdiction over finance or consumer protection, and nearly every segment of the financial-services industry.
Dodd-Frank Wall Street Reform & Consumer Protection Act
A naturally appearing radioactive gas found in some buildings, that, in sufficient concentrations, may cause health problems.
Radon
A federal statute that repealed both the part of the Glass-Stegall Act prohibiting combinations among banking, securities, and insurance companies, and related conflict-of-interest provisions for such companies’ officers, directors, and employees.
Gramm-Leach-Bliley Act (GLB) 1999
Determination of the rate or amount of something, such as a tax or damages.
Assessment
Can refer to a discharge signed by the mortgagee or mortgage holder indicating that the property subject to the mortgage is released or that the mortgage debt has been paid and the mortgage conditions have been fully satisfied.
Satisfaction of Mortgage
An agreement to cover a loss resulting from the insured’s liability to a third party, such as a loss incurred by a driver who injures a pedestrian, and usually to defend the insured or to pay for a defense regardless of whether the insured is ultimately found liable.
Liability Insurance
A blank account, generally held in the name of the depositor and an escrow agent that is returnable to the depositor or paid to a third person on the fulfillment of specified conditions.
Escrow account
An agreement to indemnify against loss arising from a defect in title to real property, usually issued to buyer of the property by the title company that conducted the search.
Title Insurance
A daily compilation by the British Association of the rates that major international banks charge each other for large-volume, short-term loans of Eurodollars, with monthly maturity rates calculated out to one year.
London Interbank Offered Rate (LIBOR)
Property that is pledged as security against a debt; the property subject to a security interest or agricultural lien.
Collateral
The account in which funds are held so they can be applied as each payment comes due for an interest rate buy-down plan.
Buy down account
Loosely, the loan on which such a transaction is based.
Mortgage
Arrangement that allows the seller to deposit the money to an account, from which the money is released each month to reduce the mortgagor’s monthly payments during the early years of the mortgage.
Interest Rate Buy Down Plan
A financial statement that summarizes the revenues, costs, and expenses that a business incurred during a given period.
Profit and Loss Statement
A veteran’s mortgage that is guaranteed by the Veterans Administration.
VA Mortgage
A deed conveying title to real property to a trustee as security until the grantor repays a loan.
Deed of trust
The difference between a loan’s face value and the market value of the collateral that secures the loan.
Margin
A corporation that purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and other approved banks.
Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC)
The difference between the value of the property and all encumbrances on it.
Equity
One of the Act’s better-known and more heavily litigated provisions prohibits merchants from printing the expiration date or more than the last five digits of the card number on a point-of-sale credit-card or debit-card receipt.
Fair and Accurate Credit Transactions Act (FACT Act) 2003
an irs form used to retrieve past tax retuns, w-2, and 1099 transcripts that are on file with the irs
4506-T
The value of an asset as determined by an appraiser for tax purposes.
Assessed value
Any borrower in addition to the first bar or whose name appears on the application.
Co-borrower
The Bureau protects consumers by restricting unfair and deceptive business practices, by promoting financial education, by taking consumer complaints, and by enforcing federal consumer-financial-protection laws
Consumer Financial Protection Bureau (CFPB)
Borrowers can typically pay from 0-4 points.
Tax-deductible.
Discount point
Equity that results from a buyer giving an existing property as trade for all or part of the down payment on the subject property.
Trade Equity
Take-home pay after taxes and payroll deductions.
Net Monthly Income
When a business or person revises a payment schedule for repaying debt.
Refinance
A banker’s certificate acknowledging the receipt of money and promising to repay the depositor.
Certificate of deposit
The program was developed by the Home Owners Warranty Corporation, a subsidiary of the National Association of Home Builders.
Homeowner’s Warranty (HOW)
Borrowers generally must have high credit ratings to be approved for this type of loan.
Unsecured Loan
A number, usually expressed in the form of a percentage or ratio, that indicates or measures a series of observations, especially those involving a market or the economy.
Index
The actual cost of borrowing money, expressed in the form of an annualized interest rate.
Annual Percentage Rate (APR)
A mortgage loan under the maximum amount of loans that Fannie Mae and Freddie Mac are legally allowed to buy.
Conforming loan
The cap is usually defined in terms of rate, but the dollar amount of the principal and interest payment can be capped as well.
Payment Cap
An official who evaluates or makes assessments, especially for purposes of taxation.
Assessor
The fee paid to an agent for a transaction, usually as a percentage of the money received from the transaction.
Commission
After the fixed-interest rate expires, the interest rate starts to adjust based on an index plus a margin.
Fixed-Period Adjustable-Rate Mortgage
One’s ability to borrow money
Credit
The total cost of the fund is divided by the fund’s total assets to arrive at a percentage amount.
Total Expense Ratio
A statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
Non-Assumption Clause
A single real-estate unit in a multi-unit development in which a person has both separate ownership of a unit and a common interest, along with the development’s other owners, in the common areas.
Condominium
This differs from a tenancy in common because each joint tenant has a right of survivorship to the other’s share
Joint Tenancy
If the specific event is covered within the policy, the property owner will receive compensation to cover the cost of any damage incurred.
Hazard Insurance
A gift imposed on the transfer of property, especially by will, inheritance, or gift.
Transfer Tax
Financing that is ranked behind that held by secured lender in terms of the order in which the debt is repaid.
Subordinate Financing
The maximum interest rate that a financial institution can charge a borrower for an ARM or loan according to the contractual terms of the mortgage loan.
Interest Rate Ceiling (Cap)
One who is engaged for another, usually on a commission, to negotiate contracts relating to property in which he or she has no custodial or proprietary interest.
Real Estate Agent/Broker
The date when a new monthly payment amount takes effect.
Payment Change Date
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
Offers protections for service members, and sometimes their family members, such as protection for small-business owners.
Service Members Civil Relief Act
If things line up, the buyer can force seller to sell. If not, buyer is out its consideration paid.
Option Contract
A mortgage-application interest rate that is established and guaranteed for a specified period.
Lock-In-Rate
This type of deed resembles a mortgage.
Deed of trust
The interest rate that a commercial bank holds out as its lowest rate for a short-term loan to its most creditworthy borrowers, usually large corporations.
Prime Rate
Rent paid by a tenant under a long-term lease for the use of undeveloped land, usually for the construction of a commercial building.
Ground rent
a concise statement, usually prepared for a mortgagee or purchaser of real property, summarizing the history of a piece of loan, including all conveyances, interests, liens, and encumbrances that affect title to the property.
Abstract of Title
There are three types of ________ acts: race, notice, and race-notice. Which recording act applies depends on the state.
Recording
A conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms.
Mortgage
It implies that the debt ranks behind the first secured lender, and means that the secured lenders will be paid back before subordinate debt holders.
Subordinate Financing
A mortgage that covers the costs of rehabilitating a property.
Rehabilitation Mortgage
An index based on the auctions of U.S. Treasury bills or on the U.S. Treasury’s daily yield curve, which is used in determining mortgage rates for mortgages with an unfixed component.
Treasury Index
A type of asset that is not easily turned into cash. Real estate is considered a non-liquid asset.
Non-Liquid Asset
These initial periods are offered in 3, 5, 7, and 10 year terms.
hybrid loan
A form of housing tenure where a person owns the home in which he or she lives.
Owner-Occupied Property
Ratio of debt to income and housing expense to income that is used by mortgage lenders to determine a borrower’s credit-worthiness for certain loan amounts.
Qualifying Ratios
A dispute-resolution process in which the disputing parties choose one or more neutral third parties to make a final and binding decision resolving the dispute.
The parties to the dispute may choose a third party directly by mutual agreement, or indirectly, such as by agreeing to have an arbitration organization select the third party.
Arbitration
An office in the U.S. Department of the Treasury responsible for regulating and examining thrift institutions to ensure that they are financially sound.
Office of Thrift Supervision (OTS)
A real-estate agent who is a member of the National Association of Realtors.
Realtor
The percentage of gross monthly income that goes toward paying for monthly housing expenses, alimony, child support, car payments, and other installment debts, and payments on revolving or open-ended accounts, such as credit cards.
Debt-to-income ratio
Means any written or oral statement, illustration, or depiction, whether in English or any other language, that is designed to effect a sale or create interest in purchasing goods or services, whether it appears on or in a label, package, package insert, radio, television, cable television, brochure, newspaper, magazine, pamphlet, leaflet, circular, mailer, book insert, free standing insert, letter,
catalogue, poster, chart, billboard, public transit card, point of purchase display, film, slide, audio program transmitted over a telephone system, telemarketing script, on-hold script, upsell script, training materials provided to telemarketing firms, program-length commercial (“infomercial”), the internet, cellular network, or any other medium.
Commercial communication
A warranty and insurance program that, among other coverage, insures a new home for ten years against major structural defects.
Homeowner’s Warranty (HOW)
In real estate, it is generally a percentage of the purchase price and may be a substantial sum. Though it rarely exceeds 10 percent of the purchase price.
Earnest Money Deposit
An agreement to pay off a mortgage if the insured dies or becomes disabled.
Mortgage Insurance (MI)
The voluntary yielding to a demand for the sake of a settlement
In a real-estate transaction, something given up or agreed to in sale negotiations. For example, the sellers may agree to help pay for closing costs.
Concessions
Obsolescence that results from external economic factors, such as decreased demand or changed governmental regulations.
Economic Obsolescence
A contractual provision by which an owner of realty enters an agreement with another allowing the latter to rent the property upon signing the lease with the option to buy the property at the end of the lease term, usually for a reduced rate.
Rent with Option to Buy
This conveyance is a lien against the property
Also refers to the instrument specifying the terms of such a transaction.
Mortgage
A loan which allows for gradual interest rate increase during the first few years of the loan.
Subordinate Financing
Financing that is ranked behind that held by secured lender in terms of the order in which the debt is repaid.
It implies that the debt ranks behind the first secured lender, and means that the secured lenders will be paid back before subordinate debt holders.
Step Rate Mortgage
Truth-in-Lending Act (TILA/Regulation Z)
A 1968 federal statute enacted as the first subchapter of the Consumer Credit Protection Act to safeguard consumers in the use of credit by regulating the use of credit cards.
Truth-in-Lending Act (TILA/Regulation Z)
These mortgages, which feature a fixed periodic payment and interest throughout the mortgage term, are typically used for home financing.
Conventional Mortgage
An ordinary ___________is revocable and automatically terminates upon the death or incapacity of the principal.
Power of Attorney
Financially sound enough that a lender will extend credit in the belief that default is unlikely. Fiscally healthy.
Creditworthy
Insurance that protects property owners against damage caused by fires, severe storms, earthquakes, or other natural events.
Hazard Insurance
A soft gray mineral that does not burn that was used especially as a building material in the past. It can cause serious diseases of the lungs when its dust is breathed in.
Asbestos
Gives you an estimate of the costs of the mortgage loan.
Good Faith Estimate
The process by which a company collects interest, principal, and escrow payments from a borrower.
Loan Servicing/Administration
A listing giving one agent has the right to be the only person, other than the owner, to sell the property during a specified period.
Exclusive Agency Listing
The act or an instance of improving the value of economically useless land by physically changing the land, such as irrigating a desert.
Reclamation
A listing stating the agent will allow other agents to try to sell the property.
Multiple Listing Service (MLS)
A person or entity from which money is borrowed.
Lender
The expenses that must be paid, usually in lump sum at closing, apart from the purchase price and interest.
Closing cost
An additional fee assessed on a debt when a payment is not received by the due date.
Late Charge
The acquisition of real property coupled with the assumption of personal liability for debt secured by that property.
Assumption (of Mortgage or Trust Deed)
These may include taxes, title insurance, and attorney’s fees.
Closing cost
The pro-rated amount of interest due calculated and paid at loan closings
Per Diem Interest
It was established by the Dodd-Frank Act in 2010 and began operating in 2011.
Consumer Financial Protection Bureau (CFPB)
A federally owned corporation in the U.S. Department of Housing and Urban Development responsible for guaranteeing mortgage-backed securities composed of FHA-insured or VA- guaranteed mortgage loans.
Government National Mortgage Association (Ginnie Mae/GNMA)
Non-invasive visual examination of a residential dwelling, performed for a fee, which is designed to identify observed material defects within specific components of said dwelling.
Home Inspection
Long-term mortgage loan.
Permanent Loan
The amount by which an interest in property exceeds secured claims or liens.
Equity
Listing agreement upon which the broker gets commission even if seller is the one who sells the house during the agreement period or for a certain period thereafter.
Exclusive Right-to-Sell Listing
It performs like a fixed and adjustable rate loan. It has a fixed rate for an initial period before turning into an ARM.
Hybrid Loan
A Fannie MAE loan application form designed by fannie mae and freddie mac that is used by lenders to obtain financial personal information from borrowers who apply for a mortgage loan secured by a one-to-four unit residential real estate
1003 (ten-oh-three)
An arrangement by which a borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.
Repayment Plan
A destruction or deprivation of some estate or right because of the failure to perform some contractual obligation or condition.
Forfeiture
In some states, this right must be clearly express in the conveyance – otherwise, the tenancy will be presumed to be a tenancy in common.
Joint Tenancy
The price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm’s-length transaction, the point at which supply and demand intersect.
Fair Market Value
A tax-deferred retirement program developed for the self-employed.
Keogh Plan
A loan with a fixed rate for the first year that has a rate that changes yearly for the remaining life of the loan.
One Year Adjustment Rate Mortgage
The actual annual rate, which incorporates compounding when calculating interest, rather than the stated rate or coupon rate.
Effective Interest Rate
A promise from a lender to make a mortgage loan.
Firm commitment
______ is usually performed by the lender or the lender’s agent, for a fee.
Servicing
A residential mortgage on a dwelling that is designed to house more than four families, such as an apartment complex.
Multifamily Mortgage
The right to sell a principal’s products or to act as the seller’s real-estate agent to the exclusion of all others, including the owner.
Exclusive Right-to-Sell Listing
A mortgage that is senior to all other mortgages on the same property.
First mortgage
This plan is also known as an H.R. 10 plan, after the House of Representatives bill that established the plan.
Keogh Plan
A clause within the sales contract stating that a certain condition that must be met before a contract is legally binding, before the sale can close.
Real estate contracts often have a specific date by which this must be met.
Contingency clause
The act or result of gradually extinguishing a debt, such as a mortgage, usually by contributing payments or principal each time a periodic interest payment is due.
Amortization
A period of extra time allowed for taking some required action (such as making payment) without incurring the usual penalty for being late.
Grace period
The third-party depositary of an escrow.
Escrow agent
Article 9 of the UCC provides for a 20-day ______ _____, after the collateral is received, during which a purchase-money security interest must be perfected to have priority over any conflicting security interests.
Grace period
Was enacted to provide sufficient time for consumers to review the disclosures before consummation can take place.
Mortgage Disclosure Improvement Act (MDIA) 2008
A document indicating that a building complies with zoning and building ordinances and is ready to be occupied
Certificate of occupancy
A charge to a borrower when a mortgage banker or other small lender must borrower money on a short-term basis to loan money on mortgage loans.
Warehouse Fee
_____ is generally available as a remedy or defense for a non-defaulting party and is accompanied by restitution of any partial performance, thus restoring the parties to their precontractual positions.
Rescission
An initial evaluation of the credit worthiness of a potential borrower that is used to determine the estimated amount that the person can afford to borrow.
Pre-Qualification
Any property right that is not an ownership interest.
Encumbrance
Prepaid interest on the mortgage loan. The more points paid, the lower the interest rate.
Loan Discount Points
A clause in a mortgage contract that says if the mortgage is prepaid within a certain time, a penalty will be assessed.
Pre-Payment Penalty
A notification given to a borrower stating that they have not made their payments by the predetermined deadline, or is otherwise in default on the mortgage contract.
Notice of Default (NOD)
A mortgage that is guaranteed by a third party.
Guarantee Mortgage
Intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations.
Community Reinvestment Act (1977)
Such a mortgage covers both the outstanding balance of the first mortgage and the additional funds loaned.
Wraparound Mortgage
time between adjustment dates for an arm
adjustment period
A price extended to another party at which one is ready to buy or sell.
Offer
The measuring of a tract of land and its boundaries and contents. Also refers to the map indicating the results of such measurements.
Survey
Known as: uniform residential loan application
1003 (ten-oh-three)
Origination from a third party where the person is involved in the process of making mortgages and gathering borrower information for a mortgage application, which is then transferred or sold to the actual mortgage lender.
Third-Party Origination
A credit report that contains information from at least three credit repositories. Any duplicate entries are combined to provide a concise summary of outstanding liabilities and credit history.
Merged Credit Report
A modification of the original construction plans ordered by the property owner or general contractor.
Change order
The omission or failure to perform a legal or contractual duty, especially the failure to pay a debt when due.
Default
It compromises 12 central banks supervised by a Board of Governors whose members are appointed by the President and confirmed by the Senate.
Federal Reserve System (FRS)
The ownership history of a piece of land, from its first owner to the present one.
Chain of title
Fee issued to the client which covers the cost of the assessment and is included in closing costs and fee
Flood certificate fee
A contractual stipulation
Term
If the mortgage is prepraid within a certaintime, the penalty is usually based on percentage of the remaining mortgage balance or a certain number of months’ worth of interest.
Pre-Payment Penalty
The sale of property on the understanding, or with the express option, that the seller may lease the property from the buyer, usually immediately after the sale.
Sale-Leaseback
A lien imposed on a judgment debtor’s nonexempt property.
Judgment Lien
Designed to enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan originators.
Secure and Fair Enforcement Act (S.A.F.E. Act) 2008
Assumption of the liability of another’s debts in the event of default.
Guarantee
The Association purchases, on the secondary market, residential mortgages originated by local lenders; it then issues federally insured securities backed by these mortgages.
Government National Mortgage Association (Ginnie Mae/GNMA)
An assignment in which a mortgage lender or borrower transfer the mortgage to a third party.
Assignment of mortgage
Truth-in-Lending Act (TILA/Regulation Z)
A 1968 federal statute enacted as the first subchapter of the Consumer Credit Protection Act to safeguard consumers in the use of credit by (1) requiring full disclosure of the terms of loan agreements, including finance charges.
Truth-in-Lending Act (TILA/Regulation Z)
Also, a right, often acquired under a life-insurance contract, to receive fixed payments periodically for a specified duration
Annuity
A loan in which its entirety, or a portion of it, can be forgiven or deferred for a period by the lender when certain conditions are met.
Soft Second Loan
Reasons include the loan amount is higher than the conforming loan limit, lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it.
Non-Conforming Loan
The land burdened by an easement
Servient estate
A land area zoned for a single-community subdivision with flexible restrictions on residential, commercial, and public uses.
Planned Unit Development (PUD)
A mortgage that is fully amortized over a significantly shorter term than the traditional 25- to 30- year mortgage, with increasing payments each year.
Growing-Equity Mortgage (GEM)
Offers protections for service members, and sometimes their family members, such as eviction prevention.
Service Members Civil Relief Act
A guarantee that the lender will deliver a specific combination of interest rate and points if the mortgage closes by a specified date.
Lock
An escrow holder is not a common-law agent because the holder does not act subject to the control of the parties to the escrow agreement.
Escrow agent
