P

Question 1

PAID OUTSIDE OF CLOSING (P.O.C.)

Answer 1

Used to denote fees paid by the borrower before closing/settlement.

Question 2

PAR RATE

Answer 2

The retail interest rate that a borrower may receive without paying discount points.

Question 3

Periodic Rate Cap

Answer 3

A limit on the amount by which the interest rate can change during any adjustment periods.

Question 4

Payment Cap

Answer 4

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.

Question 5

PAYMENT SHOCK

Answer 5

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.

Question 6

PAYMENT SHOCK REFINANCE

Answer 6

The refinancing of a non-standard mortgage to a standard mortgage as a means of shielding consumers from payment shock.

Question 7

PERMANENT BUY-DOWN

Answer 7

The payment of points to permanently lower the interest rate on a loan.

Question 8

PERMANENT LOAN

Answer 8

A long-term mortgage, usually of ten years or more, as opposed to a short-term loan, such as a construction loan.

Question 9

PERMISSIBLE PURPOSE

Answer 9

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.

Question 10

PIGGYBACK LOAN

Answer 10

A transaction in which a borrower takes on subordinate financing in order to cover a down payment or to finance closing costs.

Question 11

PITI

Answer 11

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.

Question 12

PLANNED UNIT DEVELOPMENT (PUD)

Answer 12

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.

Question 13

POINT

Answer 13

A fee equal to 1% of the loan amount. (0.01 x Loan Amount = 1 point)
a.k.a.: Discount point

Question 14

POINTS AND FEES THRESHOLD

Answer 14

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.

Question 15

PRE-APPROVAL

Answer 15

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.

Question 16

PREDATORY LENDING

Answer 16

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.

Question 17

PREPAID EXPENSES

Answer 17

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

Question 18

PREPAID FINANCE CHARGE

Answer 18

Any finance charge that is paid before or at consummation.

Question 19

PREPAYMENT

Answer 19

A payment that the borrower makes in advance of the due date. A prepayment may be a “partial prepayment” or a “prepayment in full.”

Question 20

PREPAYMENT PENALTY

Answer 20

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.

Question 21

PREPAYMENT PENALTY THRESHOLD

Answer 21

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.

Question 22

PRESUMPTION OF COMPLIANCE

Answer 22

The presumption that a person has complied with the requirements of the law if certain conditions are met. See also Safe Harbor.

Question 23

PRIMARY MORTGAGE MARKET

Answer 23

Retail lenders, such as banks, savings and loan associations, credit unions, and mortgage companies, who make mortgage loans directly to qualified borrowers.

Question 24

PRIME LOANS

Answer 24

Loans made to borrowers who have good credit scores, stable income histories, down payments, and low debt ratios.

Question 25

PRINCIPAL (AGENCY RELATIONSHIP/FIDUCIARY DUTY)

Answer 25

The individual to whom a fiduciary duty or other duty of loyalty is owed in an agency relationship. See also Agency, Fiduciary Duty.

Question 26

PRINCIPAL (FINANCIAL)

Answer 26

The amount borrowed, and the portion of each monthly payment that reduces the remaining balance of a mortgage.

Question 27

PROHIBITED BASIS

Answer 27

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.

Question 28

PROMISSORY NOTE

Answer 28

A legal agreement for a borrower to repay a loan.

Question 29

PROPERTY FLIPPING

Answer 29

The purchase and resale of a piece of property within a short period of time.

Question 30

PROPERTY FLOPPING

Answer 30

The forced sale of a property for less than it is worth, followed by resale of the property at its true value.

Question 31

PURCHASE MONEY MORTGAGE

Answer 31

A mortgage loan obtained by a borrower for the purchase of a residential property, in which the property serves as collateral for the loan.