TERMINOLOGY

Question 1

401(k)/403(b)

Answer 1

An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.

Question 2

401(k)/403(b) loan

Answer 2

Some administrators of 401(k)/403(b) plans allow for loans against the monies accumulated in these plans by an individual. Loans against 401K plans are an acceptable source of down payment for most types of loans.

Question 3

Adjustable Interest Rate Table (AIR)

Answer 3

The “Adjustable-Interest Rate (AIR) Table” describes the index and margin, initial interest rate, the minimum and maximum interest rates allowed during the life of the loan (the lifetime caps), when the rate can be adjusted for the 1st time and how often it can be adjusted thereafter, and how much the interest rate can go up or down in each adjustment (periodic caps).

Question 4

Adjustable-rate mortgage (ARM)

Answer 4

A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Question 5

Adjustment Date

Answer 5

The date the interest rate changes on an adjustable-rate mortgage.

Question 6

Amortization

Answer 6

Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time. The term “amortization” can refer to two situations. First, amortization is used in the process of paying off debt through regular principal and interest payments over time. An amortization schedule is used to reduce the current balance on a loan, for example a mortgage or car loan, through installment payments. Second, amortization can also refer to the spreading out of capital expenses related to intangible assets over a specific duration – usually over the asset’s useful life – for accounting and tax purposes.
• Amortization typically refers to the process of writing down the value of either a loan or an intangible asset.
• Amortization schedules are used by lenders, such as financial institutions, to present a loan repayment schedule based on a specific maturity date.
• Intangibles amortized (expensed) over time help tie the cost of the asset to the revenues generated by the asset in accordance with the matching principle of GAAP.

Question 7

Amortization schedule

Answer 7

A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

Question 8

Annual Percentage Rate (APR)

Answer 8

An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction but does not take compounding into account.
As loans or credit agreements can vary in terms of interest-rate structure, transaction fees, late penalties and other factors, a standardized computation such as the APR provides borrowers with a bottom-line number they can easily compare to rates charged by other lenders.

Question 9

Anti-Money Laundering (AML)

Answer 9

Anti-money laundering refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. Though anti-money-laundering (AML) laws cover a relatively limited range of transactions and criminal behaviors, their implications are far-reaching

Question 10

Application

Answer 10

The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.

Question 11

Application Programming Interface (API)

Answer 11

A software tool that acts as an intermediary between an application and the data produced by another application. APIs package functions for retrieving this information, which allows for greater speed and agility with any related programming.”
In the real estate world, an API (also known as an application programming interface) transfers property listing data from the MLS to an agent website or real estate application.

Question 12

Appraisal

Answer 12

An appraisal is a valuation of property, such as real estate, a business, collectible, or an antique, by the estimate of an authorized person. The authorized appraiser must have a designation from a regulatory body governing the jurisdiction of the appraiser. Appraisals are typically used for taxation purposes or to determine a possible selling price for an item or property. An appraisal serves as a written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

Question 13

Appraiser

Answer 13

An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

Question 14

Appreciation

Answer 14

The increase in the value of a property due to changes in market conditions, inflation, or other causes.

Question 15

Assessed value

Answer 15

The valuation placed on property by a public tax assessor for purposes of taxation.

Question 16

Asset

Answer 16

Items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Question 17

Assignment

Answer 17

When ownership of a mortgage is transferred from one company or individual to another, it is called an assignment.

Question 18

Assumption

Answer 18

The process of accepting liability of a mortgage is called assumption of mortgage. As a result, the buyer of a property becomes liable for all terms imposed by the mortgage, including payments. This term is applied when a buyer assumes the seller’s mortgage.

Question 19

Balloon Mortgage

Answer 19

A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Question 20

Balloon Payment

Answer 20

The final lump sum payment that is due at the termination of a balloon mortgage.
A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon payment because of its large size. Balloon payment mortgages are more common in commercial real estate than in residential real estate. A balloon payment mortgage may have a fixed or a floating interest rate. The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.

Question 21

Bankruptcy (BK)

Answer 21

Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a “Chapter 7 No Asset” bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an “A” paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

Question 22

Borrower

Answer 22

An individual, organization or company that is using funds, materials or services on credit.

Question 23

Bridge Loan

Answer 23

A bridge loan is a short-term loan used in both commercial and residential real estate. Homebuyers sometimes take out bridge loans, which will give them the money to help them buy a home, before they sell their current house. Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.

Question 24

Broker

Answer 24

Broker has several meanings in different situations. Most Realtors are “agents” who work under a “broker.” Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

Question 25

Brokers Price Opinion (BPO)

Answer 25

A broker price opinion (BPO) is the estimated value of a property as determined by a real estate broker or other qualified individual or firm. A broker price opinion is based on the characteristics of the property being considered. A BPO is not representative of an official appraised value, nor will it necessarily correspond to a property’s market value.

Question 26

Buydown

Answer 26

Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A “lender funded buydown” is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to “qualify” at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

Question 27

Carrington Charitable Foundation (CCF)

Answer 27

The company’s nonprofit organization, Carrington Charitable Foundation

Question 28

Carrington Mortgage Holdings (CMH)

Answer 28

Founded in 2003 by Bruce Rose, Carrington is a holding company whose primary businesses work in sync with one another to provide a broad range of real estate services encompassing nearly all aspects of single-family residential real estate transactions in the United States. We work diligently for the benefit of the many borrowers, homebuyers and investors we serve.
Carrington operates multiple affiliated operating companies, with branch offices nationwide. These businesses are organized into three primary segments: our direct-to-consumer platform, Vylla.com; mortgage operations; and asset management

Question 29

Carrington Mortgage Services (CMS)

Answer 29

Founded in 2007, Carrington Mortgage Services, LLC (“Carrington”, “CMS”) is a subsidiary of Carrington Holding Company, LLC (“CHC”), a holding company whose primary businesses work in sync with one another to provide a broad range of real estate services encompassing nearly all aspects of single-family residential real estate transactions in the United States. Headquartered in California, CMS operates three loan servicing locations that together provide integrated full-life-cycle mortgage loan servicing support to borrowers and investors.

Question 30

Carrington Real Estate Services (C Res)

Answer 30

A short hand reference to the original company for Carrington sometimes used.

Question 31

Cash-out refinance or Cash-out Refi

Answer 31

When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a “cash out refinance.”

Question 32

Certificate of Deposit (CD)

Answer 32

A certificate of deposit is a time deposit, a financial product commonly sold by banks, thrift institutions, & credit unions. CDs are similar to savings accounts in that they are insured “money in the bank” and thus, up to the local insured deposit limit, virtually risk free. It is a time deposit held in a bank which pays a certain amount of interest to the depositor.

Question 33

Certificate of Eligibility

Answer 33

A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan

Question 34

Certificate of Reasonable Value (CRV)

Answer 34

Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

Question 35

CFPB – Consumer Financial Protection Bureau (CFPB)

Answer 35

Like a cop on the beat, CFPB is responsible for rule-making, supervision, and enforcement of Federal consumer financial protection laws and restricting unfair, deceptive, or abusive acts or practices against consumers. The Bureau of Consumer Financial Protection (CFPB) is an independent bureau within the Federal Reserve System that empowers consumers with the information they need to make financial decisions in the best interests of them and their families.

Question 36

Chapter 7

Answer 36

Chapter 7 of Title 11 of the United States Code (Bankruptcy Code) governs the process of liquidation under the bankruptcy laws of the United States

Question 37

Clear Title

Answer 37

A title that is free of liens or legal questions as to ownership of the property.

Question 38

Closing

Answer 38

This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorder’s office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.

Question 39

Closing Costs

Answer 39

Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non- recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

Question 40

Co-borrower

Answer 40

An additional individual who is both obligated on the loan and is on title to the property.

Question 41

Commission

Answer 41

Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others

Question 42

Commission Disbursement Authorization (CDA)

Answer 42

CDA stands for Commission Disbursement Authorization. It is a type of form that is filled out to allow real estate agents to collect their rightful commission for their work.

Question 43

Community Property

Answer 43

In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

Question 44

Company Gen

Answer 44

Can mean REO (previous reference) or Company Generated Lead for Real Estate Agents

Question 45

Comparable Sales or Comps

Answer 45

Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”

Question 46

Cooperative (co-op)

Answer 46

A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Question 47

Cost of funds index (COFI)

Answer 47

One of the indexes that are used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

Question 48

Covenants, Conditions & Restrictions (CCR’s)

Answer 48

Covenants, Conditions & Restrictions (CC&Rs) are limits and rules placed on a group of homes or condominium complex by a builder, developer, neighborhood association, or homeowners association.

Question 49

Credit History

Answer 49

A record of an individual’s repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.

Question 50

Customer Relationship Management (CRM)

Answer 50

CRM stands for “Customer Relationship Management” and refers to all strategies, techniques, tools, and technologies used by enterprises for developing contacts and customers.

Question 51

Customer Service Representative (CSR)

Answer 51

Carrington Mortgage Services associates, primarily on the phones assisting clients are they call inbound