Vocab Flashcards
1
Q
1003
A
A Fannie Mae loan application form designed by Fannie Mae and Freddie Mac that is used
by lenders to obtain personal financial information from borrowers who apply for a
mortgage loan secured by a one-to-four-unit residential real estate. Also known as:
Uniform Residential Loan Application (URLA). It has been widely adopted by mortgage
lenders as a standard loan application form and is often pronounced “ten-oh-three.”
Freddie Mac also uses the same application form, referring to it as the Freddie Mac Form
65.
2
Q
1031 Exchange
A
A 1031 exchange allows resident and non-resident United States federal taxpayers to defer
capital gains and recaptured depreciation taxes when exchanging real or personal property
held for productive use in a trade, business, or for investment for like-kind real or personal
property held for productive use in a trade, business, or for investment. The tax otherwise
paid in a traditional sale is deferred indefinitely until the replacement property is sold or
another 1031 exchange is initiated.
3
Q
2-1 Buydown
A
A 2-1 buydown is a type of financing that lowers the interest rate on a mortgage for the
first two years before reaching a permanent rate. Sellers and builders may
offer buydown options to make a property more attractive to buyers, making payments
during the initial period to the lender to subsidize the difference
4
Q
4506-C
A
An IRS Form used to retrieve past tax returns, W-2, and 1099 transcripts that are on file
with the IRS. It is used to validate income documentation for underwriting and quality
control purposes.
5
Q
Abstract of Title
A
A concise statement, summarizing the history of a loan, including all conveyances, interests, liens, and
encumbrances that affect title to the property. A good and merchantable abstract of title
shows clear and marketable title, rather than showing only the history of the property.
6
Q
Acceleration Clause
A
A loan-agreement provision that requires the debtor to pay off the balance sooner than the
due date if some specified event occurs, such as failure to pay an installment or to maintain
insurance.
7
Q
Accrued Interest
A
Interest that is earned but not yet paid. For example: If your payment is August 1, you are
paying interest for the previous month. Unlike rent, it is paid for the month, you are going
to live in eh apartment.
8
Q
Acquisition Costs
A
The original cost of an asset.
9
Q
Adjustable Rate Mortgage (ARM)
A
A mortgage in which the lender can periodically adjust the mortgage interest rate in accordance with fluctuations in an external market index. Also known as: Variable Rate mortgage (VRM)
10
Q
Adjusted basis
A
Basis increased by capital improvements and decreased by depreciation deductions.
11
Q
Adjustment interval
A
On an Adjustable Rate Mortgage (ARM), the time between changes in the interest rate
and/or monthly payment. Typically, one, three, or five years depending on the index.
12
Q
Adjustment Period
A
Time between the adjustment dates for an Adjustable Rate Mortgage (ARM).
13
Q
Affiliated Business Arrangement (AfBA)
A
An arrangement in which a person refers a business to a real estate service involving a
federally related mortgage loan that has either an affiliate relationship with as little as 1%
ownership interest. Such persons directly or indirectly refer business to that provider and
may influence the selection of that provider. An MLO that is also a Licensed Real Estate
Agent requires an Affiliated Business Arrangement (AfBA) disclosure. AMBA is a violation of
Section 8 of the Real Estate Settlement Procedures Act (RESPA), if not disclosed to the
borrower with three business days of informing the borrower of the conflict of interest.
14
Q
Agreement of sale
A
An agreement that obligates someone to sell and may include a corresponding obligation
for someone else to buy.
15
Q
Alienation Clause
A
An alienation clause is a provision in the contract signed with the lender that states that the
borrower must pay the mortgage in full before the borrower can transfer the property to
another person. This is also known as a due-on-sale clause.
16
Q
Alternative documentation
A
A method of documenting a loan file by using information such as pay stubs, W-2 forms, tax
returns and bank stubs instead of waiting on verifications sent to third parties for
confirmation of statements made on the application.
17
Q
American land title association (ALTA)
A
The mission of ALTA is to improve the skills and knowledge of providers in the real
property transaction, effectively advocate member concerns, and standardize products for
industry use.
18
Q
Amortization
A
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.
19
Q
Amortization Term 
A
The length of time it will take to amortize the mortgage loan expressed in months. For
example, a 30-year mortgage is a 360-month amortization term.
20
Q
Annual percentage rate (APR)
A
The actual cost of borrowing money expressed in the form of an annualized interest rate.
21
Q
Annuity
A
A fixed sum of money payable periodically, usually monthly or annually. These payments
terminate upon the death of the designated beneficiary. Also, a right, often acquired under
a life-insurance con- tract, to receive fixed payments periodically for a specified duration.
22
Q
Appraisal
A
The determination of what constitutes a fair price for something or how its condition can
be fairly stated at a point in time.
23
Q
Appraisal fee
A
A fee charged by a licensed certified appraiser to determine the fair market value.
24
Q
Appraiser
A
An impartial person who estimates the value of something such as real estate.
25
Appreciation
An increase in an asset's value (often because of inflation)
26
Arbitration
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. A third party may
be chosen directly by mutual agreement, or indirectly by agreeing to have an arbitration
organization select the third party.
27
Adjustable rate mortgage disclosure
Describes the features of the Adjustable Rate Mortgage (ARM) loan which must be
presented to the consumer within 3 days of application.
28
Adjustable rate mortgage handbook (charm)
The consumer Handbook to Adjustable-Rate Mortgages must be presented within 3 days of
application.
29
Asbestos
A soft gray mineral that was used as a building material in the past. It is no longer in use
but can still be found in some older homes. When asbestos dust is inhaled it can cause
serious diseases of the lungs.
30
Assessed value
The value of an asset as determined by an appraiser for tax purposes.
31
Assessment
Determination of the rate or amount of something, such as a tax or damages.
32
Assessor
An official who evaluates or makes assessments, especially for purposes of taxation.
33
Asset 
An owned item that has value.
34
Assignment
The transfer of rights or property.
35
Assignment of Mortgage/assigned loan
An assignment in which a mortgage lender or borrower transfers the mortgage to a third
party.
36
Assumption (of Mortgage or Trust Deed)/Assumable
The acquisition of real property coupled with the assumption of personal liability for debt
secured by that property. Assumption is not allowed by Fannie Mae, Freddie Mac or USDA
FHA and VA do allow for assumptions in certain situations.
37
Assumption fee
The fee paid to a lender when an assumption takes place. It is usually paid by the
purchaser.
38
Average prime offer rate
The Average Prime Offer Rate (APOR) is an annual percentage rate that is based
on average interest rates, fees, and other terms on mortgages offered to highly qualified
borrowers.
39
Balance sheet
A statement of financial position as of the statement's date, disclosing the value of assets,
liabilities, and equity.
40
Balloon mortgage
A mortgage requiring periodic payments for a specified time and a lump-sum payment of
the outstanding balance at maturity. The minimum term for a balloon mortgage under
HOEPA is five (5) years.
41
Balloon payment
A final loan payment that is usually much larger than the preceding regular payments. This
payment discharges the principal balance of the loan.
42
Bait and switch
The action (generally illegal) of advertising goods which are an apparent bargain, with the
intention of substituting inferior or more expensive goods.
43
Basis point
Basis points are used in computing and calculating the interest rate in real estate
transaction. One basis point is equal to 1/100th of 1%, or 0.01%, and is used to denote the
percentage change in a financial instrument.
44
Bankruptcy
A statutory procedure that the debtor obtains financial relief and
undergoes a judicially supervised reorganization or liquidation of the debtor's assets for
the benefit of lenders. Chapter 11 or 13 remains on the credit report for 7 years, a Chapter
7 for 10 years.
45
Blanket mortgage
A mortgage that covers an aggregation of property, or that secures indebtedness previously
existing in various forms. For example: a mortgage covering two or more properties that
are pledged to support a debt.
46
Bona fide
Made in good faith without fraud or deceit.
47
Bona-fide Nonprofit Organization
Bona fide nonprofit organization means any organization that is exempt from taxation
48
Borrower (mortgagor)
Someone who mortgages property.
49
Borrowers signature Authorization
A form signed by the applicant authorizing the lender to obtain and verify information and
documentation from third parties that is needed in connection with the application for
mortgage loan.
50
Bridge loan
A short-term loan that uses the borrower's equity to make a down payment on a new
home. The Bridge Loan will be paid upon the sale of the existing home.
51
Building code
A law or regulation setting standards for the construction, maintenance, occupancy,
use, or appearance of buildings and dwelling units.
52
Buy-down
Money paid by the buyer of a house to reduce the mortgage-interest payments.
53
Buy down account for temporary buydowns
The account in which funds are held so they can be applied as each payment comes due for
an interest rate buy-down plan.
54
Buyer’s broker/agent
A real estate broker who acts as the agent of a purchaser of property. Statutes in many
states permit prospective buyers to retain a licensed real estate agent. In some states, a
buyer's broker is treated as the subagent of the broker with whom the owner lists property
for sale and not the agent of the buyer.
55
Buyer’s market
A market in which supply significantly exceeds demand, resulting in lower prices.
56
Call option
An option to buy something at a fixed rate price even if the market rises; the right to
require another to sell.
57
Capacity
Gross income X the Debt to Income (DTI) ratio = the maximum mortgage and debt
payments, the borrower can afford.
58
Cash flow
The movement of cash through a business as a measure of profitability or liquidity.
59
Cash out refinance
Cash-out refinance gives the borrower a lump sum when they close their refinance loan.
The loan proceeds are first used to pay off the borrower's existing mortgage(s), including
closing costs and any prepaid items (for example real estate taxes or homeowners
insurance); any remaining funds are the borrower to use as they wish.
60
Cashier’s check
A check drawn by a bank payable to another person. This is evidence that the payee has
authorization from the bank for the amount of money represented by the check.
61
Certificate of deposit
A banker's certificate acknowledging the receipt of money and promising to repay the depositor.
62
Certificate of eligibility
A certificate issued by the Department of Veterans Affairs (VA) certifying a veteran's
maximum benefits for a VA loan. This certificate is also known as the Certificate of Entitlement.
63
Certificate of occupancy
A document indicating that a building complies with zoning and building ordinances and is
ready to be occupied. A certificate of occupancy is often required before title can be transferred and the building occupied.
64
Certificate of reasonable value (CRV)
An appraisal issued by the Department of Veterans Affairs (VA) showing the property's fair
market value.
65
Certificate of title
A document indicating the ownership of real or personal property. This document also Identifies any liens or other encumbrances.
66
Certificate of veteran status
Certificate given to veterans or reservists who have served 90 days of continuous active
duty (including training time), which enables veterans to obtain lower down payments on
VA loans.
67
Chain of title
The ownership history of a piece of land, from its first owner to the present one. For the
holder to have a good title, every prior negotiation must have been proper. If the necessary
indorsement is missing or forged, the chain of title is broken, and no later transferee can
become a holder.
68
Change orders
A modification of the original construction plans ordered by the property owner or general
contractor.
69
Clear title
A title free from any encumbrances, burdens, or other limitations. I.e. a good and
marketable title.
70
Civil rights act (1964)
Is a landmark civil rights and labor law in the United States that outlaw's discrimination
based on race, color, religion, sex, or national origin. It prohibits unequal application of
voter registration requirements, and racial segregation in schools, employment, and public
accommodations. Enacted July 2, 1964.
71
Change frequency
Change in the frequency of payment or interest rate of Adjustable Rate Mortgage (ARM).
72
Closing/settlement
The final transaction between the buyer and seller whereby the conveyance of documents
is concluded, and the money and property are transferred.
73
Closing agent
An agent who represents the buyer and seller in the negotiation and closing of real
property transactions by handling financial calculations and transfer of documents.
74
Closing Costs
The expenses that must be paid, usually in a lump sum at closing, apart from the purchase price and interest. These may include taxes, title insurance, and attorneys fees and any other cost assessed to the borrower to obtain the loan
75
Closing Date
The date scheduled for the signing of the documents on the real estate transaction.
76
Closing Statement
A written breakdown of the costs involved in the real estate transaction, usually prepared by a lender or an escrow agent.
77
Cloud on Title
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.
78
Co-Borrower
Any borrower in addition to the primary borrower whose name appears on the application.
The co-borrower's along with the borrower's income, assets, liabilities, and credit history
are considered in determining creditworthiness.
79
Collateral
Property that is pledged as security against a debt, such as mortgage.
80
Combined Loan-to-Value(CLTV)
Ratio of the total mortgage liens against the property to the lesser of either the appraised
value or the sales price. On a refinance, it is first mortgage and the amount of the HELOC, or
second mortgage drawn divided by the value.
81
Commission
The fee paid to an agent for a transaction usually as a percentage of the money received
from the transaction.
82
Commitment
A binding offer by a lender to make a loan under certain terms or conditions to a borrower.
Includes the amount of the mortgage, the interest rate, and repayment terms.
83
Common Areas
The common areas (ex. hallways, lobby, workout facilities) that all tenants may use, though
the landlord retains control over and responsibility for it.
84
Community Property State
In community property states, the assets of each spouse are considered assets of the
marital unit. The assets of each partner in the relationship are not legally separate from
those of the spouse. That is, while a couple is married, creditors of one spouse, with certain
restrictions, can seize the assets of both spouses
85
Community Reinvestment Act (1977)
Intended to encourage depository institutions to help meet the credit needs of the
communities in which they operate, including low to moderate income neighborhoods,
consistent with safe and sound banking operations.
86
Comparables
An abbreviation for "comparable properties" used in the appraisal process. Comparables
are properties similar to the property under consideration. They have reasonably the same
size, location, and amenities and have recently been sold. They must be similar property,
within one mile of the subject property and should be no more than 6 months old.
Comparable help the appraiser determine the approximate fair market value of the
subject property.
87
Concession
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.
88
Condition
A stipulation or prerequisite in a sales contract. If a court construes a contractual term to
be a condition, then its breach will entitle the party to whom it is made to be discharged from all liabilities under the contract
89
Condominium
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.
90
Conforming Loan
A mortgage loan meeting the guidelines and are under the maximum amount of loans that
Fannie Mae and Freddie Mac are legally allowed to buy.
91
Construction Mortgage
A mortgage used to finance a construction project.
92
Consumer credit
Credit advanced to consumers for the purchase of goods or services.
93
Consumer Financial Protection Bureau (CFPB)
An independent federal agency that regulates consumer financial products and services.
The Bureau protects consumers by restricting unfair and deceptive business practices, by
promoting financial education, taking consumer complaints, and enforcing federal
consumer-financial-protection laws. It was established by the Dodd-Frank Act in 2010 and
began operating in 2011.
94
Consumer Reporting Agency (Credit Bureau)
An independent firm that collects, compiles and reports the credit activities of individuals
which is made available, for a fee, to lenders or credit issuing entities investigating the
creditworthiness of those applying for credit. Consumers may also access reports from
each of the three major reporting agencies for free as required by law.
95
Contingency Clause
A clause within the sales contract stating that a certain condition must be met before a
contract is legally binding, and the sale can close. Real estate contracts often have a specific
date by which the contingency must be met. E.g. The buyer will often include an inspection
contingency, requiring the home to be inspected for physical damages or problems before
the sales contract is binding. The buyer will have the right to rescind if the contingency is
not met.
96
Conventional Mortgage
A mortgage which the borrower gives a voluntary lien to the mortgage lender or other
financial institution. These mortgages, which feature a fixed periodic payment and interest
throughout the mortgage term, are typically used for home financing.
97
Conversion Clause/Option
A provision in an Adjustable Rate Mortgage (ARM) which allows the loan to be converted
from an ARM to a fixed-rate mortgage at specified times during the term. Usually allowed at
the end of the first adjustment period. Also known as a Convertible ARM.
98
Conveyance
The voluntary transfer of property.
99
Cooperative (Co-op) Project
A project in which a corporation holds the title to a residential property and sells shares to
individual buyers, who then receive a proprietary lease as their title.
100
Counteroffer
An offeree's new offer that varies the terms of the original offer and that ordinarily rejects
and terminates the original offer. A late or defective acceptance is considered a
counteroffer.
101
Covenants
A formal agreement or promise to perform, or not perform, a particular act.
102
Credit
One's ability to borrow money.
103
Credit History
Information in the files of a credit bureau regarding an individual's debts and repayments
(or non-repayments).
104
Credit Life Insurance
Life insurance on a borrower, usually in a consumer installment loan, in which the amount
due is paid if the borrower dies.
105
Credit Report
A credit bureau's report on a person's financial status, usually including the approximate
amounts and locations of a person's bank accounts, charge accounts, loans, other debts,
bill-paying habits, defaults, bankruptcies, foreclosures, marital status, occupation, income,
and lawsuits. It may indicate a High, Middle or Low Credit Score.
106
Credit Score
Statistically derived numeric expression of a person's creditworthiness that is used by
lenders to assess the likelihood that the individual will repay their debts. Payment history,
inquiries and credit utilization are some of the factors determining credit score.
107
Creditworthy
Financially sound enough that a lender will extend credit in the belief that default is
unlikely.
108
Debt
Liability on a loan
109
Declaration Page
The front page (or pages) of a policy that specifies the named insured, address, policy
period, location of premises, policy limits, and other key information that varies from
insured to insured. The declarations page is also known as the information page.
110
Delinquent loan
Delinquency means that a borrower is behind on payments. Once a borrower is delinquent for a certain period of time, the lender will declare the loan to be in default.
The entire loan balance will become due at that time.
111
DD-214
Known as the Certificate of Release or Discharge from Active Duty, generally referred to as
a "DD 214", is a document of the United States Department of Defense, issued upon a
military service member's retirement, separation, or discharge from active duty in the
Armed Forces of the United States
112
Debt-to-Income Ratio/Debt Ratio
The percentage of verified gross monthly income divided into total payments 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.
113
Deed
A legal document that is signed and delivered from the seller to the borrower showing
ownership of property.
114
Deed-in-Lieu of Foreclosure
Deed in which the mortgagor conveys all interest in the property to the mortgagee to
satisfy a loan that is in default to avoid foreclosure proceedings. A written settlement
agreement will always accompany deed-in-lieu. The lender waives the right to collect any
deficiency based on a promissory note.
115
Deed of Reconveyance
A mortgage holder issues a deed of reconveyance to indicate that the borrower has been
released from the mortgage debt. The deed transfers the property title from the lender,
also called the beneficiary, to the borrower. This document is most commonly used when a
mortgage has been paid in full.
116
Deed of Trust
A deed conveying the title of real property to a trustee as security until the grantor repays a
loan. This type of deed resembles a mortgage. It is an alternative to a mortgage preferred
by lenders because it is faster and cheaper to foreclose.
117
Default
he omission or failure to perform a legal or contractual duty, especially the failure to pay a debt when due
118
Delinquency
A debt that is overdue in payment.
119
Department of Veterans Affairs (VA)
The cabinet-level department of the federal government responsible for operating programs that benefit veterans of military service and their families. It is headed by the Secretary of Veterans Affairs.
120
Depreciation
A reduction in the value or price of something, specifically, a decline in an asset's value
because of use, wear, obsolescence, or age.
121
Discount Point
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 Points can only be used to reduce the
interest rate. Borrowers can typically pay from 0-4 points.
122
Dodd-Frank Wall Street Reform & Consumer Protection Act
A 2010 federal statute that promotes the financial stability of the United States by
improving accountability and transparency in the financial system. The statute affects
nearly every federal agency with jurisdiction over finance or consumer protection, and
nearly every segment of the financial-services industry.
123
Double Selling
Double selling is a type of real estate or mortgage fraud that generally involves a mortgage
broker. The mortgage broker takes the information from a potential borrower in order to
obtain a mortgage loan. The borrower is usually in on the mortgage fraud scam.
124
Down Payment
A portion of the purchase price paid in cash (or its equivalent) at the time the sale
agreement is executed.
125
Due-on-Sale Clause
A mortgage provision that gives a lender the option to accelerate the debt if the borrower
transfers any part of the mortgaged real estate without the lender's consent.
126
Early Payment Default
Early Payment Default means, with respect to a Mortgage Loan, the failure of the Mortgagor
to make any of the first three Monthly Payments due under the Mortgage Loan on or before
its scheduled Due Date.
127
Earnest Money Deposit
A deposit paid (often in escrow) by a prospective buyer to show a good-faith intention to
complete the transaction, and ordinarily forfeited if the buyer defaults. It is generally a
percentage of the purchase price and it rarely exceeds 10 percent.
128
Easement
An interest in land owned by another person, consisting of the right to use or control the
land, or an area above or below it, for a specific limited purpose. E.g., an ingress and egress
easement for the right to access the land through the land of another. The land benefitting
from an easement is called the dominant estate, while the land burdened by an easement is
called the servient estate. Unlike a lease or license, an easement may last forever, but it
does not give the holder the right to possess, take from, improve upon, or sell the land.
The primary recognized easements are:
A right-of-way.
A right of entry for any purpose relating to the dominant estate.
A right to support of land and buildings.
A right of light and air.
A right to water.
A right to do some act that would otherwise amount to a nuisance: and
A right to place or keep something on the servient estate.
129
Economic Obsolescence
Obsolescence that results from external economic factors, such as decreased demand or changed governmental regulations.
130
Effective Interest Rate
The actual annual rate, which incorporates compounding when calculating interest, rather than the stated rate or coupon rate.
131
Eminent Domain
The inherent power of a governmental entity to take privately owned property and convert
it to public use, subject to reasonable compensation for the taking.
132
Employer-Assisted Housing
A program in which an employer assists its employees in purchasing homes by helping
with the down payment, closing costs, or monthly payments.
133
Encroachment
An interference with or intrusion onto another's property.
134
Encumbrance
A claim or liability that is attached to property and that may lessen its value, such as a lien
or mortgage. An encumbrance cannot defeat the transfer of possession, but it remains after
the property or right is transferred.
135
Entitlement
An absolute right to a benefit granted immediately upon legal requirement.
136
Equal Credit Opportunity Act (ECOA/Regulation B)
A federal statute that prohibits lenders from discriminating against credit applicants based
on race, color, religion, national origin, age, sex, or marital status with respect to any aspect
of a credit transaction.
137
Equitable Mortgage
A transaction that has the intent but not the form of a mortgage, and that a court of equity
will treat as a mortgage.
138
Equity
The amount by which an interest in property exceeds secured claims or liens. The
difference between the value of the property and all encumbrances on it.
139
Escrow
A legal document or property delivered by a promisor to a third party to be held by that
third party for a given amount of time or until the occurrence of a condition at which time
the third party is to hand over the document or property to the promiser.
140
Escrow Account(s)
A bank 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.
141
Escrow agent
The third-party depositary of an escrow. 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.
142
Escrow Agreement
The instruction given to the third-party depositary of an escrow.
143
Escrow Contract
The contract among buyer, seller, and escrow holder, setting forth the rights and
responsibilities of each.
144
Escrow Holdback
An escrow holdback is simple money set aside that assures the seller will finish agreed
upon work at a later time.
145
Eviction
The act or process of legally dispossessing a person of land or rental property.
146
Exclusive Right-to-Sell Listing
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. The 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.
147
Exclusive Agency Listing
A listing giving one agent the right to be the only person, other than the owner, to sell the
property during a specified period. A listing agreement upon which the broker does not get
a commission if the seller sells the property themselves.
148
Executor
A person named by a testator to carry out the provisions of the testator's will.
149
Fair and Accurate Credit Transactions Act (FACT Act) 2003
A 2003 amendment to the federal Fair Credit Reporting Act providing free annual credit
reports to consumers and establishing measures intended to help prevent identity theft.
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 receipts.
150
Fair Credit Reporting Act (FCRA/Regulation V)
A 1970 federal statute that regulates disclosure and use of consumer-credit information
and ensures the right of consumers to have access to and to correct their credit reports.
Many states have enacted similar statutes
151
Fair Housing Act (FHA)
A 1968 federal statute that prohibits discrimination based on race, sex, religion, family
status, or national origin in the sale or rental of a dwelling, especially in the refusal to sell
or rent.
152
Fair Market Value
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.
153
Fannie Mae/Freddie Mac Loan Limit
The loan limits as set by FIFA for Fannie Mae and Freddie Mac loans. These numbers are
higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. They change yearly
154
Federal Mortgage Loans
Federal Mortgage Loans are loans insured or guaranteed by the federal government.
Examples are FHA, VA and USDA loans
155
Federal National Mortgage Association (Fannie Mae/FNMA)
A privately owned and managed corporation chartered by the U.S. government that
provides a secondary mortgage market for the purchase and sale of conventional
conforming mortgages.
156
Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC)
A corporation that purchases both conventional conforming first mortgages from members
of the Federal Reserve System and other approved banks.
157
Federal Housing Administration (FHA)
An agency in the U.S. Department of Housing and Urban Development responsible for
facilitating FHA mortgage lending by insuring mortgage loans on houses meeting the
agency's standards. The FHA was created in 1934.
158
Federal Reserve System (FRS)
The central bank that sets credit and monetary policy by fixing the reserves to be
maintained by depository institutions, determining the discount rate charged by Federal
Reserve Banks, and regulating the amount of credit that may be extended on any security.
The Federal Reserve System was established by the Federal Reserve Act of 1913.It
incorporates 12 central banks supervised by a Board of Governors whose members are
appointed by the President and confirmed by the Senate.
159
Fee simple
An interest in land that; being the broadest property interest allowed by law, endures until
the current holder dies without heirs.
160
FHA Mortgage
A mortgage that is insured fully or partially by the Federal Housing Administration (FHA).
161
FHA Mortgage Insurance
Current Federal Housing Administration (FHA) upfront mortgage insurance premiums are
1.75 percent of the loan size. If an FHA-backed mortgage is used for a purchase mortgage
and your loan size is $300,000, then your upfront Mortgage Insurance Premium (MIP) will
be $5,250. The renewal premium varies by FHA product, generally.85 x mortgage amount
divided by 12 = the monthly premium added to the monthly payment
162
Finance charge
A finance charge is a fee charged for the use of credit or the extension of existing credit. It
may be a flat fee or a percentage of borrowings, with percentage-based finance charges
being the most common. A finance charge is often an aggregated cost, including the cost of
carrying the debt itself along with any related transaction fees, account maintenance fees
or late fees charged by the lender.
163
Firm commitment
A promise from a lender to make a mortgage loan.
164
First mortgage
A mortgage that is senior to all other mortgages or liens on the same property.
165
First-time home buyer
An individual who has had no ownership in a principal residence during the 3-year period
ending on the date of purchase of the property. This includes a spouse. If either meets the
test, they are considered first-time homebuyers.
A single parent who has only owned with a former spouse while married.
166
Fixed installment
The monthly payment due on a mortgage loan which includes both principal and interest.
167
Fixed period adjustable rate mortgage
An adjustable rate mortgage with an initial fixed interest rate period. After the fixed
interest rate expires, the interest rate starts to adjust based on an index plus a margin. The amount by which the interest rate can adjust the fixed period usually subject to an interest rate cap
168
Fixed-Rate Mortgage (FRM)
A mortgage with an interest rate that remains the same over the life of the mortgage
regardless of market conditions.
169
Flood certification fee
Fee issued to the client which covers the cost of the assessment and is included in closing
costs and fees.
170
Flood insurance
Insurance that indemnifies against a loss caused by a flood. This type of insurance is often
sold privately but subsidized by the federal government. Maximum coverage is $250,000
171
Floor
On an ARM loan, the margin is the floor and the lowest the interest rate can go over the life
of the loan.
172
Forbearance
The act of refraining from enforcing a right, obligation, or debt. Permitting one to retain a
loan of money after it has become due and payable is forbearing it. Forbearance, within the
meaning of usury laws, is the giving of further time for the return of payment of money
after the date upon which it became due.
173
Forced placed insurance
Lien holders will put forced place insurance onto a mortgaged property in cases where the
borrower allows the coverage they were required to purchase to lapse. Lapses may be due
to non-payment of premium, filing false claims, or other reasons. Forced place insurance
will protect the property, the homeowner, and the lien holder. Future mortgage payments
will reflect the added cost of the insurance
174
Foreclosure
A legal proceeding to terminate a mortgagor's interest in property, instituted by the lender
(the mortgagee) either to gain title or to force a sale to satisfy the unpaid debt secured by
the property.
175
Forfeiture
A destruction or deprivation of some estate or right because of the failure to perform some
contractual obligation or condition. When a condition is not likely to occur until the obligee
has relied on the expected exchange by, for example, performing or preparing to perform, a
non-occurrence of the condition results in the obligee's loss of its reliance interest when
the oblige loses the right to that exchange. This loss of reliance interest is often described
as forfeiture.
176
Fraud Enforcement and Recovery Act of 2009 (FERA)
The law enhanced criminal enforcement of federal fraud laws, especially regarding
financial institutions, mortgage fraud, and securities fraud or commodities fraud. Enacted
May 2009.
177
Fully Amortized Mortgage
A mortgage in which the mortgagor pays the interest as well as a portion of the principal in
the periodic payment. At maturity, the periodic payments will have completely repaid the
loan. Also known as a self- liquidating mortgage. For example, 360 P&l payments on a 30-
year loan will pay the loan in full.
178
General contractor
Someone who contracts for the completion of an estate project, including purchasing all
materials, hiring and paying subcontractors, and coordinating all the work.
179
General Warranty deed
A seller promises that there are no defects in the title that arose or were created while the
seller owned the property or while anyone prior to the seller owned the property.
180
Gift letter
A letter to the lender from the donor stating a gift of money has been made to the buyer to
purchase a specific property. The gift must come an immediate blood relative and no
evidence of repayment required.
181
Good faith estimate
Gives you an estimate of the costs of the mortgage loan. A form that lists basic information
about the terms of a mortgage for which the applicant has applied. If the applicant applied
for a mortgage before October 3, 2015, or if the applicant is applying for a reverse
mortgage or HELOC, they will receive a Good Faith Estimate (GFE).
182
Government mortgage
Mortgage insured by a government entity, such as Federal Housing Administration (FHA),
Veteran's Administration (VA) or Rural Housing Service (RHS - USDA loans).
183
Government National Mortgage Association (Ginnie Mae/GNMA)
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. The Association purchases, on the secondary market,
residential mortgages originated by local lenders; it then issues federally insured securities
backed by these mortgages.
184
Grace period
An extra period of time allowed for taking some required action (such as making payment)
without incurring the usual penalty for being late. Article 9 of the Uniform Commercial
Code (UCC) provides for a 20-day grace period after the collateral is received. During that
time a purchase-money security interest must be perfected to have priority over any
conflicting security interests.
185
Gramm-Leach-Bliley Act (GLB) 1999 - Regulation P
A federal statute that repealed both parts of the Glass-Stegall Act prohibiting combinations
among banking, securities, and insurance companies, as well as related conflict-of-interest
provisions for such companies' officers, directors, and employees. The Act also regulates
the collection, disclosure, use, and protection of consumers' nonpublic personal
information.
186
Gross Monthly Income
The total amount of a person's income before taxes.
187
Ground rent
Rent paid by a tenant under a long-term lease for the use of undeveloped land, usually for
the construction of a commercial building.
188
Growing-Equity Mortgage (GEM)
A mortgage that is fully amortized over a significantly shorter term than the traditional 30-
year mortgage, with increasing payments each year.
189
Guarantee
Assumption of the liability of another's debts in the event of default.
190
Guarantee Mortgage
A mortgage that is guaranteed by a third party.
191
Guaranty
A promise to answer for the payment of some debt, or the performance of some duty, in
case of the failure of another who is liable in the first instance.
192
Hazard insurance
Insurance that protects property owners against damage caused by fires, severe storms,
earthquakes, or other natural events. It will also protect the borrower against liability for
someone that is injured on the property. If the specific event is covered within the policy,
the property owner will receive compensation to cover the cost of any damage incurred.
193
Higher-Priced mortgage /High Priced Mortgage
In general, a higher-priced mortgage loan is one with an annual percentage rate, or APR,
higher than a benchmark rate called the Average Prime Offer Rate. The Average Prime Offer
Rate (APOR) is an annual percentage rate that is based on average interest rates, fees, and
other terms on mortgages offered to highly qualified borrowers. A mortgage will be
considered a higher-priced mortgage loan if the APR is a certain percentage higher than the APOR depending on what type of loan the borrower has. See the Federal Comprehensive
Textbook for the thresholds.
194
High Cost Mortgage
In general, a high-cost mortgage is a type of loan where the loan exceeds one or more of the
three thresholds. See Federal Comprehensive Textbook for the thresholds.
195
Home Equity Loan
A line of bank credit given to a homeowner, using the homeowner's equity in the home as
collateral.
196
Home Inspection
A 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
197
Home Mortgage Disclosure Act of 1975 (HMDA/Regulation C)
This regulation provides the public loan data that can be used to assist in determining
whether financial institutions are serving the housing needs of their communities, public
officials in distributing public-sector investments to attract private investment to areas
where it is needed, and in identifying possible discriminatory lending patterns. The
regulation applies to certain financial institutions, including banks, savings associations,
credit unions, and other mortgage lending institutions. Mortgage Brokers are exempt
198
Homeowner's Insurance
Insurance that covers both damage to the insured's residence and liability claims made
against the insured, especially those arising from the insured's negligence.
199
Homeowner's Warranty (HOW)
A warranty and insurance program that, among other coverage, insures a new home for ten
years against major structural defects. The program was developed by the Home Owners
Warranty Corporation, a subsidiary of the National Association of Home Builders. Builders
often provide this type of coverage and may states provide similar warranty protection by
statute.
200
Home Ownership and Equity Protection Act (HOEPA) 1994
HOEPA was enacted in 1994 as an amendment to the Truth-In-Lending Act (TILA) to
address abusive practices in refinances and closed end home equity loans with high
interest rates or high fees.
201
Housing and Urban Development (HUD)
The cabinet-level department of the federal government responsible for overseeing
programs that are concerned with housing needs and fair-housing opportunities, and with
improving and developing the country's communities. Established in 1965, headed by the
Secretary of Housing and Urban Development.
202
Housing code
A law or regulation setting standards for the construction, maintenance, occupancy, use, or
appearance of buildings and dwelling units.
203
Housing and Economic Recovery Act of 2008
The Housing and Economic Recovery Act (HERA) was created to address the subprime
mortgage crisis of 2008. The Housing and Economic Recovery Act allowed the Federal
Housing Administration (FHA) to guarantee up to $300 billion in new 30-vear fixed rate
mortgages for subprime borrowers. In order to participate, lenders were required to write
down the balances on principal loans up to 90 percent of their current appraised value.
204
Housing Expenses-to-Income Ratio
A ratio comparing housing expenses to before-tax income that is used by lenders to qualify
borrowers for a mortgage. The housing expense measure includes mortgage principal,
interest payments, property taxes, hazard insurance, mortgage insurance, and association
fees. The limit for housing is generally 28 percent of the expense-to-income ratio on
manually underwritten conventional conforming loans.
205
HUD-1 Settlement Statement
Standard form at closing 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. This form is used only for Reverse Mortgages and HELOC's since
TRID was implemented
