The difference between the market value of a property and the outstanding mortgage balance.
A loan based on the equity in a property.
The holding of documents and money by a neutral third party prior to closing. Also an account held by a lender into which a homeowner pays money for taxes and insurance.
Federal Housing Administration, A devision of the Department of Housing and Urban Development. The main function is insuring residential mortgage loans made by private lenders. Sets standards for construction and underwriting, does not lend money.
Federal Home Loan Mortgage Corporation, A private corporation authorized by Congress which became an independant stockholder owned government corporation. Promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secon
dary market and selling securities backed by those mortgages in the capital market.
housing, mortgage insurance for residential mortgages (FHA), equal opportunity in housing, and reserch and technology.
Also called Rate Index, A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates. Common indices are the 1-Year Treasury Security and F
HLBB's Cost of Funds.
The rate on which the borrower's first payment is calculated. If the loan is discounted or bought down, it may be lower than the Fully Indexed Accrual Rate.
The annual interest rate used to calculate the borrower's initial payment. If, for example, the note specifies that a fully amortized annual rate of 11% be used to calculate the initial monthly payment, and that rate is Bought Down 2%, the IBPR is 9%.
The fee charged for borrowing money.
A provision of an ARM loan limiting how much interest rates may change per adjustment period. See also Rate Caps and Lifetime Caps.
An institution that makes loans to borrowers on real estate.
A legal claim against a property that must be paid when the property is sold.
A provision of an ARM loan that limits the total change in interest rates over the life of the loan.
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
The ratio of the original loan amount devided by the lower of the sales price or the appraised value.
Also called Spread, The amount the lender adds to the index to determine the Fully Indexed Accrual Rate. Usually the margin is a fixed percentage throughout the loan.
A legal document that pledges a property to the lender as security for payment of a debt.
A company that originates mortgages exclusively for resale in the secondary market.
A company that for a fee matches borrowers with lenders.
Mortgage Insurance Premium, The fee paid to FHA or a private insurer for mortgage insurance.
The lender in a mortgage agreement.
The borrower in a mortgage agreement.
Also called Deferred Interest, If the payments are too small to cover the interest due on a loan, the remaining interest owed is added to the outstanding loan balance, causing Negative Amortization. The loan gets bigger, rather than smaller as it does with
Positive Amortization. Interest is then charged on the deferred interest in future months.
The value of all assets, including cash, less total liabilities. Often used as an underwriting guideline to indicate an individual's creditworthiness and financial strength.
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
A fee paid to a lender for the processing a loan application, often stated as a percentage of the mortgage amount, or points.
Money advanced by a borrower or on behalf of a borrower to reduce monthly payments on a mortgage either during the entire term or for an initial period of a loan.
A provision of an ARM loan limiting how much the interest rate or mortgage payments may increase or decrease.
A loan transaction in which the borrower recieves funds at the time of closing.
The occasion where a sale is finalized, seller and buyer sign documents and closing costs are paid. Also known as settlement.
Expenses over and above the price of the property incurred by the seller and buyer in transferring ownership of a property. Also known as Settlement Costs.
An additional borrower on a loan who's obligations are the same as all other borrowers.
A formal offer by a lender stating the terms under which it agrees to loan money to a borrower.
Comparable properties used in an appraisal characteristic of the property under consideration.
A mortgage that is not insured by the Federal Government.
An adjustable rate mortgage that can be converted to a fixed rate mortgage under specific conditions.
A report of an individual's credit history prepared by a credit bureau, used by a lender to determine a borrowers creditworthiness.
A document transferring ownership of a real property from one party to another.
A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.
Failure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.
A loan in which a payment is overdue but not yet in default.
A decline in the value of a property.
A one time charge by the lender to increase the yeild of a loan. A point is 1% of the mortgage amount.
The part of the purchase price which the buyer pays in cash and does not finance as part of a mortgage.
The difference between the market value of a property and the outstanding mortgage balance.
A loan based on the equity in a property.
The holding of documents and money by a neutral third party prior to closing. Also an account held by a lender into which a homeowner pays money for taxes and insurance.
Federal Housing Administration, A devision of the Department of Housing and Urban Development. The main function is insuring residential mortgage loans made by private lenders. Sets standards for construction and underwriting, does not lend money.
Federal Home Loan Mortgage Corporation, A private corporation authorized by Congress which became an independant stockholder owned government corporation. Promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secon
dary market and selling securities backed by those mortgages in the capital market.
n the normal repayment of the loan and recalculating the interest rate as if the costs paid are interest. The purpos
e is to have a gage to compare different types of loans.
Buying the interest rate down for the full term of the loan. Also known as a Point buydown because the cost is usally calculated as points on the loan amount.
Buying down the interest rate for a portion of the loans term, amounts to pre-paying a portion of the interest to substadise the lower payment. Commonly refered to as a 1/1, 2/1, or 3/2/1 buydown.
A mortgage in which the interest rate is adjusted periodically according to the movement in a preselected index. For example a 12 month ARM with 2/6 caps would be an ARM that is adjusted every 12 months with a maximum adjustment of 2% and a maximum lifetim
e adjustment of 6% from the initial interest rate.
Reduce a debt by regular payments of both principal and interest. Fully Amortize meaning payments scheduled to pay off the debt completely during a set term.
A timetable for payment of a loan showing the amount of each payment applied to interest and principal and the remaining balance.
A professional opinion of the market value of a property.
An increase in the value of a property due to changes in market conditions.
The valuation placed upon property by a public tax assessor for purposes of taxation.
Meaning the property is the owner's primary residence.
The length of time, typically a year, between changes to the AML borrower's P&I payments. On a longer payment change AML, for instance a three year or five year AML, the initial Payment Adjustment Period may still be one year if there is a payment discount
or buydown, causing the payments to change after the first year.
Payment buydowns occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan. Payment buydowns can result in rapid payment increases in the i
nitial years of the loan.
A limit on the amount the payment can be changed at the end of each Payment Adjustment Period. It can be a percentage of the previous payment, a fixed dollar amount, or a specified change in the interest rate on which the payment is calculated. It does not
have to be the same as the interest rate cap.
In a payment discount, the lender reduces the first year's interest rate to make the mortgage more attractive to borrowers. It can be offered on either AML's or FRM's and usually results in a payment jump after the first year.
Principal, Interest, Taxes, and Insurance, components of a mortgage payment.
A one time charge by the lender to increase the yield of a loan, a point is 1% of the mortgage amount.
The process of determining how much money a prospective home buyer will be eligible to borrow before application for a loan.
The amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
amortization schedule
ppraisal
eciation
r, annual percentage rate
rm adjustable rate mortgage
ssessed value
buydown
, perminent
temporary
sh out
losing
costs
o-borrower
mmitment letter
parables
nventional mortgage
rtable arm
redit report
deed
in lieu
fault
linquency
preciation
iscount points
own payment
equity
loan
scrow
lmc, freddie mac
irst mortgage
nma, fannie mae
oreclosure
rm, fixed rate mortgage
ull recasting
& y indexed accrual rate
hazard insurance
omeowners insurance
warranty
index
itial borrower interest rate
terest
rate cap
ial borrower payment rate
lein
nder
ifetime cap
oan servicing
tv, loan-to-value ratio
margin
ortgage
banker
roker
negative amortization
t worth
otice of default
origination fee
wner occupied
payment adjustment period
buydown
discount
oints
re-qualification
incipal
qualifying ratios
rate caps
eo, real estate owned
second mortgage
ary mortgage market
ller provided funds
rvicer
ingle premium
teaser rate
il, truth-in-lending
underwriting
APR, Annual Percentage Rate
GLS:KEYWORD
GLS:DEFINITION
GLS:DESKEY
A method of stating the yearly cost of a loan as an interest rate. Calculated by adding the costs of obtaining a loan to the interest paid in the normal repayment of the loan and recalculating the interest rate as if the costs paid are interest. The purpos
e is to have a gauge to compare different types of loans.
Buying the interest rate down for the full term of the loan. Also known as a Point buydown because the cost is usually calculated as points on the loan amount.
Buying down the interest rate for a portion of the loans term, amounts to pre-paying a portion of the interest to substadise the lower payment. Commonly refered to as a 1/1, 2/1, or 3/2/1 buydown.
A mortgage in which the interest rate is adjusted periodically according to the movement in a preselected index. For example a 12 month ARM with 2/6 caps would be an ARM that is adjusted every 12 months with a maximum adjustment of 2% and a maximum lifetim
e adjustment of 6% from the initial interest rate.
Reduce a debt by regular payments of both principal and interest. Fully Amortize meaning payments scheduled to pay off the debt completely during a set term.
A timetable for payment of a loan showing the amount of each payment applied to interest and principal and the remaining balance.
A professional opinion of the market value of a property.
An increase in the value of a property due to changes in market conditions.
The valuation placed upon property by a public tax assessor for purposes of taxation.
The mortgage that has first claim in the event of default.
A mortgage in which the interest rate does not change during the entire term of the loan.
Federal National Mortgage Association, A government sponsored corporation owned solely by private investors created to provide support to the secondary market for FHA and VA mortgages and conventional loans.
The process by which a mortgaged property may be sold when a mortgage is in default.
Setting the P&I payments to the level that will fully amortize the loan's outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.
The interest rate resulting from the index at closing, or at another point in the loan, plus the lender's full spread, rounded as prescribed in the loan documents, often to the nearest 1/8th of 1%.
Graduated Payment Mortgage, A mortgage where the payments are scheduled to increase, usually annually, for a set number of years and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30 year term.
Growing Equity Mortgage, A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.
Insurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism, or other hazards.
An insurance policy that combines liability coverage and hazard insurance.
A type of insurance that covers repairs to specific parts of a house for a specific period of time.
Department of Housing and Urban Development, A Cabinet department responsible for the implementation and administration of government housing and urban development programs. The range of programs include community planning and development, low rent public
Private Mortgage Insurance, Insurance provided by nongovernment insurers that protects lenders against loss if a borrower defaults.
Guidelines applied by lenders to determine how large a loan to grant a home buyer.
Also called Interest Rate Caps, A limit on the amount the interest rate charged to the borrower can be changed. Usually there are two caps, The Periodic Cap, which limits the interest rate change at the end of each adjustment period. The Life of Loan which
sets the highest interest rate that may be charged, and is often specified as 'X'% above either the initial interest rate or the fully indexed accrual rate.
A term frequently used by lending institutions as applied to ownership of real property acquired for investment or as a result of foreclosure.
Real Estate Settlement Procedures Act, A federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.
A mortgage that has rights that are subordinate to the rights of the first mortgage holder.
The buying and selling of existing mortgages.
Also called Seller Contributions, Seller provided funds include all transaction costs paid by the seller except the real estate agent's (or broker's) fee. May include items such as points, origionation fees, insurance premiums, etc. Since these are normall
y paid by the buyer, it is assumed that some or all of the seller provided items are added to the sales price of the home, typically allowing 3% on 95% LTV and 6% on 90% LTV.
The party who has entered into an agreement with the insured to service a loan.
A premium which provides coverage for more than one year.
Similar to a Payment Discount, but implies either an unusually large initial rate discount or an attempt by the lender to lure an otherwise unqualified borrower into the mortgage. Almost always results in a difficult payment increase for the borrower at th
e discount period's end.
A legal document establishing the right of ownership.
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.
The process of evaluating a loan application to determine the risk involved for the lender.
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