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FAIR CREDIT REPORTING ACT (FCRA) - a Federal law, in part, giving one the right to see his or her credit report so that errors may be corrected. A lender loan broker/agent (credit grantor) refusing to advance credit based upon a credit report it receives from a credit repository, is compelled by law to reveal to the potential borrower, the name of the credit repository which issued the lender loan broker/agent with the credit report. You are allowed to see that report, and have a copy of it - BUT, not from the lender loan broker/agent; your copy must be obtained from the credit repository directly.

FAIR MARKET VALUE - the price where a willing buyer and a willing seller would normally agree to trade, each of whom has a reasonable knowledge of all pertinent facts, and neither being under any compulsion to buy or sell. Appraisals are designed to consider the pertinent facts to determine the likely fair market value.

FANNIE MAE (FNMA) - The Federal National Mortgage Association (FNMA), the nation's largest mortgage investor. Created in 1968 by an amendment to Title III of the National Housing Act (12 USA 1716 et seq.), this stockholder-owner corporation, a portion of whose Board of Directors is appointed by the President of the United States, supports the secondary market in mortgages on residential property with mortgage purchase money and securitization programs for "conforming" residential real property loans.

FARMERS HOME ADMINISTRATION (FmHA) - Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) - Federal agency, which, among other things, directs the activities of the Federal Insurance Administration, and established flood insurance rates and terms of coverage, issues policies, processes claims, and identifies and maps flood-prone areas nationwide.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) - a Great Depression agency originally established by the Federal Banking Act of 1933, to protect depositors from loss.

FEDERAL HOME LOAN BANK BOARD - The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - See FreddieMac below.

FEDERAL HOUSING ADMINISTRATION (FHA) - A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - see FannieMae above.

FF&E- "Furniture, Fixtures & Equipment", a phrase often used in commercial equipment leasing. A combination of items like "furniture" (in lobby of dentist, lawyer), "fixtures" (liquor store room mounted central air conditioner, security system, shelving for book store) & "equipment" (bakery baking equipment, restaurant walk-in refrigerator/freezer) commonly utilize commercial small business equipment finance-lease structures.

FHA (FEDERAL HOUSING ADMINISTRATION) MORTGAGE - a loan insured by the Federal Housing Administration. FHA mortgages require lower down payments than conventional mortgages, and also feature less stringent income and financial requirements.

FHA (FEDERAL HOUSING ADMINISTRATION) MORTGAGE INSURANCE - Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FIRST AND SECOND MORTGAGES - the loan documents that secure a property for a lender in case the borrower fails to meet his obligations per the loan agreement. A first mortgage allows you to buy your home in the first place, a second mortgage provides for refinancing and literally hundreds of different lifetime opportunities (see difference between "mortgage" and "trust deed").

FIRST LIEN - a legal position of right to ownership by the lender for satisfaction of outstanding debt. Allows the lender to recover this money by foreclosing property if you fail to make payments you've agreed to.

FIRM COMMITMENT - A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.

FIXED AND ADJUSTABLE RATES - the way the interest on your loan is determined. A fixed rate of interest stays the same over the life of the loan; an adjustable (or "variable") rate changes, increasing or decreasing periodically according to an index which reflects general trends.

FIXED-RATE MORTGAGE - a mortgage with an interest rate that remains constant for the life of the loan. The most common fixed-rate mortgage is repaid over a period of 30 years; 15 year fixed-rate mortgages are also available.

FORECLOSURE - A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

FORBEARANCE - the act of refraining from taking legal action despite the fact that the mortgage is in arrears. It is usually granted only when a mortgagor makes satisfactory arrangements to pay the delinquent amount owed at a future date.

FREDDIE MAC (FHLMC) - The Federal Home Loan Mortgage Corporation (FHLMC), the second largest investor of residential real estate mortgage loans, created by Congress in Title III of the Emergency Home Finance Act of 1970 (12 USC 1451 et seq.), to provide an alternative source to FannieMae, for "conforming" residential real estate mortgage loans. This stockholder-owned corporation, a portion of whose Board of Directors is appointed by the President of the United States, supports the secondary market in mortgages on residential property with mortgage purchase money and securitization programs for "conforming" residential real property loans

FRONTAGE - the property line abutting the most important adjacent property, usually a street, lake, river or ocean…

FULL INCOME VERIFICATION - a requirement for fully documented proof of income; loans that contain this requirement can usually offer lower interest rates than formal no-income verification programs.

FULLY AMORTIZED ARM - An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

FUNCTIONAL DEPRECIATION - in real estate, a loss of value due to advancements in technology or design that makes the features of the current facility obsolete. Also called functional obsolescence.

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GINNI MAE - see Government National Mortgage Association.

GOOD FAITH ESTIMATE (GFE) - a written estimate which you sign, that the lender/loan agent must present to you within 3 days of when they receive your consumer residential real property loan application credit package. It is a government required document and must contain a detailed itemization of what the lender/loan agent proposes to charge you. Although it is not the "final word", it must be the lender/loan agent's "best estimate" of the proposed transaction they think you'll qualify for, at this early stage in the process. You'll discover that a great deal of the "costs" are paid out to various non-affiliated outside vendors and suppliers to the transaction. This document, the GFE, is where they're detailed for you, early enough in the process for you to understand, compare and comment on.

GOVERNMENT NAITIONAL MORTGAGE ASSOCIATION (GNMA) - Also known as "Ginnie Mae," provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

GRACE PERIOD - a period of time (usually measured in days) after an obligation is due during which a borrower can perform without incurring a penalty and without being considered in default.

GRADUATED PAYMENT MORTGAGE (GPM) - a type of flexible payment mortgage where the payments increase for a specific period of time, and then level off. Usually results in negative amortization.

GRANTEE - the person to whom an interest in real property is conveyed.

GRANTOR - the person conveying an interest in real property.

GROSS LIVING AREA - the total floor area of a building measured from the outside of the exterior wall..

GROSS INCOME - total income produced by a rental type piece of real property, before expenses are deducted.

GROSS RENT MULTIPLIER - a figure used to compare rental properties. It is derived from the relationship between gross rental income and sales price.

GROWING EQUITY MORTGAGE (GEM) - a graduated payment mortgage in which increases in a borrower's mortgage payments are used to accelerate reduction of principal on the mortgage. Due to increased payments, the borrower acquires equity more rapidly and retires the debt earlier.

GUARANTY - A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

GUARANTEE MORTGAGE - A mortgage that is guaranteed by a third party.

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HAZARD INSURANCE - A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

HOME EQUITY - the difference between the Fair Market Value (appraisal) of your home today, minus the mortgage debt remaining on the home. Using that "equity" for a loan has been commonly called a "second mortgage" for years; today's term more accurately - a home equity loan.<

HOME IMPROVEMENT LOAN - a mortgage to finance an addition to or rehabilitation of a residence.

HOME MORTGAGE DISCLOSURE ACT (HMDA) - Federal legislation which requires certain types of lenders to compile and disclose data on where their mortgage and home improvement loans are being made.

HOMEOWNERS ASSOCIATION (HOA) - a nonprofit organization that manages the common areas and services of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common areas; in a planned unit development it holds title to common areas.

HOMEOWNER'S POLICY - an insurance policy available to owners of private dwellings which covers the dwelling and its contents as well as personal liability.

HOMEOWNERS WARRANTY PROGRAM (HOW) - an insurance program through which participating builders provide home buyers with a warranty on the workmanship and materials of a home and warrant against major structural defects.

HOMESTEAD ESTATE - in some states, a statutory exemption which prohibits the attachment or sale of owner-occupied properties, to pay the claims of creditors.

HOUSING EXPENSE RATIO - the relationship of a borrower's monthly payment obligation on housing (principal, interest, taxes, insurance and other applicable housing expenses) divided by gross monthly income, expressed as a percentage - also called the top ratio.

HUD-1 UNIFORM SETTLEMENT STATEMENT - the standard form used to disclose costs of closing. All charges imposed in the transaction must be disclosed separately, and in detail.

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IMPOUND - That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

INDEX - an economic indicator, usually a published interest rate, that determines changes in the interest rate of an ARM. ARM rates are adjusted to reflect changes in the index. The margin is the amount a lender adds to the index to establish the actual interest rate on an ARM.

INDEXED RATE - The sum of the published index plus the margin. For example if the index were 9% and the margin 2.75%, the indexed rate would be 11.75%. Often, lenders charge less than the indexed rate the first year of an adjustable-rate mortgage.

IN FILE CREDIT REPORT - a computer generated credit report of credit and legal information obtained from a credit repository. Some in file credit reports may be tri-merge of three credit reporting agencies.

INFLATION - an increase in he amount of money or credit available in relation to the amount of goods or services that are available. This causes an increase in the general price level of services and goods. In time, inflation reduces the purchasing power of the dollar, thus making it worth less money.

INITIAL INTEREST RATE - the original interest rate on a mortgage at the time of closing the loan. This rate changes on an adjustable rate mortgage (ARM). The initial interest rate is also known as a start rate or teaser rate.

INGRESS AND EGRESS - the right to enter and exit land.

INSOLVENCY - a condition in which a debtor is unable to pay his or her creditors.

INSTALLMENT - the periodic payment that a borrower agrees to pay a lender.

INSTALLMENT LOAN - borrower money that is repaid in payments, known as installments.

INSTITUTIONAL LENDER - a financial institution that lends to the general public. Some examples are mutual savings banks, commercial banks, federal savings banks (formerly called savings and loans), pension and trust funds, life insurance companies.

INSURABLE INTEREST - the interest of an owner, lessee, mortgagee or trustee which is insured against financial loss in the case of specified events.

INSURABLE TITLE - a real property title that a title insurance company agrees to insure against defects.

INSURANCE - a contract that provides compensation for specific losses in exchange for a periodic payment.

INSURED LOAN - generally speaking, a mortgage loan insured by FHA or a private mortgage insurance company.

INTEREST (LOANS) - the sum paid for borrowing money, which pays the lender's costs of doing business along with repaying the lenders source of money as well. "Interest Rates" are typically a function of market conditions, expenses, and borrower risk of loss probability. For example, all things being equal, if you compared same exact loan - lender to lender to lender, they'll normally cost almost the same.

INTEREST ACCRUAL RATE - The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

INTEREST RATE BUYDOWN PLAN - An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.

INTEREST RATE CEILING - for an adjustable rate mortgage (ARM) loan, it's the maximum interest rate, as specified in the mortgage note or deed of trust's note.

INTEREST RATE FLOOR - again, for an adjustable rate mortgage (ARM) loan, it's the lowest rate, as specified in the mortgage note or deed of trust's note.

INTERIM FINANCING - A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

INVESTMENT PROPERTY - a real property that is not occupied by the owner.

INVESTOR - any person or institution that invests in mortgage instruments or other items of value.

INDIVIDUAL RETIREMENT ACCOUNT (IRA) - a retirement account that allows individuals to make tax deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts, or other forms of approved investments accounts - such as stock, bonds, or mutual funds.

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LATE CHARGE - The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

LEASE-PURCHASE MORTGAGE LOAN - An alternative financing option that allows low- and moderate-income home buyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that accumulates in a savings account for a down payment.

LENDER BUY-DOWN MORTGAGE - a convertible mortgage offering a discounted interest rate at the beginning of the loan that gradually increases to an agreed-upon fixed-rate over the first few years of the loan. It provides lower initial payments and a stable final monthly rate, but the final rate may be somewhat higher than on a standard fixed-rate mortgage.

LIABILITIES - A person's financial obligations. Liabilities include long-term and short-term debt.

LIABILITY INSURANCE - insurance covering the risks related to the property, and personal liability claims of other parties against the insured party.

LIBOR - see London InterBank Offered Rate below.

LIEN - A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

LIFETIME PAYMENT CAP - For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

LIFETIME RATE CAP - For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.

LOAN - A sum of borrowed money (principal) that is generally repaid with interest.

LOAN APPLICATION - typically a combination of standardized government forms and forms provided by the lender - 1003 the most popular one, you've seen many times. A shorter, easier preliminary ONLINE APPLICATION is available here.

LOAN ORIGINATION FEE - the fee charged by a lender/loan agent (sometimes called "points") to make the funds available to you, an off-set of its marketing and overhead expenses.

LOAN PROCEEDS - part of the money you borrow.

LOAN-TO-VALUE RATIO - the relationship between the amount of the consumer residential real estate mortgage loan and the appraised value of the property expressed as a percentage. In some cases, we fund loans at LTV's in excess of 100%, called 125'ers, no equity, or partially secured lending. 125% loans however, require a strong credit score (national average score is 689 for 125'ers customers), with very few (if any) modest negative credit items in your credit report file.

LOAN TYPES:

Conforming - Conforming loans refer to a residential real estate loan in amounts that conform to

Conservative - government lending standards as determined by Fannie Mae & Freddie Mac (the original government agencies, set up in the early 1940's, established to help people finance new homes). Conforming loans (on single family homes) range in amounts up to $300,700. Although conforming loans are serviced by these government agencies, the mortgage industry has adopted the term to express loan quality standards and amounts in this range. These generally are "quoted" as the lowest rates you see around (to get your attention). Normally utilized for purchasing a home with a 20% down payment, loads of documentation needed, and nearly perfect credit is required. The quoted low rates are wonderful sounding "BAIT", but not everyone is "CONFORMING".

Jumbo - Jumbo loans refer to those loan amounts outside of the "conforming" range or, above $300,700.

Investment Properties (Non-Owner Occupied) - These types of homes are normally acquired specifically for investment purposes or are owned as a result of moving to a new house without selling or being able to sell the old house. Financing for investment properties can be achieved using any of the above described programs. Typically, the rates are a bit higher and the LTV's can be a bit lower.

Non-Conforming - Can be an applicant with a 'conforming' type high quality credit history, but someone looking for a mortgage loan with more lenient standards, then the conservative 'conforming' guidelines. Also applies to customers with credit scores that are below the 'conforming' range. 'Non-conforming' lenders help over 60% of all loan applicants, however the rates will be higher. Higher is better than being REJECTED.

No Document or Low Document Loans - In certain situations it is either difficult or impossible for potential borrowers to show a lender their "taxable" income on paper. In these instances any of the above described programs can be used, but under circumstances called NIV or No Income Verification. All of the other program parameters must be met, however, in the case of income, a borrower may only be required to show a operating license or business license and/or limited income information. With this type of financing, rates & fees offered tend to be slightly higher. This type of financing is recommended for self-employed borrowers or borrowers who have difficulty showing their income on paper, for one reason or another.

Cash-Out Refinances - Favorable only under low or dropping interest rate markets. This is a substitute for home equity (second mortgage) lending; usually more costly as well. Occasionally, when refinancing a first trust deed mortgage.

LOCK - Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from day of application.

LONDON INTERBANK OFFERED RATE (LIBOR) - the rate at which banks in the foreign market lender dollars to one another. LIBOR varies by deposit maturity. This moving standard, is a common interest rate index, it's one of the most valid barometers of the international cost of money. A guide used by many lender funding sources for ARM loans.

LOSS PAYABLE CLAUSE - an insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the insured property.

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MANUFACTURED HOME - factory built or pre-fabricated housing including mobile homes. Generally they must be a 'double-wide' on a permanent foundation for any mortgage company to consider funding. You must already own the dirt.

MARGIN - The date on which the principal balance of a loan becomes due and payable.

MARKET VALUE - the highest price that a buyer and the lowest price that a seller would accept, neither one being compelled to buy or sell; also called Fair Market Value.

MATURITY - The date on which the principal balance of a loan becomes due and payable.

MAXIMUM LOAN AMOUNT - highest loan dollar amount allowed under Federal or conventional guidelines. In commercial real estate, the highest loan dollar amount that a property can support based on projected income.

MECHANIC'S LIEN - a claim created by law to secure priority of payment for work performed and materials provided by a vendor. Land may be attached as well as building, equipment or other property.

METES AND BOUNDS - a description of a parcel of land in a deed in which the boundaries are defined by directions and distances.

MINIMUM PROPERTY STANDARDS - regulations and guidelines used as underwriting criteria that set forth acceptable property standards and specifications.

MOBILE HOME - a factory-assembled residence consisting of one or more modules in which a chassis and wheels are an integral of the structure, and can be readied for occupancy without removing the chassis and/or wheels.

MODULAR HOME - a factory-assembled residence built in units or sections, transported to a permanent site and erected on a foundation. Excludes mobile homes.

MONTHLY FIXED INSTALLMENT - That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction and doesn't cover all of the interest. The loan balance therefore increases instead of decreasing.

MORTGAGE - a pledge of property, especially real property, s security for a debt. In many States this document is a Deed of Trust. The document may contain the terms of repayment of the debt.

MORTGAGE BANKER - an individual, firm or organization that originates, sells and/or services loans secured by mortgages on real property.

MORTGAGE BROKER - a firm or individual who, for a commission, matches borrowers and lenders.

MORTGAGE COMMITMENT - an agreement between lender and borrower detailing the terms of a mortgage loan, such as interest rate, loan type, term and amount.

MORTGAGE INSURANCE (MI) - insurance which protects mortgage lenders against loss in the event of default by the borrower. This allows lenders to make conventional refinance loans at higher loan-to-value rations, and purchase money loans with lower down payments. The Federal government offers MI through HUD/FHA; private entities offer MI for conventional loans.

MORTGAGE INSURANCE CERTIFICATION - certificate issued by HUD/FHA as evidence that a mortgage has been insured and that a contract of mortgage insurance exists between HUD/FHA and the lender incorporating HUD/FHA regulations identified in the certificate. There is a premium payment, paid by the borrower for this.

MORTGAGE INSURANCE PREMIUM (MIP) - the amount paid by a mortgagor (borrower) for mortgage insurance either to FHA or a private mortgage insurance company.

MORTGAGE NOTE - a written promise to pay a sum of money at a stated interest rate, during a specific term. A mortgage note is secured by a mortgage.

MORTGAGEE - the lender in a mortgage transaction.

MORTGAGEE CLAUSE - a clause that may be attached to an insurance policy stipulating that the lender will receive a portion of insurance proceeds sufficient to satisfy the unpaid amount of a loan in the event of loss.

MORTGAGOR - the borrower in a mortgage transaction who pledges real property as a security for a debt.

MULTIPLE LISTING SERVICE (MLS) - a service provided by the Board of Realtors which enders access to real estate listings of properties for sale or lease.

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NEGATIVE AMORTIZED (NEG/AM) - the unpaid interest which is added to the mortgage principal in a loan where the principal balance increases rather than decreases, because the monthly mortgage payments do not cover the full amount of the interest that's due.

NEG AM LOANS - a popular type of an Adjustable Rate Mortgage (ARM) loan, where the initial interest rate (start-rate) is very low, therefore monthly payments are smaller than other type loans. These type loans have interest rates which adjust periodically, and monthly payments which also change. There normally is a CAP, or ceiling, which limits the amount the interest rate can go up (fully indexed), AND also a separate limit on the size the monthly payments can increase as well (usually limited to a 7.5% annual payment size increase). Perfect for people with strong income 'potential', bigger home now for less money monthly.

NEGATIVE CASH FLOW - the deficit that is created when expenditures required to maintain an investment exceed income received on the property.

NET EFFECTIVE INCOME - The borrower's gross income minus federal income tax.

NET WORTH - the value of all assets including cash less total liabilities. Often used as an underwriting guideline to indicate creditworthiness and financial strength.

NO CASH-OUT REFINANCE (RATE & TERM RE-FI) - transaction in which the mortgage amount is limited to the sum of the unpaid principal balance pf any existing mortgages plus closing costs.

NON-ASSUMPTION CLAUSE - A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note.

NON-CONFORMING MORTGAGE LOAN - a residential mortgage loan in which the loan amount, the loan-to-value ratio, the term, the credit score, or some other aspect (or combination of characteristics) of the loan exceeds permissible limits as specified in (GSE) agency regulations. Rates & fees are always higher than 'conforming' rates.

NOTE - a general term for any kind of paper or document signed by a borrower that is an acknowledgment of the debt and is, by inference, a promise to pay. When the note is secured by a mortgage, it is called a mortgage note, and the mortgagee is named as the payee.

NOTICE OF COMPLETION - notice recorded after completion of construction. Mechanic's liens must be filed within a specific period of time thereafter.

NOTICE OF DEFAULT - notice recorded after a default under a deed of trust or mortgage has occurred. Also, the notification sent to defaulting borrowers required by insurers or guarantors - such as FHA, VA, or certain mortgage insurance companies.

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OBSOLESCENCE - loss of value resulting from outmoded physical features, technical advances or economic influences.

OFFICE THRIFT SUPERVISION (OTS) - The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank Board

OFF-SITE IMPROVEMENTS - improvements outside the boundaries of a property that enhance its value such as sidewalks, streets, curbs and gutters.

ONE-YEAR ADJUSTABLE - Mortgage whose annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.

ON-SITE IMPROVEMENTS - any construction of buildings or other improvements within the boundaries of a property that increase its value.

ORDINARY INCOME - income subject to tax at full or ordinary rates, rather than a capital gains rate.

ORIGINATION - marketing and attracting, then securing a completed mortgage loan application from a commercial or residential borrower.

ORIGINATION FEES - the fee charged by a broker/lender (sometimes called "points") to make the funds available to you, an off-set of its marketing and overhead expenses.

ORIGINATOR - a person who assists a borrower with the application for a mortgage loan.

OWNER FINANCING - A property purchase transaction in which the party selling the property provides all or part of the financing.

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PAR - a price of 100 percent of face value.

PARTIAL PAYMENT - in loan collection, receipt of less than the full payment due.

PARTNERSHIP - a business association of two or more owners who share in the profits and losses of he business. Partners are jointly and severally liable for the debts of the business enterprise.

PARTY WALL - a wall built on a line between two adjoining properties and common to both owners

PAYMENT CHANGE DATE - The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the adjustment date.

PAYMENT SHOCK - a scenario in which monthly mortgage payments on an adjustable rate mortgage (ARM) rise so high that the borrower may not be able to afford the payments. Many consumer protection guidelines regarding extremely low initial "teaser" rates, lifetime ceilings, and annual caps are designed to prevent payment shock.

PAYOFF FIGURES - the unpaid principal balance, plus any negative escrow amounts, plus accrued and unpaid interest, late charges, prepayment penalties, and other possible fees, to be used for payment in full of a mortgage or other lien.

PERIODIC PAYMENT CAP - A limit on the amount that payments can increase or decrease during any one adjustment period.

PERIODIC RATE CAP - A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

PERMANENT FINANCING - a mortgage loan usually covering development costs, interim loans, construction loans, financing expenses, that is put in place when the property is completed.

PERSONAL PROPERTY - any property that is not real property (dirt).

PHYSICAL DEPRECIATION - decline in the value of a physical asset or real property, resulting from normal usage, age, wear and tear, disintegration or action of the elements. Depreciation can be curable or incurable sometimes.

PIGGY-BACK LOAN - the combination of both a first and second mortgage being recorded concurrently on a single piece of property. A single mortgage lender may originate both loans, or the loans may be originated by two different lenders.. In either event, the two loans are recorded by priority.

PITI (PRINCIPAL, INTEREST, TAXES AND INSURANCE) - the four components that (for most homeowners) are included in the monthly mortgage payment. Principal and interest are the portions of the payment assigned to repay the mortgage itself; taxes and insurance are paid by your lender into a special escrow account to pay for homeowners insurance and property taxes.

PLEDGED ACCOUNT MORTGAGE (PAM) - Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

POINTS (LOAN DISCOUNT POINTS) - prepaid interest on a mortgage that is usually paid at the time of closing. Each "point" is equal to one percent of the total amount of a mortgage (one point on an $80,000 mortgage is $800, or 1 percent of 80,000). Most lenders offer mortgages with several combinations of points and interest rates; generally, the lower the interest rate, the more points you will pay at settlement, and the shorter the loans term will be. Don't mix-up "points" and "closing costs" in your mind (SEE GOOD FAITH ESTIMATE).

POINTS (typically charged) - the residential FIRST MORTGAGE market today for 'conforming' applicants is in the zero to two, two and a half point range. 'Non-conforming' customers (about 60% of everybody else) are charged generally one to three points, while SECOND MORTGAGES are often in the 2 to 5 point range at most home equity specialty companies, especially when the typical customer today is looking for higher Combined LTV's (CLTV). These are pretty much industry averages lately, and they represent what we normally charge here at Americas Money Center.

PORTFOLIO LENDER - a funding source who holds loans in their own portfolio and does not sell them to investors in the secondary market. These lender/funding sources usually hold the loans until their maturity, or until the loan is paid off.

POWER OF ATTORNEY - A legal document authorizing one person to act on behalf of another.

PRE-APPROVAL OR PRE-QUALIFICATION (prequal) - an early assurance by a lender/loan broker that you appear to meet the requirements for a specific type of loan. Unless subsequent supporting documentation doesn't adequately confirm the initial supplied information, "prequals" rarely change.

PRELIMINARY TITLE SEARCH - a real property title search a title insurance company prior to issuance of a title binder or commitment to insure.

PREPAID ITEMS - costs paid at closing for taxes, interest, and insurance. Because prepaid items are recurring costs that do not relate to the acquisition of the real property itself, they cannot be financed.

PREPAID INTEREST - mortgage loan interest that is paid in advance of when it is due to obtain tax advantages, or as required by a lender at closing for the odd days between he loan closing date and 30 days prior to the first scheduled payment due date.

PREPAYMENT - the payment of all or part of a mortgage debt before it is due.

PREPAYMENT PENALTY - a charge the mortgagor pays the mortgagee, for the privilege to prepay the loan. These are quite common in most States, they can be "bought-down" or "bought-out" at origination in many cases.

PRE-QUALIFICATION - evaluation of a potential borrower's financial status, and other characteristics, to determine the size and type of mortgage which is likely available to him or her.

PRIME RATE - the interest rate commercial banks typically charge their most creditworthy commercial customers for short-term loans. "Prime" is a yardstick for trends in interest rates, and it is often a baseline for establishing interest rates on higher-risk loans. Each bank sets its own separate "prime rate." It does NOT directly effect mortgage rates like you think it might!

PRIMARY MORTGAGE MARKET - Lenders, such as savings and loan associations, commercial banks, and mortgage companies, who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to the secondary mortgage markets such as to FNMA or GNMA, etc.

PRIMARY RESIDENCE - the residence which the owner physically occupies and uses as his or her home.

PRINCIPAL - the original balance of money lent, excluding interest. Also, the remaining balance of a loan, excluding interest.

PRINCIPAL BALANCE - The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

PRIVATE MORTGAGE INSURANCE (pmi) - a policy of insurance issued by an insurance company protecting the mortgage lender against financial loss, in the event of a borrower default on a mortgage loan. Borrower pays the premium, the lender is the beneficiary of the insurance policy (it's like the insurance company is the co-signer/guarantor on the loan).

PRO RATE - the allocation of proportionate shares of income, ownership or of an obligation which a buyer and seller share at the time of closing of a purchase transaction.

PROMISSORY NOTE - a written promise to pay a specific amount at s specified time.

PUD (Planned Unit Development) - a comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial office and industrial areas. Also, a subdivision having lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.

PURCHASE AGREEMENT - a written agreement/contract as between a buyer and a seller of real property setting froth the price and the other terms of the sale.

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QUALIFYING RATIOS - Calculations used to determine if a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

QUALITY CONTROL - policies and procedures designed to maintain optimal levels of quality, accuracy and efficiency in the production, selling and servicing of mortgage loans.

QUIT CLAIM DEED - a deed relinquishing all right, title and interest or claim an owner has in a piece of real property. Such a deed implies no warranty.

QUOTE - see rate shopper below. What sales types tell people to "hook them;" often it's not what you end up getting!

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RATE LOCK - A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time.

RATE SHOPPER - someone, like all of us, who wants VALUE of their buck. Unfortunately the "rate" is not the central difference as between any two lenders. They can be different from lender to lender, because of your credit score (which changes daily - see credit score above), the lien position (first or second mortgage,) proposed loan size, dollar amount of real estate appraisal vs. the size of the new proposed loan (Loan-To-Value percentage), property marketability, repair and condition, it's uniqueness to the neighborhood, your income source(s) and their long term stability, your historic income stream, your past and present credit records, it's depth, variety and quality, your capacity to be able to repay the loan according to the terms dictated by the lender, and most importantly the overall common sense of your request and the "reason" for the loan (purchasing, re-finance [no cash-out], equity advance, bill consolidation, home improvement etc ). For any 'rate quote' to even be remotely close to the final number, you need to supply the lender/broker agent with a COMPLETE application and have a three (3) credit bureau merged credit report run on you (and any other applicants) for the lender/broker agent to be able to give you a thorough answer about your eligibility to qualify for a particular rate. It's NOT one rate fits all in residential real estate mortgage lending. You getting a QUICK ANSWER, won't be the REAL ANSWER. QUICK IS GREAT FOR HAMBURGERS, BUT NOT FOR CREDIT DECISIONS.

REAL ESTATE AGENT - A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) - a federal statute and regulation promulgated by HUD, governing residential real estate lending practices and disclosures.

REAL PROPERTY - land and objects permanently attached to it, such as buildings and fences. In some States, this term is synonymous with the term "real estate."

REALTOR ® - A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

RECONCILIATION - the last step in the appraisal process, in which all data are compared and the approaches to value considered to arrive at a final estimate of value.

RECONVEYANCE - an instrument used to transfer title from a trustee to the equitable owner of real estate; used when the performance of debt is satisfied under the terms of a deed of trust.

RECORDING - the filing of documents or details of a legal document to make them a matter of public record. Usually requires the witnessing and notarizing of the document or instrument to be recorded.

REDORDING FEES - Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

RED LINING - arbitrary denial of a residential real estate loan application in certain geographical areas, without considering the individual applicants qualifications.

REFINANCING - the repayment of a debt from the proceeds of a new loan, using the same property as security for the new loan.

REGULATION B - Federal Reserve regulation prohibiting discrimination against consumer credit applicants, and establishing guidelines for collecting and evaluating credit information.

REGULATION Z - Regulation written by the Federal Reserve Board to implement the Federal Truth-In-Lending Act, requiring full written disclosures of the credit portion of all consumer loans, including annual percentage rate (APR) etc.

REHABILITATION - restoration of a parcel of real property, or neighborhood to bring it back to its full (highest & best) potential use.

REINSTATEMENT - the curing of all loan defaults by a borrower, to return it to a current status.

RELEASE OF LIABILITY - an agreement by a lender to terminate personal obligation of a mortgagor in connection with payment of a debt.

RELEASE OF LIEN - an instrument discharging secured property from a lien.

RENT CONTROL - legal limitations on rent increases.

REPLACEMENT COST - the money required to replace building structure, with one of equivalent value and function, but not necessarily identical in design or materials.

REPRODUCTION COST - the cost required to reproduce a building using the same or equivalent materials, design and construction methods, less an allowance for depreciation. An element of the cost approach method of appraisal.

RESCISSION - the cancellation of a transaction or contract by law or by mutual consent.

RESTRICTIVE COVENANT - a clause in a deed that denies the buyer full rights to the property in question.

REVERSE ANNUITY MORTGAGE (RAM) - A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral for and repayment of the loan.

REVOLVING LIABILITY - A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services.

RIDER - an addendum or amendment to a written contract.

RULE OF 78TH'S - a mathematical method used by a lender, usually on installment loans, for calculating an interest rebate on a loan paid off or refinanced prior to its maturity date, also known as the United States Rule.

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SALES CONTRACT - a written agreement between buyer and seller, stating terms and conditions of a sale or exchange of property.

SATISFACTION OF MORTGAGE - the recorded instrument the lender provides, to evidence payment in full of a mortgage debt.

SEASONED MORTGAGE - a mortgage on which payments have been made regularly for a year or longer.

SECOND MORTGAGE (HOME EQUITY LOAN) - a mortgage loan that has rights which are subordinate to a first, or senior lien.

SECONDARY MORTGAGE MARKET - The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

SECURITY - The property that will be pledged as collateral for a loan.

SECURED PARTY - an entity party holding a security interest or lien, also called the mortgagee.

SECURITY INSTRUMENT - mortgage or deed of trust, evidencing the pledge of real estate as collateral for a loan.

SELF-EMPLOYMENT INCOME - the net earnings from your business or profession, determined by subtracting business expenses from gross tax return reported income. For lending documentation purposes, if you didn't pay taxes on it, you didn't earn it.

SELLER CARRY-BACK - An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See owner financing.

SELLER CONTRIBUTIONS - payment by the seller or any other interested party of some or all of the purchaser's usual closing costs. Investors and pmi insurers sometimes limit the amount of seller contribution and require lenders to adjust the property's value if contributions exceed limitations. Undisclosed seller contributions (such as decorating allowances, appliances or payment of moving expenses) are made to borrowers outside of closing, and are also subject to investor/lender and insurer restrictions.

SENIOR MORTGAGE (LIEN) - a first mortgage or deed of trust.

SERVICER - An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

SERVICING - All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

SETTLEMENT COSTS - money paid by borrower (and seller if a purchase transaction) to effect the closing of a mortgage loan, including payments for title insurance, survey, attorney fees, and such prepaid items as taxes and insurance escrow.

SHARED APPRICIATION MORTGAGE (SAM) - A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.

SIMPLE INTEREST - Interest which is computed only on the principle balance.

SITE DEVELOPMENT - all improvements made to a site, such as clearing, grading and the installation of public utilities, before the actual construction of a building.

SITE VALUE - the value of land without improvements, as if vacant.

SPECIAL ASSESSMENT DISTRICT - a governmental subdivision with the power to tax and improve property within its jurisdiction. Also called special improvement district.

SPOT LOANS- single family residential real estate mortgage loans solicited on an individual basis, rather than through Realtor referrals, or otherwise.

STANDARD PAYMENT CALCULATION - 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.

STEP-RATE MORTGAGE - A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.

SUBCONTRACTOR - a person or company contracted to perform work for a developer or general contractor

SUBDIVISION - improved or unimproved land divided into a number of parcels for sale, lease, financing or development.

SUBORDINATION - the act of a party acknowledging, by a written record, that a debt is inferior to the interest of another in the same property. Subordination may also apply not only to mortgages but to leases, real estate rights and any other types of debt instruments.

SURETY BOND - written evidence of a third party, called the surety, that will be primarily liable for a debt in the case of default.

SURVEY - a measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions and the location and dimensions of any improvements.

SWEAT EQUITY - Equity created by a purchaser performing work on a property being purchased.

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TAX LIEN - a claim against property for unpaid taxes.

TENANCY IN COMMON - a form of undivided ownership interest by two or more persons that provides for no right of survivorship. The interest need not be a equal percentages.

TENANT - one who is not the owner, but occupies real property under consent of the owner, and in subordination to the owner's title. The tenant is entitled to exclusive possession, use and enjoyment of the property, usually for a time ands amount specified in a lease or rental agreement.

TERM - the period of time between the commencement date and termination date of a note, mortgage, deed of trust, legal document or other contract.

THIRD-PARTY ORIGINATION - When a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

TITLE - written evidence of the right to or ownership in real property. Title may be acquired through purchase, inheritance, devise, gift, or through foreclosure of a mortgage.

TITLE INSURANCE - a contract by which the insurer agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise.

TITLE SEARCH - an examination of public records, laws and court decisions, to ensure that no one except the current owner has a valid claim to the property, and to disclose past and current facts regarding ownership of the subject property.

TOTAL EXPENSE RATIO - Total obligations as a percentage of gross monthly income including monthly housing expenses plus other monthly debts.

TOWNHOUSE - a row house on a small lot, which has exterior limits common to other similar units. Title to the unit and its lot is vested in the individual owner with a fractional interest in common areas, if any.
TRUSTEE - one who holds legal title to property for the benefit of another, or to secure performance of a specific obligation.

TRUTH-IN-LENDING ACT (TILA) - the Federal Truth-in-Lending Act (PL. 90-321, 15 USC 1601 et seq.) Part of the Consumer Credit Protection Act of 1965, a Federal law that requires lenders to provide full written disclosure of credit terms and conditions, the finance charges, the annual percentage rate (APR), and other fees and charges incurred in a consumer loan agreement.

TWO STEP MORTGAGE - A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. the lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. also called "Super Seven" or "Premier" mortgage.

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U *

UNDERWRITING - the process of deciding whether to make a loan based on credit, employment, assets and other factors. CHARACTER - CAPACITY - COLLATERAL - COMMON SENSE.

UNENCUMBERED PROPERTY - a parcel of real property which is free and clear of debt or liens.

UNIFORM COMMERCIAL CODE (UCC) - a comprehensive code of laws regulating important legal aspects of business and financial transactions.

UNIFORM RESIDENTIAL APPRAISAL REPORT (URAR) - The FNMA 1004/FHLMC 65 standard residential form used by real property appraisers to detail facts supporting the value of single-family properties.

UNIMPROVED LAND - raw land, dirt only.

URBAN RENEWAL - the redevelopment or rehabilitation of real property in an urban area.

USURY - the act of charging borrowers a rate of interest greater than that permitted by law.

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VA (DEPARTMENT OF VETERANS AFFAIRS) MORTGAGE - government insured loans guaranteed by the Department of Veterans Affairs, requiring very low or no down payments and with generous requirements for qualification. They are available only to veterans of the armed services, those currently on active duty or in the reserves, and their spouses.

VA FUNDING FEE - a fee the VA charges to guarantee a residential real estate mortgage loan

VA LOAN - mortgage loan made by an approved lender and guaranteed by the Department of Veterans Affairs. VA loans are made to eligible veterans and those currently serving in the military and can have a lower down payment than other type loans.

VACANCY RATE - the ratio between the number of vacant units and the total number of units in a multi-tenant building or development.

VALUATION - the estimation of a property's price through appraisal.

VARIABLE RATE MORTGAGE (VRM) - see adjustable rate mortgage.

VERIFICATION OF DEPOSIT (VOD) - a form that requests and secures verifications of amount on deposit at financial institutions.

VERIFICATION OF EMPLOYMENT (VOE) - a form that requests and secures documentation of a mortgage applicant's work history and/or occupation, to assist in the lender's credit investigation.

VESTED INTEREST - a legal claim or right to the present or future enjoyment of real property.

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WAREHOUSE FEE - Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans, the mortgage firm has an economic loss which is offset by charging a warehouse fee.

WRAPAROUND MORTGAGE - Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

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