| A compilation of common mortgage and loan related terms and their definitions. | |
|---|---|
| Adjustable Rate Mortgage (ARM): | Mortgage loans that permit the lender to periodically adjust the interest rate to reflect fluctuations in the cost of money. |
| Alternative Documentation: | The use of Verifications of Employment (VOE), Verifications of Deposit (VOD) and letters from Certified Public Accountants (CPA Letters) to qualify a borrower for a mortgage loan, as opposed to the more traditional financial documents such as pay stubs, W-2 forms, 1040s and bank statements. |
| Amortization: | The systematic and continuous payment of an obligation through installments until the debt has been paid in full. |
| Annual Percentage Rate (APR): | A mathematical formula which represents the relationship between the cost of borrowing and the total amount financed. It could be higher than the interest rate stated on the Note because it includes, in addition to the interest rate, loan discount points, commitment fees, prepaid interest and mortgage insurance. |
| Application: | An initial statement of personal and financial information, which is required to approve your loan. |
| Appraisal: | An estimate or opinion of value for real property as of a certain date. |
| Appreciation: | An increase in the value of a property due to market conditions or other causes. The opposite is depreciation. |
| Balloon Mortgage: | A fixed-rate mortgage for a set number of years and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with borrowers expecting to sell or refinance their property within a definite period of time. |
| Bankruptcy: | Legal relief from the payment of all debts after the surrender of all assets to a court-appointed trustee. Assets are distributed to creditors as full satisfaction of debts, with certain priorities and exemptions. A person, firm or corporation may declare bankruptcy under one of several chapters of the U. S. Bankruptcy Code: Chapter 7 covers liquidation of the debtor's assets; Chapter 11 covers reorganization of bankrupt businesses; Chapter 13 covers payment of debts by individuals through a bankruptcy plan. |
| Cap: | The limit placed on adjustments that can be made to the interest rate or payments such as the annual cap on an adjustable rate loan (ARM) or the cap on a rate over the life of the loan. |
| Cash-out Refinance: | To refinance the mortgage on a property for more than the principal owed. This allows the borrower to get cash from the equity in their home. Loan products may vary on how much can be borrowed on a cash-out refinance. |
| Ceiling: | The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage. |
| Closing: | Also known as settlement, the finalization of the process of purchasing or refinancing real estate. The closing includes the delivery of a Deed, the signing of Note(s) and Mortgage(s), and the disbursement of funds. |
| Closing Costs: | Costs that are due at closing, in addition to the purchase price of the property. These costs normally include, but are not limited to, origination fee, discount points, attorney's fees, costs for title insurance, surveys, recording documents, and prepayment of real estate taxes and insurance premiums held by the lender. Sometimes the seller will make a contribution to closing costs, per contract. |
| Closing Statement: | An accounting of the debits and credits incurred at closing. All FHA, VA and Conventional financing loans use a Uniform Closing or Settlement Statement commonly referred to as the HUD-1. |
| CMT: | The Constant Maturity Treasury (CMT) is published by the Federal Reserve Board based on the average yield of a variety of Treasury securities adjusted to a one-year maturity. The CMT is offered as an index for setting rates on adjustable rate mortgage programs. |
| Co-Borrower: | A party who signs the mortgage Note along with the primary borrower, and is equally responsible for all obligations under the Note together with the primary Borrower, and who may also share title to the subject property. |
| Collateral: | Property pledged as security for a debt. For example, real estate that secures a mortgage. Collateral can be repossessed or foreclosed if the loan is not repaid. |
| Combined Loan To Value (CLTV): | The mathematical relationship between the total of all loan amounts (first mortgage plus subordinate mortgage liens, including home equity lines of credit) and the value of the subject property. |
| Community Reinvestment Act (CRA): | This act requires financial institutions to meet the credit needs of their community, including low and moderate-income sections of the local community. It also requires banks to make reports concerning their investment in the areas where they do business. |
| Condominium: | A form of property ownership in which the homeowner holds title to an individual dwelling unit, an undivided interest in common areas of a multi-unit project, and sometimes the exclusive use of certain limited common areas. All condominiums must meet certain investor requirements. |
| Conforming Loan: | Mortgage loans that meet Fannie Mae/Freddie Mac standards and can therefore be sold on the secondary mortgage market. |
| Contract of Sale: | The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer. |
| Conventional Loan: | A mortgage loan not insured or guaranteed by the federal government. |
| Conversion Option: | Options to convert an adjustable rate mortgage or balloon loan to a fixed rate mortgage under specified conditions. |
| Creditor: | A person to whom debt is owed by another person who is the "debtor". |
| Credit Limit: | The maximum amount that you can borrow. |
| Credit Rating: | A rating given a person or company to establish credit-worthiness based upon present financial condition, experience and past credit history. |
| Credit Report: | A document completed by a credit-reporting agency providing information about the buyer's credit cards, previous mortgage history, bank loans and public records dealing with financial matters. |
| Debt Service: | The total amount of credit card, auto, mortgage or other debt upon which you must pay. |
| Debt Service Coverage Ratio (DSCR): | Within commercial mortgage financing underwriting practice, it is the ratio used most often to determine whether or not the mortgage loan as applied for is likely to be paid timely each month during loan servicing. In general, DSCR is determined by diving the Net Operating Income (NOI) by the Total Debt Service. A DSCR of 1.0 is considered a break-even rental property. Lenders generally look for DSCR of at least 1.25 - 1.35 as a condition to lend. |
| Deal Structure: | An Underwriters review of certain aspects of a loan application that do not meet standard guidelines. |
| Debt to Income (DTI) Ratio: | Compares the amount of monthly income to the amount the borrower will owe each month in house payment (PITI) plus other debts. The other debts may include but not limited to car payment, credit cards, alimony, child support, and personal loans. This ratio is commonly used to see if the borrower has the capacity to repay the debt. |
| Deed of Trust: | A legal document that conveys title to real estate to a disinterested third party (trustee) who holds the title until the owner of the property has repaid the debt. In states where it is used, a Deed of Trust accomplishes essentially the same purpose as a Mortgage. |
| Default: | Failure to comply with the terms of any agreement. In real estate, generally used in connection with a mortgage obligation to refer to the failure to comply with the terms of the Promissory Note. Most often this default is a failure to make payments, however, there are other means by which a borrower may default, such as the failure to pay real estate taxes or an unauthorized transfer of title. |
| Depreciation: | A decline in the value of property. The opposite of appreciation. |
| Discount Points: | An amount paid to Lender when a loan is made to make up the difference between the current market interest rate and the rate a Lender gives a Borrower on a Note. Discount points increase a Lender's yield, allowing the Lender to give the Borrower a lower interest rate. |
| Down Payment: | The part of the purchase price which the buyer pays in cash and does not finance with a mortgage. |
| Earnest Money: | Deposit made by a purchaser of real estate as evidence of good faith and is typically made at the time of contract signing. |
| Equal Credit Opportunity Act (ECOA): | Federal law that prohibits a lender in granting credit on the basis of race, color, religion, national origin, sex, marital status, age, or income derived from public assistance programs. |
| Equity: | The difference between the current market value of a property and the principal balance of all outstanding mortgage liens. |
| Escrow Account: | An account held by the lending institution to which the borrower pays monthly installments for property taxes, insurance, and special assessments, and from which the lender disburses these sums as they become due. Some funds may be withheld at closing for escrow start up, together with regular monthly installments after closing during loan servicing. |
| Fair Credit Reporting Act: | Federal law dealing with the granting of credit, access to credit information, the rights of debtors, and the responsibilities of creditors. |
| Fair Housing Act: | Prohibits the denial or variance of the terms of real estate related transactions based on race, color, religion, sex, national origin, disability, or familiar status of the credit applicant. Real estate related transactions include a mortgage, home improvement, or other loans secured by a dwelling. |
| Federal Home Loan Mortgage Corporation (FHLMC): | Also known as Freddie Mac. A publicly owned corporation created by Congress to support the secondary mortgage market, and that functions as a buyer and seller of residential mortgages. |
| Federal National Mortgage Association (FNMA): | Also known as Fannie Mae. A privately owned corporation to support the secondary mortgage market. It adds liquidity to the mortgage market by investing in home loans through the country. |
| FICO Score: | A credit score given to a person that establishes creditworthiness based on present financial condition, experience and past credit history. |
| Finance Charge: | The cost of credit as a dollar amount. It includes any charge payable directly or indirectly by the borrower and any charge that the lender imposes directly or indirectly as a condition of extending credit. Finance charges include origination fees, appraisal, underwriting fees, discount points, mortgage insurance, etc. It does not include title insurance, tax stamps, lender paid mortgage broker compensation, and those charges that seller pays for. |
| Financial Statement: | A summary of facts showing an individual's or company's financial condition. For individuals, it states their assets and liabilities as of a given date. For a company it should include a Profit and Loss Statement (P&L) for a certain period of time and balance sheet, stating assets and liabilities as of a given date. Mortgage underwriters will likely require this as a condition for loan approval for self-employed borrowers. |
| First Mortgage: | A real estate loan that creates a primary lien against real property. |
| First Rate Adjustment -- First rate adjustment after: | In association with an Adjustable Rate Mortgage loan, this is the number of months after which the loan has closed when the first interest rate adjustment will occur. |
| First Rate Adjustment -- Maximum rate decrease: | In association with an Adjustable Rate Mortgage loan, this is the most the interest rate can decrease during the first adjustment period. |
| First Rate Adjustment -- Maximum rate increase: | In association with an Adjustable Rate Mortgage loan, this is the most the interest rate can increase during the first adjustment period. |
| Fixed Rate Mortgage: | The type of loan where the interest rate will not change for the entire term of the loan. |
| Floating: | The term used to describe that period of time after initial application is taken but prior to rate lock. |
| Floatdown: | The term used to describe interest rate lock in, while preserving the ability to lock in at some subsequent date prior to closing at a lower interest rate, subject to lender and/or investor restrictions, terms and conditions. |
| Flood Insurance: | Insurance that compensates for direct physical damages by or from flood to the insured property subject to the terms, provisions, conditions and losses not covered provision of the policy. It is required for mortgages on properties located in federally designated flood areas. |
| Good Faith Estimate (GFE): | An estimate of settlement charges paid by the borrower at closing. The Real Estate Settlement Procedures Act (RESPA) requires a Good Faith Estimate to be provided within three business days of the date the loan application is made. |
| Gift Letter: | A letter or affidavit that indicates that part of a borrower's down payment is supplied by a relative of an irrevocable gift and that the gift does not have to be repaid. |
| Gross Income: | A person's income before deduction for income taxation. |
| Home Equity Line of Credit: | Or HELOC, is a credit facility as secured against real property, although it is usually against a primary residence. A HELOC allows a borrower to borrow funds at closing or at some point thereafter through permitted draws against the unused portion of the HELOC. HELOCs are most often used for home improvements, debt consolidation or as general cash in hand, but may also be used as a purchase money mortgage loan, and may be advisable depending on specific circumstances. |
| Home Equity Loan: | A loan taken by a homeowner secured by a mortgage, although it is usually a second mortgage and against a primary residence. Home equity loans are usually a one-time loan for a specific amount of money and purpose, such as auto or boat loans, credit card debt, medical debt, and education loans. |
| Hazard Insurance: | Insurance against losses caused by perils which are commonly covered in policies described as a "Homeowner Policy". HO-3 is insurance parlance for those policies against private homes. HO-6 is for condominium owners. Mortgage Lender(s) are required to be referenced as additional insured parties on hazard insurance policies, due to their interest in the subject property. |
| Maintenance: | Costs associated with maintaining a home or rental property. This may include, but not limited to, general repairs, replacement or repair of furnace, air conditioning, roof, plumbing and electrical systems. |
| Home Mortgage Disclosure Act (HMDA): | Also known as Regulation C. The purpose of HMDA is to provide disclosure of mortgage lending application activity (home purchase or improvement) to regulators and the public within a given geographic area. |
| Homeowners Association (HOA): | A non-profit corporation or association that manages common areas and services of a Condominium or Planned Unit Development (PUD). |
| Homeowners Insurance: | Insurance that covers damage to the insured's' residence and liability claims made against the insured subject to the policy terms, conditions, provisions, losses not insured provision and exclusions. |
| Housing Expense Ratio: | Ratio used to determine the borrowers capacity to repay a home loan. The ratio compares gross monthly income to the house payment (Principal, Interest, Taxes and Insurance). |
| HUD 1 Settlement Statement: | A form utilized at a residential loan closing that includes mortgage financing which itemizes the costs associated with purchasing the home. Used universally by mandate of HUD, the Department of Housing and Urban Development. |
| Index: | In connection with ARM loans, the external measurement used by a Lender to determine future changes which are to occur to an adjustable loan program. These will typically be published rates that are independent of the Lender's control, such as a Treasury Bill. |
| Initial Interest Rate: | The beginning interest rate at the start of an adjustable rate mortgage (ARM). It may be lower than the fully indexed rate or "going market rate" and it will remain constant until it is adjusted up or down on the adjustment date. |
| Interest: | The amount paid by a borrower to a lender for the use of the lender's money for a certain period of time. |
| Interest Rate: | The percentage of an amount of money that is paid for its use for a specific time; usually expressed as an annual percentage. |
| Judgment: | Decree of a court declaring that one individual or entity is indebted to another and fixing the amount of such indebtedness. Judgments become a matter of public record. |
| Jumbo Loan: | A loan above the limit set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Also referred to as a non-conforming loan. Jumbo loans may have underwriting criteria and interest rates that are in contrast to those for conforming loans. |
| Late Charge: | An additional charge a borrower is required to pay as a penalty for failure to pay a regular mortgage loan installment when due; a penalty for a delinquent payment. |
| LIBOR: | LIBOR is an abbreviation for the "London Interbank Offered Rate," and is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Interest only loans and other adjustable rate mortgage programs. |
| Lien: | A legal claim against property for payment of a debt or obligation. Effective liens must be paid off or subordinated when the property is sold. A mortgage lien is created when you borrow money and use your home as collateral for the loan. |
| Life of Loan -- Maximum rate decrease: | In association with an Adjustable Rate Mortgage loan, this is the most the interest can decrease over the life of the mortgage loan. |
| Life of Loan -- Maximum rate increase: | In association with an Adjustable Rate Mortgage loan, this is the most the interest can increase over the life of the mortgage loan. |
| Loan Application: | A source of information on which the lender bases a decision to make or not make a loan; defines the terms of the loan contract, gives the names of the borrower(s), place of employment, salary, bank accounts, credit references, real estate owned, and describes the property to be mortgaged. It is the most important document in a mortgage loan file, and becomes the basis for a series of legal rights and obligations, pursuant to banking law. |
| Loan Balance: | The amount of remaining unpaid principal balance owed by the borrower. |
| Loan Term: | Number of years a loan is amortized. Mortgage loan terms are generally 15, 20, or 30 years. |
| Loan-to-Value (LTV): | The ratio of the total amount borrowed on a mortgage against a property, compared to the appraised value of the property. A LTV ratio of 90 means that the borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is the lesser of the purchase price or the appraised value. For refinances the value is determined by an appraisal. |
| Loan-to-Value Ratio: | The ratio, expressed as a percentage, of the amount of the loan (numerator) to the value or selling price of real property (denominator). For example, if you have an $80,000 1st mortgage on a home with an appraised value of $100,000, the LTV is 80% ($80,000 / $100,000 = 80%). |
| Lock-In: | A written agreement between the lender and borrower for a specified period of time in which the lender will hold a specific interest rate, origination and/or discount point(s). |
| Margin: | Under the terms of an adjustable rate mortgage (ARM), the margin is a set adjustment to the index. The particular loan product determines the amount of the margin at the time the loan is originated. |
| Median Income: | The middle income level. Half of the incomes would be higher than the median income and half of the incomes would be below the median income. This is not to be confused with an average income. Each county is individually assessed by HUD for median income figures. |
| Minimum Payment: | The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the minimum payment may be "interest only," (simple interest). In other plans, the minimum payment may include principal and interest (amortized). |
| Mortgage: | The written instrument used to pledge a title to real estate as security for repayment of a debt pursuant to a Promissory Note. |
| Mortgage Banker: | Originates mortgage loans; loaning its own funds. Lenders close mortgage loans in their own name but may assign the loan anytime after loan funding to other investors. |
| Mortgage Broker: | As do mortgage bankers, takes loan application and processes the necessary paperwork. Unlike a mortgage banker, brokers do not fund the loan with their own money, but work on behalf of several investors, such as mortgage bankers, large financial banks and investment bankers, and act as an intermediary between lenders and borrowers. |
| Mortgage Insurance: | Insurance written in connection with a mortgage loan that indemnifies the lender in the event of borrower default. In connection with conventional loan transactions, this insurance is commonly referred to as Private Mortgage Insurance (PMI). |
| Mortgage Loan: | A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The Mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security. |
| Mortgage Note: | A written promise to pay a sum of money at a stated interest rate during a specified term. It is typically secured by a mortgage. |
| Mortgage Servicing: | Controlling the necessary duties of a mortgagee, such as collecting payments, releasing the lien upon payment in full, foreclosing if in default, and making sure the taxes are paid, insurance is in force, etc. The lender or a company acting for the lender, for a servicing fee, may do servicing. (Also called Loan Servicing.) |
| Mortgagee: | The institution, group, or individual that either lent money on the closing of a mortgage loan, or receives a mortgage by assignment or other transfer as a successor in interest. |
| Mortgagee Clause: | This is the clause that is typically used for hazard insurance and flood insurance. For loans originated by the State Farm Bank® it will read: State Farm Bank, F.S.B., Its Successor and/or Assigns, P.O. Box 2583, Ft. Wayne, IN 46801-2583. |
| Mortgagor: | The owner of real estate who pledges his property as security for the repayment of a debt; the borrower. |
| Negative Amortization : | Amortization type in which the monthly payments or other installments are less than the amount that would require to cover the accrued interest on the debt obligation. In this case, the outstanding principal balance will increase as long as negative amortization is in effect. |
| Net Income: | The difference between effective gross income and expense including taxes and insurance. The term is qualified as net income before depreciation and debt. |
| Net Operating Income (NOI): | Rental income of a property after operating expenses. These expenses would include all operating expenses, including real property taxes, assessments, maintenance, janitorial, supplies, insurance, accounting, management, utilities, etc. |
| Non-Conforming: | A loan with a mortgage amount that exceeds that which is eligible for purchase by FNMA or FHLMC. All other loans above this amount are considered to be non-conforming or jumbo loans. |
| Non-Owner-Occupied Property: | Property purchased by a borrower not for a primary residence but as an investment with the intent of generating rental income, tax benefits, and profitable resale. |
| Note: | A written promise by one party to pay a specific sum of money to a second party under conditions agreed upon mutually. Also called "promissory note." |
| Note Rate: | The interest rate on the mortgage loan. |
| Origination Fee: | A fee paid to a lender or broker for taking and processing a loan application. It is usually stated as a percentage of the mortgage amount, but may also be a flat fee. |
| Owner-Occupied Property: | The borrower or a member of the immediate family lives in the property as a primary residence. Under Conforming loan programs, the most advantageous loan terms attach to loans on owner-occupied properties. |
| PITI: | Term commonly used to refer to a mortgage loan payment. Acronym stands for Principal, Interest, Taxes, and Insurance. |
| PITI Ratio: | Compares the amount of the monthly income to the amount the borrower will owe each month in principal, interest, real estate tax and insurance on a mortgage. Lenders use it in deciding whether to give the borrower a loan. Also called "income-to-debt" ratio. |
| Planned Unit: | A housing project that may consist of any combination of homes (one-family to four-family), condominiums, and various other styles. |
| Development (PUD): | In a PUD, often the individual unit and the land upon which it sits are owned by the unit/homeowner; however, the homeowner's association owns common facilities. |
| Points: | The amount paid either to maintain or lower the interest rate. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000). |
| Pre-Approval: | A process in which a customer provides appropriate information on income, debts and assets that will be used to make a credit only loan decision (without addressing collateral). The customer typically has not identified a property to be purchased, however, a specific sales price and loan amount may be used to make a loan pre-approval in this case. Only Mortgage Lenders may issue pre-approvals; not Mortgage Brokers. |
| Pre-Qualification: | A process designed to assist a customer in determining a maximum sales price, loan amount and PITI payment they are qualified for. A pre-qualification is not considered a loan approval. A customer would provide basic information (income, debts, assets) to be used to determine the maximum sales price, etc. Mortgage Brokers or Lenders may issue pre-qualifications. |
| Prepaid Expenses or Prepaids: | The term used to describe either the funds the Lender requires to be deposited to establish the escrow account for taxes and insurance at the time of closing, or a partial month of pre-paid mortgage interest taken at settlement from loan proceeds (also refers to Prepaid Interest). |
| Prepayment: | A loan repayment made in advance of its contractual due date. |
| Prepayment Penalty: | A penalty under a Note, Mortgage or Deed of Trust imposed when the loan is paid before its maturity date. |
| Principal and Interest: | Two components of a monthly mortgage payment. Principal refers to the portion of the monthly payment that reduces the remaining balance for the mortgage (amortization), plus the accrued interest on the outstanding loan balance since the time of the prior loan installment. |
| Principal Balance: | The outstanding balance of a mortgage, not counting interest. |
| Principal, Interest, Real Estate Tax, Insurance Payment (PITI): | The total mortgage payment which includes principal, interest, taxes and insurance. |
| Private Mortgage Insurance (PMI): | Insurance against a loss by a lender in the event of default by a borrower (mortgagor). A private insurance company issues this insurance. The premium is paid by the borrower and is included in the mortgage payment. |
| Processing: | Gathering the loan application and all required supporting documents (including the property appraisal, credit report, credit history, and income and expenses) so that a lender can consider the borrower for a loan. |
| Promissory Note: | A document in which the borrower promises to pay a stated amount on a specific date. The note normally states the name of the lender, the terms of payment and any interest rate. |
| Property Taxes: | Taxes assessed on real property. Property taxes are determined by varying formulas based on real property valuations by a given local and or state government agency. |
| Purchase Agreement: | A written agreement between a buyer and seller of real property that states the price and terms of the sale. |
| Purchase Price: | The total amount paid for real property. |
| Qualifying Income Ratios: | Income analysis used by lenders in deciding whether to offer the borrower a loan. One type of analysis compares only the amount of the proposed monthly mortgage payment to the monthly income. Another compares the amount of the total monthly payments (for example car, credit card and proposed mortgage payments) to the monthly income. |
| Rate Index: | An index used to adjust the interest rate of an adjustable mortgage loan. |
| Real Estate Appreciation Rate: | Percentage increase in the value of real estate, expressed at an annual rate. |
| Real Estate Settlement Procedures Act (RESPA): | A consumer protection law that requires, among other things, lenders to give borrowers advance notice of closing costs, and how much each real estate business is receiving as compensation for their services. |
| Realtor: | A person licensed to negotiate and transact the sale of real estate on behalf of the property owner or Buyer. A real estate broker or associate must hold active membership in a real estate board affiliated with the National Association of Realtors. |
| Recording Fee: | The amount paid to the recorder's office in order to make a document a matter of public record. |
| Regulation Z: | Federal Reserve regulation issued under the Truth-in-Lending Act, which, among other things, requires that a credit purchaser be advised in writing of all costs connected with the credit portion of the loan. |
| Re-Lock: | The term used to describe the state where an interest rate had been locked in, and set to expire at a given date, but where interest rate markets had either maintained their levels or had decreased so that an extension of the rate lock expiration date would be possible and/or would come at no cost, subject to lender and/or investor restrictions, terms and conditions. |
| Rental Payment: | A payment made to use another's property. The amount of the rent is determined in a contract and is typically paid monthly. |
| Renters Insurance: | Insurance against perils which are commonly covered in policies described as a "Renters Policy". |
| Rent Roll: | A list of tenants, what their rental obligations are, and when each lease agreement expires. |
| Repayment: | The payment of a mortgage loan over a period of time established when the loan is originated. |
| Rescind: | To avoid or cancel in such a way as to treat the contract or other object of the rescission as if it never existed. |
| Right to Rescission: | The legal right to void or cancel your mortgage contract in such a way as to treat the contract as if it never existed. Such right is applicable for refinances of primary residences, and not to second homes, investment properties, or in purchase transactions. |
| Sales Contract: | A written agreement between parties stating all terms and conditions of a sale. |
| Secondary Market: | An active market where existing mortgages are bought and sold. Fannie Mae is the most active player in the secondary mortgage market. |
| Seller Contribution: | A seller of real property may agree to pay some or all of the borrower's cost, subject to limitations of Conforming and Non-Conforming loan products. |
| Selling Costs: | The costs incurred in selling a home. This could include Realtor commissions and transfer taxes, depending on the property location and the applicable jurisdiction. |
| Servicing: | All the management and operational procedures that the mortgage company handles for the life of the loan, up through foreclosure if necessary, including: collecting the mortgage payments, ensuring that the taxes and insurance charges are paid promptly, and sending an annual report on the mortgage and escrow accounts. Some mortgage lenders service their originated loans, while others do not. |
| Servicing Released: | A stipulation in the agreement for the sale of mortgages in which the Lender is not responsible for servicing the loan. |
| Servicing Release Premium (SRP): | The payment received by a mortgage lender on the sale of a closed mortgage loan to the secondary mortgage market. The amount of SRP paid is based on the market value of the mortgage note, influenced by several key variables, such as interest rate, loan type, margin (for ARM loans), and the inclusion or exclusion of other items such as prepayment penalties. Also considered are the loan's LTV (loan to value), the borrower's credit score, the presence of Private Mortgage Insurance (PMI), pre-payment risk of the borrower and other factors |
| Servicing Retained: | A loan sale in which the original lender's servicing department continues to service the loan after the sale to a secondary institution or investor. |
| Settlement Statement: | Also referred to as a HUD-1 Settlement Statement. The complete breakdown of costs involved in the real estate transaction for both the seller and buyer. |
| Single-Family Attached Home: | A single-family dwelling that is attached to other single-family dwellings. |
| Single-Family Detached Home: | A freestanding dwelling for a single family. |
| 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. |
| Subordination: | The process by which one party's rights are ranked below those of others. A Subordination Agreement is an agreement by which one party holding an otherwise senior real estate lien consents to reduction in priority to a subsequent lien holder or other interested party. This happens most often when a Borrower applies for a new first mortgage with the intent of keeping a pre-existing HELOC open and undisturbed. |
| Subordinate Financing: | An additional lien against the real estate securing borrowers first mortgage. This lien takes second priority to the first mortgage. |
| Subsequent Rate Adjustment -- Maximum rate decrease: | In association with an Adjustable Rate Mortgage loan, this is the most the interest rate can decrease when it is scheduled for reevaluation and possible adjustment. |
| Subsequent Rate Adjustment -- Maximum rate increase: | In association with an Adjustable Rate Mortgage loan, this is the most the interest rate can increase when it is scheduled for reevaluation and possible adjustment. |
| Subsequent Rate Adjustment -- Next ARM Adjustment Date: | In association with an Adjustable Rate Mortgage loan, this is the date scheduled for the next possible payment adjustment. |
| Subsequent Rate Adjustment -- Rate Change Frequency: | In association with an Adjustable Rate Mortgage loan, this is the frequency in which possible Adjustments may be made to the interest rate amount for Adjustable Rate Mortgages after the initial adjustment. |
| Tax Rates: | Tax levied by the federal government and some states based on a person's income. Federal income tax rates vary depending on a person's adjusted gross income. |
| Title: | The evidence to the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed, which specifies in whom the legal state is vested and the history of ownership and transfers, and recordation of the deed is required in nearly all cases in order to be an effective indicia of ownership. Title may be acquired through purchase, inheritance, devise, gift or through the foreclosure of a mortgage. |
| Title Insurance Policy: | A contract by which the insurer, usually a title company, indicates who has legal title and agrees to pay the insured a specific amount of any loss caused by clouds, claims or defects of title to real estate, which the insured has an interest as owner, mortgagee or otherwise.? (a) Owner's Title Policy: Usually issued to the landowner himself. The owner's title insurance policy is bought and paid for only once and then continues in force without any further payment. Owner's Title Insurance policies are not assignable.? (b) Mortgagee's Title Policy: Issued to the mortgagee and terminates when the mortgage debt is satisfied. |
| Treasury Bills: | Interest bearing U.S. Government obligations sold at a weekly sale. The change in interest rates paid on these obligations is frequently used as the Rate Index for Adjustable Mortgage Loans. |
| Truth in Lending (TIL): | The name given to the federal statues and regulations (Regulation Z) which are designed primarily to insure that prospective Borrowers of credit received credit and cost information before concluding a loan transaction. |
| Underwriting (Mortgage Loans): | The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's creditworthiness and the quality of the property itself. |
| Variable Rate | An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. |
| Verification of Deposit (VOD): | Form used in mortgage lending to verify the deposits or assets of a prospective borrower when monthly statements are unavailable or unusable. |
| Verification of Employment (VOE): | Form used in mortgage lending to verify the employment and income of a prospective borrower when pay stubs and W2 forms are unavailable or unusable. |
| Verification of Mortgage (VOM): | Form used in mortgage lending to verify the existing mortgage balance, monthly payments and late payments, if any. |
| Verification of Rent: | Form used in mortgage lending to verify monthly rents paid and late payments, if any. |
