|
Chapter 12 |
||
|
GLOSSARY OF MORTGAGE TERMS -A- Accrued
Interest: Interest earned for the period of time
elapsed since interest was last paid. Acquisition
Cost: In a HUD/FHA transaction, the price the borrower paid for
the property plus any of the following costs: closing, repairs, or
financing (except discounts in other than a refinance transaction). Does
not include prepaid discounts in a purchase transaction, mortgage
insurance premiums, or similar add-ons. Aggregate
Analysis: An accounting method a servicer uses in
conducting an escrow account analysis by computing the sufficiency of
escrow account funds by analyzing the account as a whole. ALTA
: American Land Title Association. A national association of
title insurance companies, abstractors, and attorneys specializing in real
property laws. The association speaks for the title insurance and
abstracting industry and establishes standard procedures and title policy
forms. Amortization:
Repayment of a mortgage debt with periodic payments of both principal and
interest, calculated to retire the obligation at the end of a fixed period
of time. Applicant:
A prospective borrower who has completed an application. Application:
An application is series of steps, usually including the completion of
documents, a lender requires of those seeking a loan. Appraisal:
An opinion or estimate of value. Also refers to the process by which a
value estimate is obtained. Appraised
Value: An opinion of value reached by an appraiser based upon
knowledge of a market area and analysis of market sales data. Appraiser:
One qualified by education, training, and experience to estimate the value
of real and personal property. APR:
Annual Percentage Rate. A term defined in section 106 of the federal Truth
in Lending Act (PL 90-321; 15 USC 1606), which expresses on an annualized
basis the charges imposed on the borrower to obtain a loan (defined in the
Act as "finance charges"), including interest, discount and
other costs. Arm's
Length Transaction A transaction in which the parties
involved are entirely independent of each other, deal with each other as
strangers, and have no reason for collusion. ARM
Loan: An adjustable rate mortgage loan, the note rate of which is
subject to periodic adjustment in accordance with the terms of the Note. Arrears:
The situation in which mortgage interest and real estate taxes are paid at
or after the end of the period for which they are levied. Late payment is
also described as being in arrears. -B- Balance
Sheet: A report of the financial position of a business at a
specific point in time, showing its assets, liabilities, and owner's
equity. Balloon
Mortgage: A mortgage with periodic installments
of principal and interest that do not fully amortize the loan. The balance
of the mortgage is due in a lump sum at a specified date, usually the
unamortized final payment. Bankruptcy:
Court proceedings to relieve the debts of an individual or business unable
to pay its creditors. Basis
Point: One one-hundredth of one percent. Used primarily to describe
changes in yield or price on debt instruments, including mortgages and
mortgage-backed securities. Binder:
Temporary hazard or title insurance granted prior to the issuance of a
permanent policy. In real estate, a preliminary agreement between a buyer
and seller which includes the price and terms of the contract. Bond
Loan: A state-sponsored method of assisting low income borrowers
and first time homeowners in the purchase of a home at a reduced interest
rate. Broker:
An individual employed on a fee or commission basis to bring buyers and
sellers together and assist in negotiating contracts between them. A
mortgage broker does not retain servicing typically. Business
Day: Days on which a bank or market is open for business or
trading; usually excludes Saturdays, Sundays, and legal public holidays. -C- Cap:
Payment: Consumer safeguards on an adjustable-rate mortgage which limit
the amount monthly payments may change. Interest: Consumer safeguards on
an adjustable-rate mortgage which limit the amount the interest rate may
change per year and over the life of the loan. Cash
Out Refinance: When the principal amount of a new
mortgage involved in refinancing is greater than the principal amount
outstanding of the existing mortgage being refinanced, and all or a
portion of the equity is converted to cash. CBA:
Controlled Business Arrangement. Business relationship in which a provider
of settlement services receives a referral from an affiliated company in
another settlement service business. Real estate brokerage and mortgage
lenders that are commonly owned, controlled or franchised and refer
settlement service business to each other are typical examples of such
CBA's. CHUMS:
Computerized Home Underwriting Management System. HUD's automated system
that tracks the application for mortgage insurance from the initial
appraiser request through to loan closing and MIC issuance. CLAS:
CHUMS Lender Access System Closed-End
Mortgage: A mortgage under which the mortgagor is
prohibited from borrowing additional funds under the same mortgage. Closing:
In real estate, the delivery of a deed, financial adjustments, the signing
of note and the disbursement of funds necessary to consummate a sale or
loan transaction. Closing
Costs: Fees paid to affect the closing of a mortgage, such as an
origination fee, discount points, title insurance fees, survey fees, and
attorney's fees. Co-Borrower:
Second or additional person equally responsible for payments on a
mortgage. Co-op
(Cooperative): In real estate, a form of multiple
ownership in which a corporation or business trust entity holds title to a
property, (usually an apartment complex) and grants occupancy rights to
shareholder tenants through proprietary leases. Collateral:
Property pledged as security for a debt, for example, mortgaged real
estate. Commitment:
An agreement, generally in writing, between a lender and a borrower, to
loan money at a future date, subject to specified conditions. In secondary
marketing, an agreement, in writing, between a lender and an investor to
buy and sell mortgages under specific terms. Commitment
Fee: Any fee paid by a potential borrower to a potential lender
for the lender's promise to loan money at a specified date in the future.
The lender may or may not expect to fund the commitment. In secondary
marketing, a fee paid by the loan seller to the investor in return for the
investor's promise to purchase a loan or package of loans at a future
date. Community
Property: In some states, a form of ownership
under which property acquired during a marriage is presumed to be owned
jointly unless acquired as separate property of either spouse. Comparables:
Properties used for comparative purposes in the appraisal process that
have similar characteristics to the subject property. Also called comps. Conditional
Commitment: An agreement to lend money to a
borrower that has yet to be identified, but is still subject to the
approval of the lender. During HUD/FHA mortgage insurance processing, it
indicates the satisfactory completion of technical processing involving
the estimated cost of the project, the "as-is" value of the
site, a detailed estimate of operating expenses and taxes, supportable
costs, the financial and credit capacity of sponsors, financial
requirements, and mortgage amounts. Condominium:
A form of property ownership whereby the purchaser receives title to a
unit in a multiunit structure and a proportionate interest in common
areas. Contractor:
A person or company who agrees to do work and/or furnish materials for a
contracted price. Subcontractors are often hired by the contractor to
perform specialized or technical labor. Conventional
Financing: Mortgage financing which is not insured
or guaranteed by a government agency such as HUD/FHA, VA or the Farmers
Home Administration. Counteroffer:
An offer made in response to an offer. Convertible
Mortgage: A type of adjustable rate mortgage that
may be converted to a fixed-rate mortgage at specified intervals during a
pre-determined time period. Credit
Report: A report to a prospective lender on the credit standing of a
prospective borrower, used to aid in the determination of
creditworthiness. Credit
Score: A score that by statistical means assess' how likely a
borrower is to repay a loan. The credit score is based on the data
available in the borrower's credit report and measures the relative degree
of risk a potential borrower represents to the lender or investor. The
score may be from FICO, Beacon, or Empirica, depending on the credit
bureau that provides the score. CRV:
Certificate of Reasonable Value. A document issued by the Veteran's
Administration which establishes a maximum value and loan amount for a VA
guaranteed mortgage. -D- DPAP:
Down payment Assistance Program. Monetary assistance with down payment
and/or closing costs provided by a local or federal agency to a low or
moderate income borrower. Debt-to-Equity
Ratio: The proportion of capital borrowed to the amount of capital
invested out-of-pocket or obtained through the sale of common stock; also
called leverage ratio. Deed
of Trust: A type of security instrument in which
the borrower conveys title to real property to a third party (trustee) to
be held in trust as security for the lender, with the provision that the
trustee shall reconvey the title upon the payment of the debt, and
conversely, will sell the land and pay the debt in the event of a default
by the borrower. Default:
Failure of a borrower to comply with the terms and conditions of either
the loan agreement or the mortgage. Delinquency:
Failure of a borrower to make timely payments under a loan agreement. Delivery:
In mortgage banking the physical transfer of loan documents to an investor
or agent in conformance with the commitment. Direct
Endorsement: A HUD program that enables an eligible
single-family lender to conduct the processing, underwriting and closing
of FHA single-family loan applications without HUDs prior review. Discount:
In loan originations, a discount refers to an amount withheld from loan
proceeds by a lender. In secondary market sales, a discount is the amount
by which the sale price or a note is less than its face value. In both
instances, the purpose of a discount is to adjust the yield upward, either
in lieu of interest or in addition to interest. The rate or amount of
discount depends on money market conditions, the credit of the borrower,
and the rate or terms of the note. Down
Payment: A portion of the sales price paid to a
seller by a buyer to close a sales transaction with the understanding that
the balance will be paid at settlement. Also, the difference between the
sale price of real estate and the mortgage amount. Draw:
Periodic advances of funds according to the schedule of payments in a
construction loan agreement. Also called advance, disbursement, payout,
progress payment, or takedown. E- Earnest
Money: A deposit made to bind the conditions of sale of real
estate. Easement:
A right to the limited use or enjoyment of land held by another. Also, an
interest in land to enable sewer or other utility lines to be laid, or to
allow access to a property. ECOA:
Equal Credit Opportunity Act. A federal law that requires lenders and
other creditors to make credit equally available without discrimination
based on race, color, religion, national origin, age, sex, marital status,
or receipt of income from public assistance programs. Also called
Regulation B. Encroachment:
An improvement that illegally violates another's property or right to use
that property. Engineer's
Report: A report rendered by an engineer stating the physical
condition of property that has been inspected, with a summation or
recommendation thereof. Equity:
Net ownership, the difference between fair market value and current
indebtedness, sometimes called owner's interest. Escrow
Analysis: The periodic examination of escrow
accounts to determine if current monthly deposits will provide sufficient
funds to pay taxes, insurance, and other bills when due. Escrow:
An item of value, money or documents, deposited with a third party to be
delivered upon the fulfillment of a condition. For example, the deposit by
a borrower with the lender of funds to pay taxes and insurance premiums
when they become due, or the deposit of funds or documents with an
attorney or escrow agent to be disbursed upon the closing of a sale or
real estate. In some parts of the country escrows of taxes and insurance
premiums are called impounds or reserves. Extenuating
Circumstances: Extenuating circumstances are
nonrecurring events that are beyond the applicant’s control that result
in a sudden, significant, and prolonged reduction in income or a
catastrophic increase in financial obligations. Extenuating circumstances
cannot be solely defined by the event itself; all circumstances must be
taken into consideration. -F- Fee
Simple: The greatest possible interest a person can have in real
estate, including the right to dispose of the property or pass it on to
one's heirs. FEMA:
Federal Emergency Management Agency. Federal agency which directs the
activities of the federal insurance administration and establishes flood
insurances rates and terms of coverage, issues policies, processes claims,
and identifies and maps flood-prone areas. FHA:
Federal Housing Administration. A federal agency within the department of
Housing and Urban Development (HUD) that provides mortgage insurance for
residential mortgages and sets standards for construction and
underwriting. The FHA does not lend money, nor does it plan or construct
housing. FHLMC:
Federal Home Loan Mortgage Corporation. Created by Congress in Title III
of the Emergency Home Finance Act of 1970 (912 USC 1451 et seq.). 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 and
securitization programs. Also called Freddie Mac. Finance
Charge: A term defined in section 105 of the federal Truth in
Lending Act (PL 90-321; 15 USC 1605), which generally includes all charges
payable as an incident to the extension of a loan. Financial
Mismanagement: Financial mismanagement may be the
result of the use of too much credit or the inability to manage credit.
Typically, the borrower(s) previously continued to increase credit usage
to the point that they were no longer willing or able to support the debt
service. Any reason that does not meet the definition of extenuating
circumstances will be considered financial mismanagement. Firm
Commitment: (1) For multifamily housing, the
HUD/FHA agreement to insure construction advances for multifamily housing
projects, subject to compliance with the terms of the commitment. HUD/FHA
issues a firm commitment for mortgage insurance after accepting complete,
final development drawings, including complete specifications and firm
costs. (2)The HUD/FHA agreement to insure a loan taken out by a borrower
on a specific previously approved single family property under specific
terms. (3)For loans, a lender's agreement to make a loan to a specific
borrower under specific terms and conditions within a given time. (4)In
the secondary mortgage market, a buyer's agreement to purchase mortgage
securities under specified terms. FIRREA:
Financial Institutions Reform, Recovery and Enforcement Act. The law
enacted to restructure the thrift industry. The Act created regulatory
entities to oversee thrifts and established risk-based capital guidelines
for Qualified Thrift Lenders (QTLs). The Act created the Office of Thrift
Supervision (OTS), the Federal Housing Finance Board (FHFB), and the
Resolution Trust Corporation (RTC); the Act dissolved the Federal Home
Loan Bank Board (FHLBB) and the Federal Savings and Loan Insurance
Corporation (FSLIC). Fixed
Rate Mortgage: A mortgage in which the interest rate
and payments remain the same for the life of the loan. Flood
Insurance: An insurance policy insuring against
flood damage to the mortgaged premises, as required for mortgaged property
located in special flood hazard areas identified by the Director of the
Federal Emergency Management Agency (FEMA) FmHA:
Farmers Home Administration. A government agency within the Department of
Agriculture that operates under the consolidated Farm and Rural
Development Act of 1921 and Title V of the Housing Act of 1949. This
agency provides financing to farmers and other qualified borrowers who are
unable to obtain loans elsewhere. FNMA:
Federal National Mortgage Association. The nation's largest mortgage
investor. Created in 1968 by an amendment to Title III of the National
Housing Act (125 USC 1716 et seq.), 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 and securitization programs. Also called
Fannie Mae. Foreclosure:
A legal procedure in which a mortgaged property is sold to pay the
outstanding debt in case of default. Fraud:
An act intended to deceive for the purpose of inducing another to give up
something of value. -G- GFE:
Good Faith Estimate. A document which tells borrowers the approximate
costs they will pay at or before settlement, based on common practice in
the locality. Under requirements of the Real Estate Settlement Procedures
Act (RESPA), the mortgage banker or mortgage broker, if any, must deliver
or mail the GFE to the applicant within three business days after the
application is received. GNMA:
Government National Mortgage Association. Created in 1968 by an amendment
to Title III of the National Housing Act (12 USC 1716 et seq.), this
federal government corporation is part of the Department of Housing and
Urban Development. Among other governmental functions, it guarantees
securities backed by mortgages that are insured or guaranteed by other
government agencies. Also called Ginnie Mae. -H- Hazard
Insurance: Insurance coverage which provides
compensation to the insured in case of property loss or damage. HMDA:
Home Mortgage Disclosure Act. Federal legislation which requires certain
types of lenders to compile and disclose data on where their mortgage and
home improvement loans are being made. Homeowner's
Association: A non-profit corporation or association
that manages the common areas and services of a planned unit development
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. Homestead
Exemption: A statutory exemption which prohibits
the attachment or sale of owner-occupied properties to pay the claims of
creditors. HUD:
Department of Housing and Urban Development. A governmental entity
responsible for the implementation and administration of housing and urban
development programs. HUD was established by the Housing and Urban
Development Act of 1965 to supersede the Housing and Home Finance Agency. HUD-1:
HUD-1 Uniform Settlement Statement. Standard form used to disclose costs
at closing. All charges imposed in the transaction, including mortgage
broker fees, must be disclosed separately. -I- In-file
credit report: Unverified credit report which may
contain unchecked, duplicated or overlapping data, Used for "quick
look" at a prospective borrower's credit history. Income
Limits: Income restrictions established for low- to moderate-income
persons to qualify for admission into subsidized housing programs. The
limits are established by law and are based on family size and geographic
location. Index:
A published interest rate, such as the prime rate, LIBOR, T-Bill rate, or
the 11th District COFI. Lenders use indexes to establish interest rates
charged on mortgages or to compare investment returns. On ARMs, a
predetermined margin is added to the index to compute the interest rate
adjustment. Ingress
and Egress: The right to enter and exit land. Insured
Closing Letter: A document issued by a title insurance
company which protects a mortgagee against embezzlement or failure to
follow specific closing instructions. Interest
Rate Change Date: With respect to an ARM loan, the date
on which the Note Rate may change in accordance with the terms of the
Note. Interim
Financing: Financing used from the beginning of a
project to the closing of a permanent loan. Usually a construction or
development loan. Installment:
The periodic payment that a borrower agrees to pay a mortgage lender. Inter
Vivos Trust: A trust that takes effect during the
life of its creator. Interest:
Consideration in the form of money paid for the use of money, usually
expressed as an annual percentage. Also, a right, share, or title in
property. -J- Judgment: Final determination by a court of the
rights and claims of the parties to an action. Jumbo Loan: A loan that exceeds the statutory loan
limit eligible for purchase or securitization by federal agencies. Junior Mortgage: A mortgage that is subordinate to the
claims of a prior lien or mortgage. -K- Kickback:
A payment to a third party in return for the referral of a client,
customer or business. Kickbacks are a violation of RESPA. -L- LAPP: Lender Appraisal Processing Program.
Program eliminates the VA's involvement in loan processing and allows the
lender to oversee the appraisal and property underwriting process. Lender
must be preapproved by the VA to participate in this program. Late Charge: An additional charge that a borrower is
required to pay as a penalty for failure to pay a regular installment when
due. Layered Risk: Occurs then multiple high-risk factors
are present in a single loan file, i.e., a credit score below 620,
doubling of the borrower's housing expense, etc. Leasehold: An estate or interest in real property
held by virtue of a lease. LGC: Loan Guaranty Certificate. A VA
document that states the portion of a loan that is guaranteed. Lien: A legal hold or claim of a creditor on
the property of another as security for a debt. Liens are always against
property, usually real property. LIBOR: London Interbank Offered Rate. The rate
at which banks in the foreign market lend dollars to one another. A common
interest rate index; one of the most valid barometers of the international
cost of money. Litigation: A contest in a court for the purposes
of enforcing a right also referred to as a judicial contest, a legal
action, a suit, a law or civil action. Lock-in Period: The number of days during which a
lender guarantees a borrower a specific interest rate and terms on a
mortgage. Loss Draft: Insurance payments in settlement of a
claim for damage to mortgaged property, Drafts are generally made out to
both the mortgagee and mortgagor. 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. LSSR: Loan Sold Servicing Released LTV Ratio: The ratio of amount borrowed to
appraised value or sales price of real property expressed as a percentage. -M- Margin:
(1) In futures trading, an amount set by each exchange that buyers and
sellers must deposit as a guarantee of performance. (2) In stock
transactions, the down payment required when borrowing from a broker to
finance stock purchases. In this case, margin requirements are set by the
Federal Reserve Board and are expressed as a percentage of the purchase
price or market value. (3) In an adjustable rate mortgage, the spread
between the index and the mortgage interest rate. MCC:
Mortgage Credit Certificate. An IRS tax credit that reduces the federal
tax liability of qualified borrowers, thus having the effect of
subsidizing the monthly mortgage payment. MIC:
Mortgage Insurance Certificate. 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 the HUD/FHA
regulations identified in the certificate. Modification
Agreement: An agreement that acts to change the
terms of the note, i.e., from an Adjustable Rate Note to a Fixed Rate
Note. Mortgage
Insurance (MI): Insurance which protects mortgage
lenders against loss in the event of default by the borrower. This allows
lenders to make loans with lower down payments. The federal government
offers MI through HUD/FHA; private mortgage insurers offer MI for
conventional loans. Mortgage:
A pledge of property, especially real property, as security for a debt. By
extension, the document evidencing the pledge. In many states this
document is a deed of trust. The document may contain the terms of
repayment of the debt. By further extension, "mortgage" is used
to describe both the mortgage property and the separate promissory note
evidencing the debt and providing the terms of the debt's repayment. -N- Negative
Amortization: The unpaid interest which is added to
the mortgage principal in a loan where the principal balance increases
rather than decreases because the mortgage payments do not cover the full
amount of interest due.< Non-Conforming
Mortgage: A mortgage loan in which the loan
amount, the loan-to-value ratio, the term, or some other aspect of the
loan exceeds permissible limits as specified in agency regulations. 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. -O- Open-End
Mortgage: A mortgage with a provision that the
outstanding loan amount may be increased upon mutual agreement of the
lender and the borrower. Origination
Fee: The lender's fee charged a borrower to prepare documents,
make credit checks, inspect and sometimes appraise a property. Usually
stated as a percentage of the face value of the loan. Origination:
Securing a completed mortgage application from a commercial or residential
borrower. -P- Pair-off: A buy-back to offset, and effectively
liquidate, a prior sale of securities or mortgages. Par Rate: The interest rate associated with zero
discount. Payment Change Date:
With respect to an ARM loan, the date on which the borrower's monthly
payment changes in accordance with the terms of the Note. 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. Consumer protection
guidelines regarding extremely low initial "teaser" rates,
lifetime ceilings, and annual caps are designed to prevent payment shock.
In underwriting, payment shock also refers to a housing expense increase
so large that it may affect the borrower's ability to repay. Pipeline: Loan applications in process that have
not yet closed. PITI: Acronym for the items included in a
monthly mortgage payment: principal, interest, taxes, and insurance. Pool: A collection of mortgage loans grouped
by one or more similar characteristics. Pool Insurance: A certificate issued to a lender by an
insurance company which evidences such company's commitment to insure the
mortgage loan(s) identified on such certificate against default. Power of Attorney: A legal document authorizing one person
to act on behalf of another. Premium: A security trading at a price in excess
of par or 100 percent. In insurance, a payment for coverage. Premium Pricing: The price associated with an above par
interest rate. This above par price can be used to pay borrower closing
costs, buydown fees, etc. Prepaid Interest: Mortgage interest that is paid in
advance of when it is due. Prepayment Penalty: A
charge the mortgagor pays the mortgagee for the privilege to prepay the
loan. Principal: The original balance of money lent,
excluding interest. Also, the remaining balance of a loan, excluding
interest. 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 in areas
owned in common and reserved for the use of some or all of the owners of
the separately owned lots. Purchase Money Mortgage: A
mortgage a purchaser of real property gives a seller as all or part of the
consideration in the sales transaction. -Q- Quit Claim Deed: A deed relinquishing all interest,
title, or claim an owner has in a property. A quitclaim deed implies no
warranty. -R- Real Estate Owned (REO):
Property acquired through foreclosure or deed in lieu of foreclosure. Red Lining: Arbitrary denial of real estate loan
applications in certain geographical areas, without considering individual
applicant qualifications. Refinancing: The repayment of a debt from the
proceeds of a new loan using the same property as security. 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 Truth-In-Lending Act, requiring full
written disclosure of the credit portion of a purchase, including the
annual percentage rate. Rehabilitation: Restoration of a property or
neighborhood to bring it back to its full potential for use. Replacement Cost: The cost to replace a structure with
one of equivalent value and function, but no necessarily identical in
design or materials. Rescission: The cancellation of a transaction or
contact by law or by mutual consent. Rescission Period: A three (3) day cancellation period
beginning on the day the loan is closed and ending at midnight three
business days later. These days exclude Sunday and federal holidays. RESPA: Real Estate Settlement Procedures Act.
A federal statute and regulation promulgated by HUD governing real estate
lending practices and disclosures. Its main features pertain to the
provision of a good faith estimate of loan settlement costs and the
provision of the HUD settlement booklet within three days of making a loan
application. Revolving Debt: An arrangement for credit in which the
customer receives purchases or services on an ongoing basis prior to
payment. Repayment is usually at regular intervals but not for a specified
amount or term. For example, charge cards. Right of First Refusal: A
right given by an owner to another party stating that if the owner decides
to sell the property, the other party has the first opportunity to
purchase the subject property before it is offered to others. Rural Property: A property which is either in an area
zoned for agricultural uses, listed as rural on the appraisal or located
in an area that is less than 25% developed, as noted on the appraisal. -S- Seasoned Mortgage: A mortgage on which payments have been
made regularly for a year or longer. Secondary Financing: A
funding method using a loan secured by a second mortgage on a property.
Sometimes used to refer to any financing technique other than equity and
first mortgage debt. Security Instrument:
Mortgage or deed of trust evidencing the pledge of real estate as
collateral for the loan. Servicing: A mortgage banking function which
includes the receipt of payments, customer service, escrow administration,
investor accounting, collections, and foreclosures. Servicing Release Premium:
Any compensation paid to a lender for the release of rights to service the
loan. SMSA: Standard Metropolitan Statistical Area.
A central city area and its surrounding suburbs and small jurisdictions. 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 or easements. Straw buyer: One who purchases property for another
to conceal the identity of the real purchaser. Sweat Equity: Equity created in a property by the
performance of work or labor by the purchaser or borrower. Syndication: The sale of equity interest in real
estate projects to investors other than the original developer. -T- Table Funding: Mortgage transaction where the broker
or third-party originator (TPO) closes the mortgage in its own name for
simultaneous assignment to an investor who advanced money for the funding. Temporary Buydown: A financing technique in which the
builder or seller advances money to subsidize the monthly payment during
the first few years of a loan. The monthly payments will normally increase
annually until the subsidy expires. TILA: Truth-in-Lending Act. The
Truth-in-Lending Act (PL 90-321; 15 USC 1601 et seq.). Part of the
Consumer Credit Protection Act, a federal law that requires lenders to
provide full written disclosure of credit terms and conditions, the
finance charge, the annual percentage rate, and other charges incurred in
a loan contract. Title Exception: An exclusion appearing in a title
insurance policy against which the insurance company does not insure. Title Insurance Policy: 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. TPO: Third Party Originator. Entity or
individual that completely or partially takes the mortgage loan
application from a borrower. A TPO may process, underwrite, or fund the
mortgage before transferring, assigning, or selling it to another mortgage
lender. -U- Underwriting:
In mortgage banking, the analysis of the risk involved in making a
mortgage loan to determine whether the risk is acceptable to the lender.
Underwriting involves the evaluation of the property as outlined in the
appraisal report, and of the borrower's ability and willingness to repay
the loan. URAR:
Uniform Residential Appraisal Report (FNMA 1004/FHLMC 65). Standard form
used by appraisers to detail facts supporting the value of single-family
properties. URLA:
Uniform Residential Loan Application (FNMA 1003/FHLMC 70). Standard form
where mortgage applicants provide the lender with information essential to
loan approval. -V- VA: Department of Veteran Affairs. A
cabinet-level agency of the federal government. The Servicemen’s'
Readjustment Act of 1944 authorized the agency to administer a variety of
benefit programs designed to facilitate the adjustment of returning
veterans to civilian life. Among the benefit programs is the VA Home Loan
Guaranty program, which encourages mortgage lenders to offer long-term,
low down payment financing to eligible veterans by partially guaranteeing
the lender against loss upon foreclosure. VOD: Verification of Deposit. A form that
requests and secures verifications of amounts on deposit at financial
institutions. When a depository institution is also the applicant's
creditor, the VOD verifies the obligation. VOE: Verification of Employment. 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. VOM: Verification of Mortgage. Form that
requests and secures verification of payments made on an applicant's
current or past mortgage. -W- Warehouse
Loan: Loans that are funded and awaiting sale or delivery to an
investor. Wholesale
Origination: A loan origination strategy by which
loans are purchased from mortgage brokers, mortgage bankers, or other loan
originators (banks, thrifts, etc. ) The loans may be purchased prior to
closing, at closing or after the loans are closed depending on the
arrangement between the originator and the wholesale lender. Wholesale
origination enables a lender to acquire mortgage servicing rights without
incurring the fixed cost associated with a retail origination strategy. -Y- Yield Spread Premium:
The dollar amount paid (generally to a broker) for a loan at an interest
rate higher than the market or "par" rate. -Z- Zoning: The creation of districts by local
governments in which specific types of property uses are authorized.
“Do
Better Business…. The Carroll Way!”
August
29, 2008
|