Copy of `HUD.GOV - Loan and finance glossary`

The wordlist doesn't exist anymore, or, the website doesn't exist anymore. On this page you can find a copy of the original information. The information may have been taken offline because it is outdated.

HUD.GOV - Loan and finance glossary Category: Economy and Finance > Loans and finance terms Date & country: 30/05/2011, USA Words: 356

Loan Fraud
purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

Loan Acceleration
an acceleration clause in a loan document is a statement in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

Loan
money borrowed that is usually repaid with interest.

Maturity
the date when the principal balance of a loan becomes due and payable.

Market Value
the amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.

Margin
the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Mandatory Delivery Commitment
an agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.

Merged Credit Report
raw data pulled from two or more of the major credit-reporting firms.

Medium Term Notes
unsecured general obligations of Fannie Mae with maturities of one day or more and with principal and interest payable in U.S. dollars.

Median Price
the price of the house that falls in the middle of the total number of homes for sale in that area.

Mitigation
term usually used to refer to various changes or improvements made in a home; for instance, to reduce the average level of radon.

Mortgagor
the borrower in a mortgage agreement

Mortgagee
the lender in a mortgage agreement. Mortgagor - The borrower in a mortgage agreement.

Mortgage-Backed Security (MBS)
a Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS holders.

Mortgage Score
a score based on a combination of information about the borrower that is obtained from the loan application, the credit report, and property value information. The score is a comprehensive analysis of the borrower's ability to repay a mortgage loan and manage credit.

Mortgage Qualifying Ratio
Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ratio is 28

Mortgage Note
a legal document obligating a borrower to repay a loan at a stated interest rate during a specified period; the agreement is secured by a mortgage that is recorded in the public records along with the deed.

Mortgage Modification
a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

Mortgage Interest Deduction
the interest cost of a mortgage, which is a tax - deductible expense. The interest reduces the taxable income of taxpayers.

Mortgage Insurance Premium (MIP)
a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.

Mortgage Insurance
a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Insurance purchased by the buyer to protect the lender in the event of default. Typically purchased for loans with less than 20 percent down payment. T...

Mortgage Broker
a firm that originates and processes loans for a number of lenders.

Mortgage Banker
a company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.

Mortgage Acceleration Clause
a clause allowing a lender, under certain circumstances, demand the entire balance of a loan is repaid in a lump sum. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage
a lien on the property that secures the Promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.

Modification
when a lender agrees to modify the terms of a mortgage without refinancing the loan.

Multiple Listing Service (MLS)
within the Metro Columbus area, Realtors submit listings and agree to attempt to sell all properties in the MLS. The MLS is a service of the local Columbus Board of Realtors?. The local MLS has a protocol for updating listings and sharing commissions. The MLS offers the advantage of more timely information, availability, and access to houses and other types of property on the market.

Multifamily Housing
a building with more than four residential rental units.

National Credit Repositories
currently, there are three companies that maintain national credit - reporting databases. These are Equifax, Experian, and Trans Union, referred to as Credit Bureaus.

Net Income
Your take-home pay, the amount of money that you receive in your paycheck after taxes and deductions.

Negative Amortization
amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the ...

Notional Principal Amount
the proposed amount which interest rate swap payments are based but generally not paid or received by either party.

Notice of Default
a formal written notice to a borrower that there is a default on a loan and that legal action is possible.

Note Rate
the interest rate stated on a mortgage note.

Note
a legal document obligating a borrower to repay a mortgage loan at a stated interest rate over a specified period of time.

Notary Public
a person who serves as a public official and certifies the authenticity of required signatures on a document by signing and stamping the document.

Nonperforming Asset
an asset such as a mortgage that is not currently accruing interest or which interest is not being paid.

Non-Conforming loan
is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

No Cost Loan
there are many variations of a no cost loan. Generally, it is a loan that does not charge for items such as title insurance, escrow fees, settlement fees, appraisal, recording fees or notary fees. It may also offer no points. This lessens the need for upfront cash during the buying process however no cost loans have a higher interest rate.

No Cash Out Refinance
a refinance of an existing loan only for the amount remaining on the mortgage. The borrower does not get any cash against the equity of the home. Also called a "rate and term refinance."

Offer
indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

Origination Fee
the charge for originating a loan; is usually calculated in the form of points and paid at closing. One point equals one percent of the loan amount. On a conventional loan, the loan origination fee is the number of points a borrower pays.

Origination
the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Original Principal Balance
the total principal owed on a mortgage prior to any payments being made.

Ownership
ownership is documented by the deed to a property. The type or form of ownership is important if there is a change in the status of the owners or if the property changes ownership.

Owner's Policy
the insurance policy that protects the buyer from title defects.

Owner Financing
a home purchase where the seller provides all or part of the financing, acting as a lender.

Payment Due Date
Contract language specifying when payments are due on money borrowed. The due date is always indicated and means that the payment must be received on or before the specified date. Grace periods prior to assessing a late fee or additional interest do not eliminate the responsibility of making payments on time.

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 interest rate adjustment date.

Payment Cap
a limit on how much an ARM's payment may increase, regardless of how much the interest rate increases.

Partial Payment
a payment that is less than the total amount owed on a monthly mortgage payment. Normally, lenders do not accept partial payments. The lender may make exceptions during times of difficulty. Contact your lender prior to the due date if a partial payment is needed.

Partial Claim
a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

Personal Property
any property that is not real property or attached to real property. For example furniture is not attached however a new light fixture would be considered attached and part of the real property.

Perils
for homeowner's insurance, an event that can damage the property. Homeowner's insurance may cover the property for a wide variety of perils caused by accidents, nature, or people.

PITI Reserves
a cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

PITI
Principal, Interest, Taxes, and Insurance

Planned Unit Development (PUD)
a development that is planned, and constructed as one entity. Generally, there are common features in the homes or lots governed by covenants attached to the deed. Most planned developments have common land and facilities owned and managed by the owner's or neighborhood association. Homeowners usually are required to participate in the association via a payment of annual dues.

PMI
Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Power of Attorney
a legal document that authorizes another person to act on your behalf. A power of attorney can grant complete authority or can be limited to certain acts or certain periods of time or both.

Points
a point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $95,000, one point means you pay $950 to the lender. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the bor...

Property Tax Deduction
the U.S. tax code allows homeowners to deduct the amount they have paid in property taxes from there total income.

Property Tax
a tax charged by local government and used to fund municipal services such as schools, police, or street maintenance. The amount of property tax is determined locally by a formula, usually based on a percent per $1,000 of assessed value of the property.

Property (Fixture and Non-Fixture)
in a real estate contract, the property is the land within the legally described boundaries and all permanent structures and fixtures. Ownership of the property confers the legal right to use the property as allowed within the law and within the restrictions of zoning or easements. Fixture property refers to those items permanently attached to the structure, such as carpeting or a ceiling fan, whi...

Promissory Note
a written promise to repay a specified amount over a specified period of time.

Private Mortgage Insurance (PMI)
insurance purchased by a buyer to protect the lender in the event of default. The cost of mortgage insurance is usually added to the monthly payment. Mortgage insurance is generally maintained until over 20 Percent of the outstanding amount of the loan is paid or for a set period of time, seven years is normal. Mortgage insurance may be available through a government agency, such as the Federal Ho...

Principal
the amount of money borrowed to buy a house or the amount of the loan that has not been paid back to the lender. This does not include the interest paid to borrow that money. The principal balance is the amount owed on a loan at any given time. It is the original loan amount minus the total repayments of principal made.

Prime Rate
the interest rate that banks charge to preferred customers. Changes in the prime rate are publicized in the business media. Prime rate can be used as the basis for adjustable rate mortgages (ARMs) or home equity lines of credit. The prime rate also affects the current interest rates being offered at a particular point in time on fixed mortgages. Changes in the prime rate do not affect the interest...

Price Range
the high and low amount a buyer is willing to pay for a home.

Pre-Qualify
a lender informally determines the maximum amount an individual is eligible to borrow. This is not a guaranty of a loan.

Prepayment Penalty Mortgage (PPM)
a type of mortgage that requires the borrower to pay a penalty for prepayment, partial payment of principal or for repaying the entire loan within a certain time period. A partial payment is generally defined as an amount exceeding 20% of the original principal balance.

Prepayment Penalty
a provision in some loans that charge a fee to a borrower who pays off a loan before it is due.

Prepayment Penalty
a fee charged to a homeowner who pays one or more monthly payments before the due date. It can also apply to principal reduction payments.

Prepayment
payment of the mortgage loan before the scheduled due date; may be Subject to a prepayment penalty.

Prepayment
any amount paid to reduce the principal balance of a loan before the due date or payment in full of a mortgage. This can occur with the sale of the property, the pay off the loan in full, or a foreclosure. In each case, full payment occurs before the loan has been fully amortized.

Premium
an amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Pre-Foreclosure sale
allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Pre-foreclosure Sale
a procedure in which the borrower is allowed to sell a property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower's debt.

Preferred Stock
stock that takes priority over common stock with regard to dividends and liquidation rights. Preferred stockholders typically have no voting rights.

Predictive Variables
The variables that are part of the formula comprising elements of a credit-scoring model. These variables are used to predict a borrower's future credit performance.

Predatory Lending
abusive lending practices that include a mortgage loan to someone who does not have the ability to repay. It also pertains to repeated refinancing of a loan charging high interest and fees each time.

Pre-Approval
a lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.

Purchase Offer
A detailed, written document that makes an offer to purchase a property, and that may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally binding contract, sometimes called the Sales Contract.

Punch List
a list of items that have not been completed at the time of the final walk through of a newly constructed home.

Public Record Information
Court records of events that are a matter of public interest such as credit, bankruptcy, foreclosure and tax liens. The presence of public record information on a credit report is regarded negatively by creditors.

Quitclaim Deed
a deed transferring ownership of a property but does not make any guarantee of clear title.

Qualifying Ratios
guidelines utilized by lenders to determine how much money a homebuyer is qualified to borrow. Lending guidelines typically include a maximum housing expense to income ratio and a maximum monthly expense to income ratio.

Rate Lock
a commitment by a lender to a borrower guaranteeing a specific interest rate over a period of time at a set cost.

Rate Cap
a limit on an ARM on how much the interest rate or mortgage payment may change. Rate caps limit how much the interest rates can rise or fall on the adjustment dates and over the life of the loan.

Radon
a radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.

Reverse Mortgage (HECM)
the reverse mortgage is used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. A lending institution such as a mortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, commonly known as HECM.

Return On Average Common Equity
net income available to common stockholders, as a percentage of average common stockholder equity.

RESPA
Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

Repayment plan
an agreement between a lender and a delinquent borrower where the borrower agrees to make additional payments to pay down past due amounts while making regularly scheduled payments.

Remaining Term
the original amortization term minus the number of payments that have been applied.

Remaining Balance
the amount of principal that has not yet been repaid.

Reinstatement Period
a phase of the foreclosure process where the homeowner has an opportunity to stop the foreclosure by paying money that is owed to the lender.

Rehabilitation Mortgage
a mortgage that covers the costs of rehabilitating (repairing or Improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.

Refinancing
paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).

Recording Fees
charges for recording a deed with the appropriate government agency.

Recording
the recording in a registrar's office of an executed legal document. These include deeds, mortgages, satisfaction of a mortgage, or an extension of a mortgage making it a part of the public record.