203(k):
this FHA mortgage insurance program enables homebuyers to finance
both the purchase of a house and the cost of its rehabilitation
through a single mortgage loan.

A

“A”
Loan or “A” Paper: a credit rating where the FICO score
is 660 or above. There have been no late mortgage payments within
a 12-month period. This is the best credit rating to have when entering
into a new loan.

ARM:
Adjustable Rate Mortgage; a mortgage loan subject to changes
in interest rates; when rates change, ARM monthly payments increase
or decrease at intervals determined by the lender; the change in
monthly payment amount, however, is usually subject to a cap.

Abstract
of Title: documents recording the ownership of property
throughout time.

Acceleration:
the right of the lender to demand payment on the outstanding
balance of a loan.

Acceptance:
the written approval of the buyer’s offer by the seller.

Additional
Principal Payment: money paid to the lender in addition
to the established payment amount used directly against the loan
principal to shorten the length of the loan.

Adjustable-Rate
Mortgage (ARM): a mortgage loan that does not have a fixed
interest rate. During the life of the loan the interest rate will
change based on the index rate. Also referred to as adjustable mortgage
loans (AMLs) or variable-rate mortgages (VRMs).

Adjustment
Date: the actual date that the interest rate is changed
for an ARM.

Adjustment
Index: the published market index used to calculate the
interest rate of an ARM at the time of origination or adjustment.

Adjustment
Interval: the time between the interest rate change and
the monthly payment for an ARM. The interval is usually every one,
three or five years depending on the index.

Affidavit:
a signed, sworn statement made by the buyer or seller regarding
the truth of information provided.

Amenity:
a feature of the home or property that serves as a benefit
to the buyer but that is not necessary to its use; may be natural
(like location, woods, water) or man-made (like a swimming pool
or garden).

American
Society of Home Inspectors: the American Society of Home
Inspectors is a professional association of independent home inspectors.
Phone: (800) 743-2744

Amortization:
a payment plan that enables you to reduce your debt gradually through
monthly payments. The payments may be principal and interest, or
interest-only. The monthly amount is based on the schedule for the
entire term or length of the loan.

Annual
Mortgagor Statement: yearly statement to borrowers detailing
the remaining principal and amounts paid for taxes and interest.

Annual
Percentage Rate (APR): a measure of the cost of credit,
expressed as a yearly rate. It includes interest as well as other
charges. Because all lenders, by federal law, follow the same rules
to ensure the accuracy of the annual percentage rate, it provides
consumers with a good basis for comparing the cost of loans, including
mortgage plans. APR is a higher rate than the simple interest of
the mortgage.

Application:
the first step in the official loan approval process; this form
is used to record important information about the potential borrower
necessary to the underwriting process.

Application
Fee: a fee charged by lenders to process a loan application.

Appraisal:
a document from a professional that gives an estimate of a property’s
fair market value based on the sales of comparable homes in the
area and the features of a property; an appraisal is generally required
by a lender before loan approval to ensure that the mortgage loan
amount is not more than the value of the property.

Appraisal
Fee: fee charged by an appraiser to estimate the market
value of a property.

Appraised
Value: an estimation of the current market value of a property.

Appraiser:
a qualified individual who uses his or her experience and knowledge
to prepare the appraisal estimate.

Appreciation:
an increase in property value.

Arbitration:
a legal method of resolving a dispute without going to
court.

As-is
Condition: the purchase or sale of a property in its existing
condition without repairs.

Asking
Price: a seller’s stated price for a property.

Assessed
Value: the value that a public official has placed on any
asset (used to determine taxes).

Assessments:
the method of placing value on an asset for taxation purposes.

Assessor:
a government official who is responsible for determining
the value of a property for the purpose of taxation.

Assets:
any item with measurable value.

Assumable
Mortgage: when a home is sold, the seller may be able to
transfer the mortgage to the new buyer. This means the mortgage
is assumable. Lenders generally require a credit review of the new
borrower and may charge a fee for the assumption. Some mortgages
contain a due-on-sale clause, which means that the mortgage may
not be transferable to a new buyer. Instead, the lender may make
you pay the entire balance that is due when you sell the home. An
assumable mortgage can help you attract buyers if you sell your
home.

Assumption
Clause: a provision in the terms of a loan that allows
the buyer to take legal responsibility for the mortgage from the
seller.

Automated
Underwriting: loan processing completed through a computer-based
system that evaluates past credit history to determine if a loan
should be approved. This system removes the possibility of personal
bias against the buyer.

Average
Price: determining the cost of a home by totaling the cost
of all houses sold in one area and dividing by the number of homes
sold.

“B”
Loan or “B” Paper: FICO scores from 620 – 659. Factors
include two 30 day late mortgage payments and two to three 30 day
late installment loan payments in the last 12 months. No delinquencies
over 60 days are allowed. Should be two to four years since a bankruptcy.
Also referred to as Sub-Prime.

Back
End Ratio (debt ratio): a ratio that compares the total
of all monthly debt payments (mortgage, real estate taxes and insurance,
car loans, and other consumer loans) to gross monthly income.

Back
to Back Escrow: arrangements that an owner makes to oversee
the sale of one property and the purchase of another at the same
time.

Balance
Sheet: a financial statement that shows the assets, liabilities
and net worth of an individual or company.

Balloon
Loan or Mortgage: a mortgage that typically offers low
rates for an initial period of time (usually 5, 7, or 10) years;
after that time period elapses, the balance is due or is refinanced
by the borrower.

Balloon
Payment: the final lump sum payment due at the end of a
balloon mortgage.

Bankruptcy:
a federal law whereby a person’s assets are turned over to a trustee
and used to pay off outstanding debts; this usually occurs when
someone owes more than they have the ability to repay.

Biweekly
Payment Mortgage: a mortgage paid twice a month instead
of once a month, reducing the amount of interest to be paid on the
loan.

Borrower:
a person who has been approved to receive a loan and is then obligated
to repay it and any additional fees according to the loan terms.

Bridge
Loan: a short-term loan paid back relatively fast. Normally
used until a long-term loan can be processed.

Broker:
a licensed individual or firm that charges a fee to serve as the
mediator between the buyer and seller. Mortgage brokers are individuals
in the business of arranging funding or negotiating contracts for
a client, but who does not loan the money. A real estate broker
is someone who helps find a house.

Building
Code: based on agreed upon safety standards within a specific
area, a building code is a regulation that determines the design,
construction, and materials used in building.

Budget:
a detailed record of all income earned and spent during a specific
period of time.

Buy
Down: the seller pays an amount to the lender so the lender
provides a lower rate and lower payments many times for an ARM.
The seller may increase the sales price to cover the cost of the
buy down.

“C”
Loan or “C” Paper: FICO scores typically from 580 to 619. Factors
include three to four 30 day late mortgage payments and four to
six 30 day late installment loan payments or two to four 60 day
late payments. Should be one to two years since bankruptcy. Also
referred to as Sub – Prime.

Callable
Debt: a debt security whose issuer has the right to redeem
the security at a specified price on or after a specified date,
but prior to its stated final maturity.

Cap:
a limit, such as one placed on an adjustable rate mortgage, on how
much a monthly payment or interest rate can increase or decrease,
either at each adjustment period or during the life of the mortgage.
Payment caps do not limit the amount of interest the lender is earning,
so they may cause negative amortization.

Capacity:
The ability to make mortgage payments on time, dependant on assets
and the amount of income each month after paying housing costs,
debts and other obligations.

Capital
Gain: the profit received based on the difference of the
original purchase price and the total sale price.

Capital
Improvements: property improvements that either will enhance
the property value or will increase the useful life of the property.

Capital
or Cash Reserves: an individual’s savings, investments,
or assets.

Cash-Out
Refinance: when a borrower refinances a mortgage at a higher
principal amount to get additional money. Usually this occurs when
the property has appreciated in value. For example, if a home has
a current value of $100,000 and an outstanding mortgage of $60,000,
the owner could refinance $80,000 and have additional $20,000 in
cash.

Cash
Reserves: a cash amount sometimes required of the buyer
to be held in reserve in addition to the down payment and closing
costs; the amount is determined by the lender.

Casualty
Protection: property insurance that covers any damage to
the home and personal property either inside or outside the home.

Certificate
of Title: a document provided by a qualified source, such
as a title company, that shows the property legally belongs to the
current owner; before the title is transferred at closing, it should
be clear and free of all liens or other claims.

Chapter
7 Bankruptcy: a bankruptcy that requires assets be liquidated
in exchange for the cancellation of debt.

Chapter
13 Bankruptcy: this type of bankruptcy sets a payment plan
between the borrower and the creditor monitored by the court. The
homeowner can keep the property, but must make payments according
to the court’s terms within a 3 to 5 year period.

Charge-Off:
the portion of principal and interest due on a loan that is written
off when deemed to be uncollectible.

Clear
Title: a property title that has no defects. Properties
with clear titles are marketable for sale.

Closing:
the final step in property purchase where the title is transferred
from the seller to the buyer. Closing occurs at a meeting between
the buyer, seller, settlement agent, and other agents. At the closing
the seller receives payment for the property. Also known as settlement.

Closing
Costs: fees for final property transfer not included in
the price of the property. Typical closing costs include charges
for the mortgage loan such as origination fees, discount points,
appraisal fee, survey, title insurance, legal fees, real estate
professional fees, prepayment of taxes and insurance, and real estate
transfer taxes. A common estimate of a Buyer’s closing costs is
2 to 4 percent of the purchase price of the home. A common estimate
for Seller’s closing costs is 3 to 9 percent.

Cloud
On The Title: any condition which affects the clear title
to real property.

Co-Borrower:
an additional person that is responsible for loan repayment and
is listed on the title.

Co-Signed
Account: an account signed by someone in addition to the
primary borrower, making both people responsible for the amount
borrowed.

Co-Signer:
a person that signs a credit application with another person, agreeing
to be equally responsible for the repayment of the loan.

Collateral:
security in the form of money or property pledged for the payment
of a loan. For example, on a home loan, the home is the collateral
and can be taken away from the borrower if mortgage payments are
not made.

Collection
Account: an unpaid debt referred to a collection agency
to collect on the bad debt. This type of account is reported to
the credit bureau and will show on the borrower’s credit report.

Commission:
an amount, usually a percentage of the property sales price that
is collected by a real estate professional as a fee for negotiating
the transaction. Traditionally the home seller pays the commission.
The amount of commission is determined by the real estate professional
and the seller and can be as much as 6% of the sales price.

Common
Stock: a security that provides voting rights in a corporation
and pays a dividend after preferred stock holders have been paid.
This is the most common stock held within a company.

Comparative
Market Analysis (COMPS): a property evaluation that determines
property value by comparing similar properties sold within the last
year.

Compensating
Factors: factors that show the ability to repay a loan
based on less traditional criteria, such as employment, rent, and
utility payment history.

Condominium:
a form of ownership in which individuals purchase and own a unit
of housing in a multi-unit complex. The owner also shares financial
responsibility for common areas.

Conforming
loan: is a loan that does not exceed Fannie Mae’s and Freddie
Mac’s loan limits. Freddie Mac and Fannie Mae loans are referred
to as conforming loans.

Consideration:
an item of value given in exchange for a promise or act.

Construction
Loan: a short-term, to finance the cost of building a new
home. The lender pays the builder based on milestones accomplished
during the building process. For example, once a sub-contractor
pours the foundation and it is approved by inspectors the lender
will pay for their service.

Contingency:
a clause in a purchase contract outlining conditions that
must be fulfilled before the contract is executed. Both, buyer or
seller may include contingencies in a contract, but both parties
must accept the contingency.

Conventional
Loan: a private sector loan, one that is not guaranteed
or insured by the U.S. government.

Conversion
Clause: a provision in some ARMs allowing it to change
to a fixed-rate loan at some point during the term. Usually conversions
are allowed at the end of the first adjustment period. At the time
of the conversion, the new fixed rate is generally set at one of
the rates then prevailing for fixed rate mortgages. There may be
additional cost for this clause.

Convertible
ARM: an adjustable-rate mortgage that provides the borrower
the ability to convert to a fixed-rate within a specified time.

Cooperative
(Co-op): residents purchase stock in a cooperative corporation
that owns a structure; each stockholder is then entitled to live
in a specific unit of the structure and is responsible for paying
a portion of the loan.

Cost
of Funds Index (COFI): an index used to determine interest
rate changes for some adjustable-rate mortgages.

Counter
Offer: a rejection to all or part of a purchase offer that
negotiates different terms to reach an acceptable sales contract.

Covenants:
legally enforceable terms that govern the use of property. These
terms are transferred with the property deed. Discriminatory covenants
are illegal and unenforceable. Also known as a condition, restriction,
deed restriction or restrictive covenant.

Credit:
an agreement that a person will borrow money and repay it to the
lender over time.

Credit
Bureau: an agency that provides financial information and
payment history to lenders about potential borrowers. Also known
as a National Credit Repository.

Credit
Counseling: education on how to improve bad credit and
how to avoid having more debt than can be repaid.

Credit
Enhancement: a method used by a lender to reduce default
of a loan by requiring collateral, mortgage insurance, or other
agreements.

Credit
Grantor: the lender that provides a loan or credit.

Credit
History: a record of an individual that lists all debts
and the payment history for each. The report that is generated from
the history is called a credit report. Lenders use this information
to gauge a potential borrower’s ability to repay a loan.

Credit
Loss Ratio: the ratio of credit-related losses to the dollar
amount of MBS outstanding and total mortgages owned by the corporation.

Credit
Related Expenses: foreclosed property expenses plus the
provision for losses.

Credit
Related Losses: foreclosed property expenses combined with
charge-offs.

Credit
Repair Companies: Private, for-profit businesses that claim
to offer consumers credit and debt repayment difficulties assistance
with their credit problems and a bad credit report.

Credit
Report: a report generated by the credit bureau that contains
the borrower’s credit history for the past seven years. Lenders
use this information to determine if a loan will be granted.

Credit
Risk: a term used to describe the possibility of default
on a loan by a borrower.

Credit
Score: a score calculated by using a person’s credit report
to determine the likelihood of a loan being repaid on time. Scores
range from about 360 – 840: a lower score meaning a person is a
higher risk, while a higher score means that there is less risk.

Credit
Union: a non-profit financial institution federally regulated
and owned by the members or people who use their services. Credit
unions serve groups that hold a common interest and you have to
become a member to use the available services.

Creditor:
the lending institution providing a loan or credit.

Creditworthiness:
the way a lender measures the ability of a person to qualify
and repay a loan.

Debtor:
The person or entity that borrows money. The term debtor may be
used interchangeably with the term borrower.

Debt-to-Income
Ratio: a comparison or ratio of gross income to housing
and non-housing expenses; With the FHA, the-monthly mortgage payment
should be no more than 29% of monthly gross income (before taxes)
and the mortgage payment combined with non-housing debts should
not exceed 41% of income.

Debt
Security: a security that represents a loan from an investor
to an issuer. The issuer in turn agrees to pay interest in addition
to the principal amount borrowed.

Deductible:
the amount of cash payment that is made by the insured (the homeowner)
to cover a portion of a damage or loss. Sometimes also called “out-of-pocket
expenses.” For example, out of a total damage claim of $1,000, the
homeowner might pay a $250 deductible toward the loss, while the
insurance company pays $750 toward the loss. Typically, the higher
the deductible, the lower the cost of the policy.

Deed:
a document that legally transfers ownership of property from one
person to another. The deed is recorded on public record with the
property description and the owner’s signature. Also known as the
title.

Deed-in-Lieu:
to avoid foreclosure (”in lieu” of foreclosure), a deed is given
to the lender to fulfill the obligation to repay the debt; this
process does not allow the borrower to remain in the house but helps
avoid the costs, time, and effort associated with foreclosure.

Default:
the inability to make timely monthly mortgage payments or otherwise
comply with mortgage terms. A loan is considered in default when
payment has not been paid after 60 to 90 days. Once in default the
lender can exercise legal rights defined in the contract to begin
foreclosure proceedings

Delinquency:
failure of a borrower to make timely mortgage payments under a loan
agreement. Generally after fifteen days a late fee may be assessed.

Deposit
(Earnest Money): money put down by a potential buyer to
show that they are serious about purchasing the home; it becomes
part of the down payment if the offer is accepted, is returned if
the offer is rejected, or is forfeited if the buyer pulls out of
the deal. During the contingency period the money may be returned
to the buyer if the contingencies are not met to the buyer’s satisfaction.

Depreciation:
a decrease in the value or price of a property due to changes in
market conditions, wear and tear on the property, or other factors.

Derivative:
a contract between two or more parties where the security
is dependent on the price of another investment.

Disclosures:
the release of relevant information about a property that may influence
the final sale, especially if it represents defects or problems.
“Full disclosure” usually refers to the responsibility of the seller
to voluntarily provide all known information about the property.
Some disclosures may be required by law, such as the federal requirement
to warn of potential lead-based paint hazards in pre-1978 housing.
A seller found to have knowingly lied about a defect may face legal
penalties.

Discount
Point: normally paid at closing and generally calculated
to be equivalent to 1% of the total loan amount, discount points
are paid to reduce the interest rate on a loan. In an ARM with an
initial rate discount, the lender gives up a number of percentage
points in interest to give you a lower rate and lower payments for
part of the mortgage term (usually for one year or less). After
the discount period, the ARM rate will probably go up depending
on the index rate.

Down
Payment: the portion of a home’s purchase price that is
paid in cash and is not part of the mortgage loan. This amount varies
based on the loan type, but is determined by taking the difference
of the sale price and the actual mortgage loan amount. Mortgage
insurance is required when a down payment less than 20 percent is
made.

Document
Recording: after closing on a loan, certain documents are
filed and made public record. Discharges for the prior mortgage
holder are filed first. Then the deed is filed with the new owner’s
and mortgage company’s names.

Due
on Sale Clause: a provision of a loan allowing the lender
to demand full repayment of the loan if the property is sold.

Duration:
the number of years it will take to receive the present
value of all future payments on a security to include both principal
and interest.

Earnest
Money (Deposit): money put down by a potential buyer to
show that they are serious about purchasing the home; it becomes
part of the down payment if the offer is accepted, is returned if
the offer is rejected, or is forfeited if the buyer pulls out of
the deal. During the contingency period the money may be returned
to the buyer if the contingencies are not met to the buyer’s satisfaction.

Earnings
Per Share (EPS): a corporation’s profit that is divided
among each share of common stock. It is determined by taking the
net earnings divided by the number of outstanding common stocks
held. This is a way that a company reports profitability.

Easements:
the legal rights that give someone other than the owner access to
use property for a specific purpose. Easements may affect property
values and are sometimes a part of the deed.

EEM:
Energy Efficient Mortgage; an FHA program that helps homebuyers
save money on utility bills by enabling them to finance the cost
of adding energy efficiency features to a new or existing home as
part of the home purchase

Eminent
Domain: when a government takes private property for public
use. The owner receives payment for its fair market value. The property
can then proceed to condemnation proceedings.

Encroachments:
a structure that extends over the legal property line on
to another individual’s property. The property surveyor will note
any encroachment on the lot survey done before property transfer.
The person who owns the structure will be asked to remove it to
prevent future problems.

Encumbrance:
anything that affects title to a property, such as loans, leases,
easements, or restrictions.

Equal
Credit Opportunity Act (ECOA): a federal law requiring
lenders to make credit available equally without discrimination
based on race, color, religion, national origin, age, sex, marital
status, or receipt of income from public assistance programs.

Equity:
an owner’s financial interest in a property; calculated by subtracting
the amount still owed on the mortgage loon(s)from the fair market
value of the property.

Escape
Clause: a provision in a purchase contract that allows
either party to cancel part or the entire contract if the other
does not respond to changes to the sale within a set period. The
most common use of the escape clause is if the buyer makes the purchase
offer contingent on the sale of another house.

Escrow:
funds held in an account to be used by the lender to pay for home
insurance and property taxes. The funds may also be held by a third
party until contractual conditions are met and then paid out.

Escrow
Account: a separate account into which the lender puts
a portion of each monthly mortgage payment; an escrow account provides
the funds needed for such expenses as property taxes, homeowners
insurance, mortgage insurance, etc.

Estate:
the ownership interest of a person in real property. The
sum total of all property, real and personal, owned by a person.

Exclusive
Listing: a written contract giving a real estate agent
the exclusive right to sell a property for a specific timeframe.

FICO
Score: FICO is an abbreviation for Fair Isaac Corporation
and refers to a person’s credit score based on credit history. Lenders
and credit card companies use the number to decide if the person
is likely to pay his or her bills. A credit score is evaluated using
information from the three major credit bureaus and is usually between
300 and 850.

FSBO
(For Sale by Owner): a home that is offered for sale by
the owner without the benefit of a real estate professional.

Fair
Credit Reporting Act: federal act to ensure that credit
bureaus are fair and accurate protecting the individual’s privacy
rights enacted in 1971 and revised in October 1997.

Fair
Housing Act: a law that prohibits discrimination in all
facets of the home buying process on the basis of race, color, national
origin, religion, sex, familial status, or disability.

Fair
Market Value: : the hypothetical price
that a willing buyer and seller will agree upon when they are acting
freely, carefully, and with complete knowledge of the situation.

Familial
Status: HUD uses this term to describe a single person,
a pregnant woman or a household with children under 18 living with
parents or legal custodians who might experience housing discrimination.

Fannie
Mae: Federal National Mortgage Association (FNMA); a federally-chartered
enterprise owned by private stockholders that purchases residential
mortgages and converts them into securities for sale to investors;
by purchasing mortgages, Fannie Mae supplies funds that lenders
may loan to potential homebuyers. Also known as a Government Sponsored
Enterprise (GSE).

FHA:
Federal Housing Administration; established in 1934 to advance homeownership
opportunities for all Americans; assists homebuyers by providing
mortgage insurance to lenders to cover most losses that may occur
when a borrower defaults; this encourages lenders to make loans
to borrowers who might not qualify for conventional mortgages.

First
Mortgage: the mortgage with first priority if the loan
is not paid.

Fixed
Expenses: payments that do not vary from month to month.

Fixed-Rate
Mortgage: a mortgage with payments that remain the same
throughout the life of the loan because the interest rate and other
terms are fixed and do not change.

Fixture:
personal property permanently attached to real estate or real property
that becomes a part of the real estate.

Float:
the act of allowing an interest rate and discount points to fluctuate
with changes in the market.

Flood
Insurance: insurance that protects homeowners against losses
from a flood; if a home is located in a flood plain, the lender
will require flood insurance before approving a loan.

Forbearance:
a lender may decide not to take legal action when a borrower is
late in making a payment. Usually this occurs when a borrower sets
up a plan that both sides agree will bring overdue mortgage payments
up to date.

Foreclosure:
a legal process in which mortgaged property is sold to pay the loan
of the defaulting borrower. Foreclosure laws are based on the statutes
of each state.

Freddie
Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally
chartered corporation that purchases residential mortgages, securitizes
them, and sells them to investors; this provides lenders with funds
for new homebuyers. Also known as a Government Sponsored Enterprise
(GSE).

Front
End Ratio: a percentage comparing a borrower’s total monthly
cost to buy a house (mortgage principal and interest, insurance,
and real estate taxes) to monthly income before deductions.

GSE:
abbreviation for government sponsored enterprises: a collection
of financial services corporations formed by the United States Congress
to reduce interest rates for farmers and homeowners. Examples include
Fannie Mae and Freddie Mac.

Ginnie
Mae: Government National Mortgage Association (GNMA); a
government-owned corporation overseen by the U.S. Department of
Housing and Urban Development, Ginnie Mae pools FHA-insured and
VA-guaranteed loans to back securities for private investment; as
With Fannie Mae and Freddie Mac, the investment income provides
funding that may then be lent to eligible borrowers by lenders.

Global
Debt Facility: designed to allow investors all over the
world to purchase debt (loans) of U.S. dollar and foreign currency
through a variety of clearing systems.

Good
Faith Estimate: an estimate of all closing fees including
pre-paid and escrow items as well as lender charges; must be given
to the borrower within three days after submission of a loan application.

Graduated
Payment Mortgages: mortgages that begin with lower monthly
payments that get slowly larger over a period of years, eventually
reaching a fixed level and remaining there for the life of the loan.
Graduated payment loans may be good if you expect your annual income
to increase.

Grantee:
an individual to whom an interest in real property is conveyed.

Grantor:
an individual conveying an interest in real property.

Gross
Income: money earned before taxes and other deductions.
Sometimes it may include income from self-employment, rental property,
alimony, child support, public assistance payments, and retirement
benefits.

Guaranty
Fee: payment to FannieMae from a lender for the assurance
of timely principal and interest payments to MBS (Mortgage Backed
Security) security holders.

HECM
(Reverse Mortgage): 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.

Hazard
Insurance: protection against a specific loss, such as
fire, wind etc., over a period of time that is secured by the payment
of a regularly scheduled premium.

HELP:
Homebuyer Education Learning Program; an educational program from
the FHA that counsels people about the home buying process; HELP
covers topics like budgeting, finding a home, getting a loan, and
home maintenance; in most cases, completion of the program may entitle
the homebuyer to a reduced initial FHA mortgage insurance premium-from
2.25% to 1.75% of the home purchase price.

Home
Equity Line of Credit: a mortgage loan, usually in second
mortgage, allowing a borrower to obtain cash against the equity
of a home, up to a predetermined amount.

Home
Equity Loan: a loan backed by the value of a home (real
estate). If the borrower defaults or does not pay the loan, the
lender has some rights to the property. The borrower can usually
claim a home equity loan as a tax deduction.

Home Inspection: an examination of the structure
and mechanical systems to determine a home’s quality, soundness
and safety; makes the potential homebuyer aware of any repairs that
may be needed. The homebuyer generally pays inspection fees.

Home
Warranty: offers protection for mechanical systems and
attached appliances against unexpected repairs not covered by homeowner’s
insurance; coverage extends over a specific time period and does
not cover the home’s structure.

Homeowner’s
Insurance: an insurance policy, also called hazard insurance,
that combines protection against damage to a dwelling and its contents
including fire, storms or other damages with protection against
claims of negligence or inappropriate action that result in someone’s
injury or property damage. Most lenders require homeowners insurance
and may escrow the cost. Flood insurance is generally not
included in standard policies and must be purchased separately.

Homeownership
Education Classes: classes that stress the need to develop
a strong credit history and offer information about how to get a
mortgage approved, qualify for a loan, choose an affordable home,
go through financing and closing processes, and avoid mortgage problems
that cause people to lose their homes.

Homestead
Credit: property tax credit program, offered by some state
governments, that provides reductions in property taxes to eligible
households.

Housing
Counseling Agency: provides counseling and assistance to
individuals on a variety of issues, including loan default, fair
housing, and home buying.

HUD:
the U.S. Department of Housing and Urban Development; established
in 1965, HUD works to create a decent home and suitable living environment
for all Americans; it does this by addressing housing needs, improving
and developing American communities, and enforcing fair housing
laws.

HUD1
Statement: also known as the “settlement sheet,” or “closing
statement” it itemizes all closing costs; must be given to the borrower
at or before closing. Items that appear on the statement include
real estate commissions, loan fees, points, and escrow amounts.

HVAC:
Heating, Ventilation and Air Conditioning; a home’s heating
and cooling system.

Indemnification:
to secure against any loss or damage, compensate or give security
for reimbursement for loss or damage incurred. A homeowner should
negotiate for inclusion of an indemnification provision in a contract
with a general contractor or for a separate indemnity agreement
protecting the homeowner from harm, loss or damage caused by actions
or omissions of the general (and all sub) contractor.

Index:
the measure of interest rate changes that the lender uses to decide
how much the interest rate of an ARM will change over time. No one
can be sure when an index rate will go up or down. If a lender bases
interest rate adjustments on the average value of an index over
time, your interest rate would not be as volatile. You should ask
your lender how the index for any ARM you are considering has changed
in recent years, and where it is reported.

Inflation:
the number of dollars in circulation exceeds the amount of goods
and services available for purchase; inflation results in a decrease
in the dollar’s value.

Inflation
Coverage: endorsement to a homeowner’s policy that automatically
adjusts the amount of insurance to compensate for inflationary rises
in the home’s value. This type of coverage does not adjust for increases
in the home’s value due to improvements.

Inquiry:
a credit report request. Each time a credit application is completed
or more credit is requested counts as an inquiry. A large number
of inquiries on a credit report can sometimes make a credit score
lower.

Interest:
a fee charged for the use of borrowing money.

Interest
Rate: the amount of interest charged on a monthly loan
payment, expressed as a percentage.

Interest
Rate Swap: a transaction between two parties where each
agrees to exchange payments tied to different interest rates for
a specified period of time, generally based on a notional principal
amount.

Intermediate
Term Mortgage: a mortgage loan with a contractual maturity
from the time of purchase equal to or less than 20 years.

Insurance:
protection against a specific loss, such as fire, wind etc., over
a period of time that is secured by the payment of a regularly scheduled
premium.

Joint
Tenancy (with Rights of Survivorship): two or more owners
share equal ownership and rights to the property. If a joint owner
dies, his or her share of the property passes to the other owners,
without probate. In joint tenancy, ownership of the property cannot
be willed to someone who is not a joint owner.

Judgment:
a legal decision; when requiring debt repayment, a judgment may
include a property lien that secures the creditor’s claim by providing
a collateral source.

Jumbo
Loan: or 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.

K

Late
Payment Charges: the penalty the homeowner must pay when
a mortgage payment is made after the due date grace period.

Lease:
a written agreement between a property owner and a tenant (resident)
that stipulates the payment and conditions under which the tenant
may occupy a home or apartment and states a specified period of
time.

Lease
Purchase (Lease Option): assists low to moderate income
homebuyers in purchasing a home by allowing them to lease a home
with an option to buy; the rent payment is made up of the monthly
rental payment plus an additional amount that is credited to an
account for use as a down payment.

Lender:
A term referring to an person or company that makes loans for real
estate purchases. Sometimes referred to as a loan officer or lender.

Lender
Option Commitments: an agreement giving a lender the option
to deliver loans or securities by a certain date at agreed upon
terms.

Liabilities:
a person’s financial obligations such as long-term / short-term
debt, and other financial obligations to be paid.

Liability
Insurance: insurance coverage that protects against claims
alleging a property owner’s negligence or action resulted in bodily
injury or damage to another person. It is normally included in homeowner’s
insurance policies.

Lien:
a legal claim against property that must be satisfied when the property
is sold. A claim of money against a property, wherein the value
of the property is used as security in repayment of a debt. Examples
include a mechanic’s lien, which might be for the unpaid cost of
building supplies, or a tax lien for unpaid property taxes. A lien
is a defect on the title and needs to be settled before transfer
of ownership. A lien release is a written report of the settlement
of a lien and is recorded in the public record as evidence of payment.

Lien
Waiver: A document that releases a consumer (homeowner)
from any further obligation for payment of a debt once it has been
paid in full. Lien waivers typically are used by homeowners who
hire a contractor to provide work and materials to prevent any subcontractors
or suppliers of materials from filing a lien against the homeowner
for nonpayment.

Life
Cap: a limit on the range interest rates can increase or
decrease over the life of an adjustable-rate mortgage (ARM).

Line
of Credit: an agreement by a financial institution such
as a bank to extend credit up to a certain amount for a certain
time to a specified borrower.

Liquid
Asset: a cash asset or an asset that is easily converted
into cash.

Listing
Agreement: a contract between a seller and a real estate
professional to market and sell a home. A listing agreement obligates
the real estate professional (or his or her agent) to seek qualified
buyers, report all purchase offers and help negotiate the highest
possible price and most favorable terms for the property seller.

Loan:
money borrowed that is usually repaid with interest.

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
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
Officer: a representative of a lending or mortgage company
who is responsible for soliciting homebuyers, qualifying and processing
of loans. They may also be called lender, loan representative, account
executive or loan rep.

Loan
Origination Fee: a charge by the lender to cover the administrative
costs of making the mortgage. This charge is paid at the closing
and varies with the lender and type of loan. A loan origination
fee of 1 to 2 percent of the mortgage amount is common.

Loan
Servicer: the company that collects monthly mortgage payments
and disperses property taxes and insurance payments. Loan servicers
also monitor nonperforming loans, contact delinquent borrowers,
and notify insurers and investors of potential problems. Loan servicers
may be the lender or a specialized company that just handles loan
servicing under contract with the lender or the investor who owns
the loan.

Loan
to Value (LTV) Ratio: a percentage calculated by dividing
the amount borrowed by the price or appraised value of the home
to be purchased; the higher the LTV, the less cash a borrower is
required to pay as down payment.

Lock-In:
since interest rates can change frequently, many lenders offer an
interest rate lock-in that guarantees a specific interest rate if
the loan is closed within a specific time.

Lock-in
Period: the length of time that the lender has guaranteed
a specific interest rate to a borrower.

Loss
Mitigation: a process to avoid foreclosure; the lender
tries to help a borrower who has been unable to make loan payments
and is in danger of defaulting on his or her loan

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

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

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.

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

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

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.

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

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

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

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.

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

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

Mortgage
Life and Disability Insurance: term life insurance bought
by borrowers to pay off a mortgage in the event of death or make
monthly payments in the case of disability. The amount of coverage
decreases as the principal balance declines. There are many different
terms of coverage determining amounts of payments and when payments
begin and end.

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. The cost of mortgage insurance is usually added to
the monthly payment. Mortgage insurance is maintained on conventional
loans until the outstanding amount of the loan is less than 80 percent
of the value of the house or for a set period of time (7 years is
common). Mortgage insurance also is available through a government
agency, such as the Federal Housing Administration (FHA) or through
companies (Private Mortgage Insurance or PMI).

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

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

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
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
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: 36.

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.

Mortgagee:
the lender in a mortgage agreement. Mortgagor – The borrower in
a mortgage agreement.

Mortgagor:
the borrower in a mortgage agreement

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

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.

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.

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 loan. Negative amortization can occur when
an ARM has a payment cap that results in monthly payments not high
enough to cover the interest due.

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

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.”

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.

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

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

Note
Rate: the interest rate stated on a mortgage note.

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

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

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.

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.

O

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

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

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

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.

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

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.

PITI:
Principal, Interest, Taxes, and Insurance: the
four elements of a monthly mortgage payment; payments of principal
and interest go directly towards repaying the loan while the portion
that covers taxes and insurance (homeowner’s and mortgage, if applicable)
goes into an escrow account to cover the fees when they are due.

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.

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.

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.

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.

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

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
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.

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.

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.

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.

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 borrower
or the home seller, or may be split between them.

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.

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.

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.

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.

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

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.

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.

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

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

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

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

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

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
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.

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

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 on a fixed mortgage.

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.

Principal,
Interest, Taxes, and Insurance (PITI): the four elements
of a monthly mortgage payment; payments of principal and interest
go directly towards repaying the loan while the portion that covers
taxes and insurance (homeowner’s and mortgage, if applicable) goes
into an escrow account to cover the fees when they are due.

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 Housing Administration (FHA) or the
Veterans Administration (VA), or through private mortgage insurance
companies (PMI).

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

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, which transfers with the property.

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

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.

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

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.

Q

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.

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

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

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

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.

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

Real
Estate Agent: an individual who is licensed to negotiate
and arrange real estate sales; works for a real estate broker.

Real
Estate Mortgage Investment Conduit (REMIC): a security
representing an interest in a trust having multiple classes of securities.
The securities of each class entitle investors to cash payments
structured differently from the payments on the underlying mortgages.

Real
Estate Property Tax Deduction: a tax deductible expense
reducing a taxpayer’s taxable income.

Real
Estate Settlement Procedures Act (RESPA): 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

Real
Property: land, including all the natural resources and
permanent buildings on it.

REALTOR�:
a real estate agent or broker who is a member of the NATIONAL ASSOCIATION
OF REALTORS, and its local and state associations.

Recorder: the public official who keeps records
of transactions concerning real property. Sometimes known as a “Registrar
of Deeds” or “County Clerk.”

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.

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

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

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.

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.

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

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

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.

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

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.

Right
of First Refusal: a provision in an agreement that requires
the owner of a property to give one party an opportunity to purchase
or lease a property before it is offered for sale or lease to others.

Risk
Based Capital: an amount of capital needed to offset losses
during a ten-year period with adverse circumstances.

Risk
Based Pricing: Fee structure used by creditors based on
risks of granting credit to a borrower with a poor credit history.

Risk
Scoring: an automated way to analyze a credit report verses
a manual review. It takes into account late payments, outstanding
debt, credit experience, and number of inquiries in an unbiased
manner.

Sale
Leaseback: when a seller deeds property to a buyer for
a payment, and the buyer simultaneously leases the property back
to the seller.

Second
Mortgage: an additional mortgage on property. In case of
a default the first mortgage must be paid before the second mortgage.
Second loans are more risky for the lender and usually carry a higher
interest rate.

Secondary
Mortgage Market: the buying and selling of mortgage loans.
Investors purchase residential mortgages originated by lenders,
which in turn provides the lenders with capital for additional lending.

Secured
Loan: a loan backed by collateral such as property.

Security:
the property that will be pledged as collateral for a loan.

Seller
Take Back: an agreement where the owner of a property provides
second mortgage financing. These are often combined with an assumed
mortgage instead of a portion of the seller’s equity.

Serious
Delinquency: a mortgage that is 90 days or more past due.

Servicer:
a business that collects mortgage payments from borrowers and manages
the borrower’s escrow accounts.

Servicing:
the collection of mortgage payments from borrowers and
related responsibilities of a loan servicer.

Setback:
the distance between a property line and the area where building
can take place. Setbacks are used to assure space between buildings
and from roads for a many of purposes including drainage and utilities.

Settlement:
another name for closing.

Settlement
Statement: a document required by the Real Estate Settlement
Procedures Act (RESPA). It is an itemized statement of services
and charges relating to the closing of a property transfer. The
buyer has the right to examine the settlement statement 1 day before
the closing. This is called the HUD 1 Settlement Statement.

Special
Forbearance: a loss mitigation option where the lender
arranges a revised repayment plan for the borrower that may include
a temporary reduction or suspension of monthly loan payments.

Stockholders’
Equity: the sum of proceeds from the issuance of stock
and retained earnings less amounts paid to repurchase common shares.

Stripped
MBS (SMBS): securities created by “stripping” or separating
the principal and interest payments from the underlying pool of
mortgages into two classes of securities, with each receiving a
different proportion of the principal and interest payments.

Sub-Prime
Loan: “B” Loan or “B” paper with FICO scores from 620 -
659. “C” Loan or “C” Paper with FICO scores typically from 580 to
619. An industry term to used to describe loans with less stringent
lending and underwriting terms and conditions. Due to the higher
risk, sub-prime loans charge higher interest rates and fees.

Subordinate:
to place in a rank of lesser importance or to make one claim secondary
to another.

Survey:
a property diagram that indicates legal boundaries, easements, encroachments,
rights of way, improvement locations, etc. Surveys are conducted
by licensed surveyors and are normally required by the lender in
order to confirm that the property boundaries and features such
as buildings, and easements are correctly described in the legal
description of the property.

Sweat
Equity: using labor to build or improve a property as part
of the down payment

Third
Party Origination: a process by which a lender uses another
party to completely or partially originate, process, underwrite,
close, fund, or package the mortgages it plans to deliver to the
secondary mortgage market.

Terms:
The period of time and the interest rate agreed upon by the lender
and the borrower to repay a loan.

Title:
a legal document establishing the right of ownership and is recorded
to make it part of the public record. Also known as a Deed.

Title
1: an FHA-insured loan that allows a borrower to make non-luxury
improvements (like renovations or repairs) to their home; Title
I loans less than $7,500 don’t require a property lien.

Title
Company: a company that specializes in examining and insuring
titles to real estate.

Title
Defect: an outstanding claim on a property that limits
the ability to sell the property. Also referred to as a cloud on
the title.

Title
Insurance: insurance that protects the lender against any
claims that arise from arguments about ownership of the property;
also available for homebuyers. An insurance policy guaranteeing
the accuracy of a title search protecting against errors. Most lenders
require the buyer to purchase title insurance protecting the lender
against loss in the event of a title defect. This charge is included
in the closing costs. A policy that protects the buyer from title
defects is known as an owner’s policy and requires an additional
charge.

Title
Search: a check of public records to be sure that the seller
is the recognized owner of the real estate and that there are no
unsettled liens or other claims against the property.

Transfer
Agent: a bank or trust company charged with keeping a record
of a company’s stockholders and canceling and issuing certificates
as shares are bought and sold.

Transfer
of Ownership: any means by which ownership of a property
changes hands. These include purchase of a property, assumption
of mortgage debt, exchange of possession of a property via a land
sales contract or any other land trust device.

Transfer
Taxes: State and local taxes charged for the transfer of
real estate. Usually equal to a percentage of the sales price.

Treasury
Index: can be used as the basis for adjustable rate mortgages
(ARMs) It is based on the results of auctions that the U.S. Treasury
holds for its Treasury bills and securities.

Truth-in-Lending:
a federal law obligating a lender to give full written disclosure
of all fees, terms, and conditions associated with the loan initial
period and then adjusts to another rate that lasts for the term
of the loan.

Two
Step Mortgage: an adjustable-rate mortgage (ARM) that has
one interest rate for the first five to seven years of its term
and a different interest rate for the remainder of the term.

Trustee:
a person who holds or controls property for the benefit of another.

Underwriting:
the process of analyzing a loan application to determine the amount
of risk involved in making the loan; it includes a review of the
potential borrower’s credit history and a judgment of the property
value.

Up
Front Charges: the fees charged to homeowners by the lender
at the time of closing a mortgage loan. This includes points, broker’s
fees, insurance, and other charges.

VA
(Department of Veterans Affairs): a federal agency, which
guarantees loans made to veterans; similar to mortgage insurance,
a loan guarantee protects lenders against loss that may result from
a borrower default.

VA
Mortgage: a mortgage guaranteed by the Department of Veterans
Affairs (VA).

Variable
Expenses: Costs or payments that may vary from month to
month, for example, gasoline or food.

Variance:
a special exemption of a zoning law to allow the property to be
used in a manner different from an existing law.

Vested:
a point in time when you may withdraw funds from an investment account,
such as a retirement account, without penalty.

Walk
Through: the final inspection of a property being sold
by the buyer to confirm that any contingencies specified in the
purchase agreement such as repairs have been completed, fixture
and non-fixture property is in place and confirm the electrical,
mechanical, and plumbing systems are in working order.

Warranty
Deed: a legal document that includes the guarantee the
seller is the true owner of the property, has the right to sell
the property and there are no claims against the property.

X

Y

Zoning: local laws established to control the uses
of land within a particular area. Zoning laws are used to separate
residential land from areas of non-residential use, such as industry
or businesses. Zoning ordinances include many provisions governing
such things as type of structure, setbacks, lot size, and uses of
a building.

Source: http://www.hud.gov/offices/hsg/sfh/buying/glossary.cfm