ACCELERATION CLAUSE

A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

ACH

Automated Clearing House 

ADJUSTABLE RATE MORTGAGE (ARM)

A mortgage loan that allows the lender to periodically adjust the interest in accordance with a specified index as agreed to at the inception of the loan.

ADJUSTMENT DATE

The date the interest rate changes on an adjustable-rate mortgage.

ADVERSE ACTION

Notice to a potential borrower of a denial of credit.

AFFORDABILITY ANALYSIS

A detailed analysis of a borrower’s ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you plan to purchase a home, and the closing costs you might expect to pay.

AGI

Adjusted Gross Income 

ALL-RISK INSURANCE

An insurance policy that provides coverage for every conceivable risk except those specifically excluded by the policy itself, as opposed to a “named-perils” policy that covers only those risks specifically set forth in the policy.

ALTA 

American Land Title Association 

AMC 

Appraisal Management Company 

AMENITY

A feature of real property, whether natural or manmade, that enhances its attractiveness and increases the occupant or user’s satisfaction, although the feature is not essential to the property’s use (such as a scenic view or recreational facility).

AMERICAN LAND TITLE ASSOCIATION (ALTA)

A national association of title insurance companies, abstractors, and title agents. The association speaks for the abstract and title insurance industry and establishes standard procedures and title policy forms.

AMI

Area Median Incomes 

AMORITIZATION

Loan payment by equal periodic payments calculated to retire the principal at the end of a fixed period and to pay accrued interest on the outstanding balance.

AMORITIZATION SCHEDULE

A timetable showing how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

ANNUAL PERCENTAGE RATE (APR)

A term used in the Truth-In-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan.

API

Annual Percentage Interest 

APPLICATION

The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more. This is often referred to as the 1003 (ten-of-three).

APPRAISAL

A report that sets forth an opinion or estimate of value, primarily based on an analysis of comparable sales of similar homes nearby.

APPRAISED VALUE

An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

APPRAISER

An individual who, by education, training, and experience, estimates the value of real property and records the findings on industry accepted appraisal forms. Although some appraisers work directly for the mortgage lenders, most are independent.

APPRECIATION

The increase in the value of a property due to changes in market conditions, inflation or other causes.

APR 

Annual Percentage Rate 

ARM 

Adjustable

ASSESSED VALUE

The valuation place on property by a public tax assessor for purposes of taxation.

ASSESSOR

A public official who establishes the value of a property for taxation purposes.

ASSIGNEE

Entity receiving the assignment.

ASSIGNMENT

When ownership of a mortgage is transferred from one company or individual to another, it is called an assignment.

ASSIGNMENT OF MORTGAGE

A document sufficient under the laws of the jurisdiction where the related mortgaged property is located, to reflect or record the sale of the mortgage to FAMC.

ASSIGNOR

Entity making the assignment.

ASSUMABLE MORTGAGE

A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must “qualify” in order to assume the loan.

ASSUMPTION

A transaction in which the purchaser of real property takes over the seller’s existing mortgage; the seller remains liable for the mortgage unless released by the lender from this obligation. The terms describing whether or not the loan is assumable are typically set forth in the security instrument.

AUS 

Automated Underwriting System 

AVM 

Automated Valuation Model

BACK-END RATIO

Calculations that are used in determining whether a borrower can qualify for mortgage. There are two ratios. The “top” or “front” ratio is a calculation of the borrower’s monthly housing cost (principal, taxes, insurance and homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing cost as well as all other monthly debt.

BALANCE PAYMENT

The final lump sum payment that is made at the maturity date of a balloon mortgage.

BALLOON MORTGAGE

A mortgage loan that required the remaining principal balance to be paid at the specific point in time. For example, a loan may be amortized as if it would be paid over a thirty-year period, but requires that at the end of the tenth year the entire remaining balance be paid.

BALLOON PAYMENT

The final lump sum payment that is due at the termination of a balloon mortgage.

BANKRUPTCY

A legal proceeding in federal court in which a debtor seeks to restructure his or her obligations to creditors pursuant to the Bankruptcy Code. This generally affects the borrower’s personal liability for a mortgage debt, but not the lien securing the mortgage.

BASE POINT (BPS)

One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages. (1/100 of 1%. For example, 7.5 basis points are equal to 0.075%).

BASE PRICE

The starting price of a loan, usually taken from the rate sheet, to which all other feature price adjusters are added or subtracted.

BCIS 

Bureau of Citizenship and Immigration Services

BENEFICIARY

Anyone receiving or who is to receive benefits, as funds from a will, insurance policy, or other legal documents granting valuable rights.

BEST EFFORTS

A designation of a Rate Commitment Period requiring Correspondent to register mortgage loans in good faith with the intent to deliver the mortgage loans to FAMC for purchase.

BILLED AMOUNT

The amount billed to the correspondent monthly for miscellaneous as needed.

BISCOM

The name of a tax server and fax software company FAMC uses to improve the efficiency of inbound and outbound fax workflow.

BLANKET INSURANCE POLICY

A single policy that covers more than one piece of property (or more than one person).

BOND MARKET

A mortgagor who receives funds in the form of a loan with the obligation of repaying the loan in full with interest if applicable.

BORROWER

The person to whose credit is extended. On a mortgage loan, the person who has an ownership interest in the security property, signs the security instrument, and signs the mortgage/deed of trust note (if his or her credit is used for qualifying purposes). See also co-borrower.

BPO

Broker Price Opinion 

BRIDGE LOAN

A short-term loan secured by the borrower’s present home (which is usually for sale) that allows the proceeds to be used for closing on a new house before the present home is sold.

BROKER

Broker has several meanings in different situations. Most realtors are “agents” who work under a “broker”. Some agents are brokers as well, either working for themselves or under another broker. In the mortgage industry broker usually refers to a company or individual that does not lend the money from the loans themselves, but broker loans to larger lenders or investors. As a normal definition, a broker is any third-party entity that processes the mortgage loan application, and may also underwrite and close the mortgage loan. Typically, the mortgage loan is closed in a lender’s name, and a lender funds the loan and then sells it to an investor.

C-TO-P

Construction To Permanent Mortgage Loan 

CAIVRS 

Credit Alert Interactive Voice Response System

CALL OPTION

A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

CAP (INTEREST RATE)

Refers to the maximum allowable interest rate increase for an adjustable rate mortgage, (also referred to as a “ceiling”).

CAPITAL

1. Money used to create income, either as an investment in a business or an income property. 2. The money or property comprising the wealth owned or used by a person or business enterprise. 3. The accumulated wealth of a person or business. 4. The net worth of a business represented by the amount by which its assets exceed liabilities.

CASH-OUT REFINANCE

The repayment of a mortgage debt from the proceeds of a new loan using the same property as security. The principal amount of the new mortgage is greater that the principal amount outstanding on the existing mortgage being refinanced, plus closing costs. In other words, borrowers can refinance their existing mortgage and increase the amount of the mortgage balance by converting a portion of the home’s equity into cash.

CD

Certificate Of Deposit 

CDO

Collateralized Debt Obligation 

CERTIFICATE OF COMPLETION

Certification required in follow-up additional repairs or completion of items required by an appraiser.

CERTIFICATE OF ELIGIBILITY

A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.

CERTIFICATE OF REASONABLE VALUE (CRV)

Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

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 free and clear of all liens or other claims.

CHAIN OF TITLE

An analysis of the transfers of title to a piece of property over the years.

CHARGE-OFF

The portion of principal and interest due on a loan that is written off when deemed uncollectible.

CHUMS

Computerized Homes Underwriting Management System 

CLEAR TITLE

A title that is free of liens or legal questions as to ownership of the property.

CLO

Collateralized Loan Obligation 

CLOSING

this has different meanings in different states. In some states, a real estate transaction is not considered “closed” until the documents record at the local recorder’s office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.

CLOSING COSTS

Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid terms.” Non-recurring closing cost are any items which are paid just once as a result of buying the property or obtaining a loan. “Prepaids” are items, which recur over time, such as property taxes and homeowners insurance. A lender/broker attempts to estimate the amount of non-recurring closing cost and prepaid items on the Good Faith Estimate, which they must issue to the borrower within three days of receiving a home loan application.

CLTV

Combined Loan To Value 

CMO

Collateralized Mortgage Obligation 

CO-BORROWER

An additional individual who is both obligated on the loan and is on title to the property.

COD

Cancellation Of Debt 

COE

Certificate Of Eligibility

COLLATERAL

The property that is pledged as security for the satisfaction of a debt collateral package: The documents required to verify and secure a mortgage loan.

COMBINED LOAN-TO-VALUE (CLTV) RATIO

A ratio that is used for a mortgage that is subject to subordinate financing, which is calculated by dividing the sum of (1) the unpaid principal balance of the first mortgage, (2) the unpaid principal balance of any HELOC from which the borrower has withdrawn funds, and (3) the unpaid principal balance of all other subordinate financing, by the lower of the property’s sales price or appraised value.

COMMERCIAL SPACE

Space in a condo project that is leased for commercial or business use.

COMMUNITY SECONDS

A subsidized second mortgage typically made by a federal, state, or local government agency, a nonprofit organization, or an employer.

CONDO PROJECT MANAGER (CPM)

A Web-based application available to lenders through Condo Project Manager that provides a clearly defined condo project acceptance path with step-by-step processes for lenders to enter condo project data and receive findings on project acceptability.

CONDOMINIUM CONVERSIONS

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

CONDOMINIUM HOTEL/RESORT

Condominium projects with any hotel-like features or resort-like features are ineligible. Condominium Hotel features or Resort features include, but are not limited to, the following: • Name includes “hotel,” “resort,” “motel,” “inn,” or “lodge,” “club”. • Publicly advertised as a condominium hotel or resort. Web sites are available to determine room availability and/or to make reservations. • Is located at the same address as a hotel or resort, or within a hotel or resort, or has a hotel or hospitality identity. • Has non-incidental businesses operated or owned by the homeowner’s association (for example, restaurant, health club, spa, etc.). • Projects allowing short-term (less than 30 days) and seasonal rentals (as evidenced by CC&R’s). • Hotel-like or leased amenities (such as front desk, maid service, concierge service, on site recreational activities, lifeguard on duty, towel or linen service, etc.) • Has HOA budget red flags, such as housekeeping costs, business income, membership fee income, personnel costs (lifeguard, maid, concierge, front desk, shuttle service, internet service fees, etc.) • Shares facilities, common elements, or amenities with a hotel, resort, and/or lodge owned and managed by the developer or another third-party entity (pool, spa, fitness center, parking, business center, conference facility, etc.) • Has units that do not have full size kitchen appliances, or that have efficiency kitchens. • Has a revenue sharing arrangement between a rental management firm and the HOA. • Requires mandatory membership (tennis, golf, health club, etc.) • Requires a mandatory rental pooling agreement or has blackout periods.

CONDOMINIUM OR CONDO

A form of ownership of real property. The purchaser receives title to a particular unit and a proportionate interest in certain common areas and, in some cases, the exclusive use of certain limited common areas. A condominium generally defines each unit as a separate owned space to the interior surfaces of the perimeter walls, floors and ceilings.

CONFORMING

A conforming mortgage loan meets all requirements (size and type) and can be sold to the agencies (Fannie Mae, Freddie Mac and Ginnie Mae). The dollar amount varies depending on the number of family units.

CONSTRUCTION LOAN

A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

CONSTRUCTION-TO-PERM

The Construction-to-Permanent mortgage allows homebuyers and homeowners to borrow money to build a home from the ground up or to finish building a home that is currently under construction.

CONTRACT UNDERWRITER

Companies that have been approved by FAMC to underwrite and issue loan approvals on mortgage loans the correspondent intends to submit to FAMC for purchase.

CONVENTIONAL MORTGAGE

A mortgage that is not insured or guaranteed by a federal government agency—the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), or Rural Development (RD).

CONVERIBLE ARM

An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

COOPERATIVE

A single family dwelling located within a Cooperative Project that is the subject of a proprietary lease.

CORPORATE RESOLUTION

Resolution of the Board of Directors, signed and sealed, required as part of the Correspondent Program Application package.

CORRESPONDENT

An individual institution or organization that may originate and underwrite the mortgage loan. The correspondent closes the mortgage loan in its own name with its own funds and sells it to a lender, which in turn may sell the loan to an investor.

CORRESPONDENT LOAN PURCHASE AGREEMENT (FORM 200)

The agreement executed by FAMC and an approved correspondent stating the terms regarding the purchase and sale of mortgage loans, representations and warranties, cost, advertising policies, and other responsibilities involved in the FAMC correspondent relationship.

CORRESPONDENT PROGRAM APPLICATION

The application by a correspondent seeking approval to sell loans to FAMC.

COST APPROACH TO VALUE

A method of measuring the value of a property based on the cost of producing a substitute residence that has the same use as the property that is being appraised.

CPA

Certified Public Accountant 

CPI

Consumer Price Index 

CPM

Condo Project Manager 

CRC

Credit Reporting Company 

CREDIT ENHANCEMENT

A method to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, or other agreements to provide and entity with some assurance that it will be recompensed to some degree in the event of a financial loss.

CREDIT PACKAGE

The documents required for delivery to FAMC for underwriting, as required by FAMC guidelines.

DD214

Department of Defense Discharge Form 

DE

Direct Endorsement 

DEBT

Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

DEBT-TO-INCOME RATIO

A ratio derived by dividing the borrower’s total monthly obligations (including housing expense) by his or her stable monthly income. This calculation is used to determine the mortgage amount for which a borrower qualifies. This is the same as “total debt-to-income ratio.”

DEED

The legal document conveying title to property.

DEED IN LIEU OF FORECLOSURE (OR DEED-IN-LIEU)

A transfer of title from a delinquent borrower to the lender in satisfaction of the mortgage debt to avoid foreclosure; also called a voluntary conveyance.

DEED OF TRUST

A type of security instrument in which the borrower conveys a trust to hold property to a third party (trustee) as security for the lender, with the condition that the trustee shall re-convey the title upon the payment of the debt and, conversely, will sell the land and pay the debt in the event of a default by the borrower.

DEFAULT

The failure of a borrower to comply with the terms of a note or the provisions of a mortgage.

DELEGATED UNDERWRITING AUTHORITY

The correspondent’s underwriting authority.

DELIVERY PERIOD

The time within which an acceptable mortgage loan must be delivered to FAMC in order to be eligible for purchase.

DELRAP

Direct Endorsement Lender Review and Approval Process 

DESKTOP ORIGINATOR (DO)

A Web-based application that gives originators access to DU through a sponsoring lender.

DESKTOP UNDERWRITER (DU)

Fannie Mae Desktop Underwriter, an automated underwriting service, designed to help lenders make credit decisions by analyzing borrower and property data. Fannie Mae issues DU underwriting finding based on the data contained in the loan application and credit report.

DETACHED

A condominium project composed of individual units that are free-standing buildings. The land may be owned by the individual unit owner or by the condominium association.

DHS

Department of Homeland Security 

DISCOUNT POINTS

In the mortgage, this term is usually used only in reference to government loans, meaning FHA and VA loans. Discount points refer to any “points” paid in addition to the one percent loan origination fee. A “point” is one percent of the loan amount.

DISCOUNTED INITIAL RATE

Initial rate on an adjustable rate mortgage that is not equal to what the rate would be if calculated by adding the margin to the index.

DO

Desktop Originator 

DOING BUSINESS AS (DBA)

A formal notice that an individual, company or organization is conducting business under a different name.

DTI

Debt To Income 

DU

Desktop Underwriter 

EARLY PAYMENT DEFAULT

An Early Payment Default (EPD) loan is defined as any loan for which any of the initial payments due to the lender and/or investor are delinquent.

EARLY PAYOFF

A conventional non-conforming loan or an FHA/VA loan purchased by FAMC which is then paid-in-full within 90 days after the date FAMC is due the first payment.

EARNEST MONEY

Money put down by a potential buyer to show their seriousness 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 declines to continue the process after the agreed upon time period.

EASEMENT

A right of way giving persons other than the owner access to or over a property.

ECOA

Equal Credit Opportunity Act 

EDI

Electronic Data Interface 

EEM

Energy Efficient Mortgage 

EFFECTIVE AGE

An appraiser’s estimate of the property’s usability and market value based on the physical condition of a building. The actual age of a building may be shorter or longer than its effective age. A ninety-year old house remodeled 10 years ago would have an effective age of 10, and an actual age of 90.

EFFECTIVE GROSS INCOME

An income measurement for an investment property, which is determined by calculating annual rent based on 100% occupancy, adding other income—such as that received from parking, laundry facilities, etc.—and subtracting an estimated amount for rent loss that can be expected for anticipated vacancies or uncollectible rent from occupied units.

EIN

Employer Identification Number

ELECTRONIC SIGNATURE

An electronic sound, symbol, or process, attached to or logically associated with, a contract or other record executed or adopted by a person with the intent to sign the record.

EMB

Emerging Mortgage Banker 

EMD

Earnest Money Deposit 

ENCUMBRANCE

Anything that affects or limits the fee simple title to a property, such as mortgage, lease, easements, or restrictions.

ENVIRONMENTAL HAZARD ASSESSMENT

An evaluation of the environmental soundness of a project development based on information gathered from various sources. A Phase I assessment involves a screening process that focuses on reviewing available documentation, interviewing people knowledgeable about the project, and inspecting the site, the building, and adjoining properties. A Phase II assessment provides a more detailed review of the site (with specific physical sampling for each hazard that was not acceptable under the Phase I assessment) and a review of historical records to determine the presence or absence of specific environmental liabilities or to quantify the extent of an observed or suspected environmental liability.

ENVIRONMENTAL HAZARDS

Any natural or man-made characteristics that are present in, or affect, the property or neighborhood, including but not limited to, hazardous wastes, toxic substances, radon gas, asbestos-containing materials, urea-formaldehyde insulation, sulfur-containing drywall (also known as Chinese drywall).

EPLS

Excluded parties List System

EQUITY

A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

ERRORS AND OMISSIONS COVERAGE

A type of indirect loss insurance used to cover losses that occur because of an error or neglect on the part of an employee to whom a specific responsibility has been assigned.

ESCROW

An item of value, money or document deposited with a third party to be delivered upon the fulfillment of a condition.

ESCROW ACCOUNT

A trust account that is established to hold funds allocated for the payment of a borrower’s property taxes and assessments by special assessment districts, ground rents, insurance premiums, condo or homeowners’ association or planned unit development association dues and similar expenses as they are received each month in accordance with the borrower’s mortgage documents and until such time as they are disbursed to pay the related bills.

ESCROW DISBURSEMENTS

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they come due.

ESCROW IMPOUND

That portion of a mortgagor’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, flood insurance, mortgage insurance, lease payments, and other items as they apply to the loan.

FACSIMILE SIGNATURES

A form of signature that is electronically reproduced or copied in another acceptable manner. Such signatures are acceptable under certain conditions as long as they are valid and enforceable in the jurisdictions in which they are used.

FACTORY-BUILT HOUSING

Prefabricated single-family housing (such as panelized, modular, or sectional housing), which is constructed in a factory (and, if applicable, in accordance with the building codes of the state in which the factory is located) and is subsequently joined together at a permanent building site, assumes the characteristics of site-built housing (such as permanent connections to water, electrical, and waste disposal systems), and is legally classified as real property. (Collectively, this term also may refer to manufactured homes. See the definition of that term for distinctions between the different types of factory-built housing.)

FAIR

Fair Access To Insurance Requirement 

FAIR CREDIT REPORTING ACT

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.

FAIR MARKET VALUE

The highest price that a buyer, willing but not compelled to buy, would pay and the lowest a seller, willing but not compelled to sell, would accept.

FANNIE MAE (FNMA OR FEDERAL NATIONAL MORTGAGE CORP.)

A government sponsored private corporation created by Congress to support the secondary mortgage market.

FDIC

Federal Deposit Insurance Corporation 

FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA)

A federal agency that provides assistance in areas that have suffered a major disaster or other emergency. It also maintains flood insurance rate maps that identify the special flood hazard areas in which Fannie Mae requires flood insurance.

FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) DISASTER AREA

A city, county, or parish designated by FEMA as eligible for individual assistance as a result of a natural disaster.

FEDERAL HOUSING ADMINISTRATION (FHA)

FHA, also a part of HUD, provides mortgage insurance on loans made by FHA-approved lenders.

FEDERAL HOUSING FINANCE AGENCY (FHFA)

The safety, soundness and mission regulator for Fannie Mae. FHFA replaced the former regulator, the Office of Federal Housing Enterprise Oversight (OFHEO).

FEE SIMPLE ESTATE

An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condo project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FEMA

Federal Emergency Management Agency 

FHA

Federal Housing Administration

FHA CASE NUMBER

A mortgage loan number assigned by FHA for loan tracking and insuring purposes.

FHA-INSURED MORTGAGE

A mortgage by the Federal Housing Administration; may be referred to as a “government” mortgage. FICO: Credit score; the classic FICO credit score developed by Fair Isaac Corporation.

FHFA

Federal Housing Finance Agency 

FHLMC

Federal Home Loan Mortgage Corporation (Freddie Mac) 

FICO

Fair Isaac Corporation

FIDELITY BOND

A type of bond that is obtained by an employer to protect against economic loss from dishonest acts of its employees.

FIDELITY INSURANCE

A type of insurance that a condo or PUD homeowners’ association or a co-op corporation obtains to protect itself against economic loss from dishonest acts of anyone who either handles (or is responsible for) funds that the association or corporation holds or administers, whether or not that individual receives compensation for services.

FINAL PROJECT ACCEPTANCE

The acceptance that is issued for a condo, PUD, or co-op project to indicate that the project’s physical characteristics and marketability are acceptable to Fannie Mae, and that mortgages or share loans on units within the project may be delivered to Fannie Mae for purchase or securitization.

FINANCED MORTGAGE INSURANCE PREMIUM

A mortgage insurance premium for which the borrower is not required to make an advance payment from his or her own funds. Rather, the amount required to pay for a lump-sum premium is financed by including it as part of the original mortgage amount.

FIRST MORTGAGE

A mortgage that is the primary lien against a property.

FIRST-TIME HOME BUYER

An individual is to be considered a first-time home buyer who (1) is purchasing the security property; (2) will reside in the security property; and (3) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property. In addition, an individual who is a displaced homemaker or single parent also will be considered a first-time home buyer if he or she had no ownership interest in a principal residence (other than a joint ownership interest with a spouse) during the preceding three-year time period. For additional information about making this determination, see the instructions for the Uniform Residential Loan Application (Form 1003).

FISCAL YEAR

Any 12-month period used for financial reporting and preparation of balance sheets, profit and loss statements, and other financial summaries.

FIXED RATE MORTGAGE

A mortgage on which the interest rate is set for the term of the loan.

FLOOD INSURANCE

Insurance that compensates for physical property damage resulting from flooding. It is required for properties in federally designated Special Flood Hazard Areas.

FMV

Fair Market Value 

FNMA

Federal National Mortgage Association (Fannie Mae) 

FORECLOSURE

The legal process by which a borrower who defaults on a mortgage is deprived of their interest in the mortgaged property. This usually involves a forced sale of the property as a public auction with the proceeds of the sale being applied to the mortgage debt.

FRAUD

Intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. Any discovery of mortgage fraud automatically requires repurchase.

FREDDIE MAC

Federal Home Loan Mortgage Corp (FHLMC). A congressionally chartered corporation that purchases mortgage loans in the secondary mortgage market.

FRM

Fixed-Rate Mortgage 

FRONT_END RATIO

Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The “top” portion or “front” ratio is a calculation of the borrower’s monthly housing costs (principal, taxes, insurance, mortgage insurance, and homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing cost as well as all other monthly debt.

FSBO

For Sale By Owner

FTHB

First Time Home Buyer

FULL PAYMENT AMOUNT

The monthly payment required, at each interest change date, to amortize the then outstanding principal balance of an ARM (or GPARM) at the new interest rate over the remaining mortgage term.

FULLY AMORTIZING ARM

An adjustable-rate mortgage that has a monthly payment sufficient to amortize the unpaid principal balance—at the interest accrual rate—over the mortgage term.

FULLY-INDEXED RATE

The interest rate on an adjustable rate mortgage that is equal to the index plus the margin, rounded to the nearest 1/8 of 1%.

GFE

Good Faith Estimate 

GNMA

Government National Mortgage Association

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.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

Also referred to as Ginnie Mae. Guarantees securities backed by mortgage that are insured or guaranteed by other government agencies. Ginnie Mae does not issue, sell, or buy mortgage-backed securities, or purchase mortgage loans. It simply guarantees (insures) the timely payment of principal and interest from approved issuers.

GPM

Graduated Mortgage Payment

GRANTEE

The person to whom an interest in real property is conveyed.

GRANTOR

The person conveying an interest in real property.

GROUND RENT

The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.

GSA

General Services Administration 

GSE

Government Sponsored Enterprise 

HAMP

Home Affordable Modification Program 

HAP

Housing Assistance Program 

HAZARD INSURANCE

Insurance coverage for the event of physical damage to a property from fire, wind, vandalism or other hazards.

HCLTV

Home Equity Combined Loan-To-Value 

HECM 

(FHA) Home Equity Conversion Mortgage 

HELOC

Home Equity Line Of Credit

HERA

Housing and Economic Recovery Act 

HIGH-RISE CONDOMINIUM

A multi-unit building with six (6) or more floors.

HMDA

Home Mortgage Disclosure Act 

HOA

Homeowners’ Association 

HOEPA

Home Ownership and Equity Protection Act

HOME EQUITY COMBINED-LOAN-TO-VALUE RATIO (HCLTV)

A ratio that is used when a mortgage financing package includes home equity lines that are potential liens; a ratio that is developed by dividing the sum of the unpaid principal balance of the first mortgage, the amount of the HELOC (whether or not there have been any draws), and the unpaid principal balance of all other subordinate financing by the lower of the property’s sales price or appraised value.

HOME EQUITY LINE OF CREDIT (HELOC)

A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined limit.

HOME MORTGAGE DISCLOSURE ACT (HMDA)

The Home Mortgage Disclosure Act (HMDA) is to prevent lending discrimination and redlining by requiring public disclosure of certain pieces of information about mortgage loan applications.

HOMEOWNER’S INSURANCE

Insurance coverage available for owner-occupied properties to protect against personal liability and physical property damages for a dwelling and its contents.

HOMEOWNERS ASSOCIATION (HOA)

A nonprofit association that manages the common areas of planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

HOUSING RATIO

The proportion of a house payment to total monthly income.

HPML

Higher Priced Mortgage Loans 

HRAP

HUD Review and Approval Process 

HUD

(Department Of) Housing And Urban Development 

HUD-1 SETTLEMENT STATEMENT

A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions; loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. It is called a HUD-1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the “closing statement” or “settlement sheet”.

HVAC

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

HVCC

Home Valuation Code Of Conduct 

HVE

Home Value Explorer 

IN-FILE CREDIT REPORT

An objective account, normally computer-generated, of credit and public record information obtained from a credit repository.

INCOME APPROACH TO VALUE

A method of measuring the value of a property based on the market rent or income that the property can be expected to earn.

INDEX

A number used to compute the interest rate for an ARM. The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps on the maximum or minimum interest rate that may be charged on the mortgage, as stated in the note.

INITIAL NOTE RATE

The interest rate on a loan at which the Borrower’s payment is calculated until the first payment adjustment date.

INSTALLMENT DEBT

Borrowed money that is repaid in several successive payments, usually at regular intervals, for a specific amount and for a specified term (for example, an automobile loan or a furniture loan).

INSTITUTIONAL LENDER

A financial institution that invests in mortgages and keeps them in its own portfolio.

INTER VIVOS REVOCABLE TRUST (OR LIVING TRUST)

A trust that an individual creates during his or her lifetime that becomes effective during his or her lifetime, but which can be changed or canceled at any time for any reason during its creator’s lifetime.

INTEREST ACCRUAL RATE

The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for graduated-payment mortgages and adjustable-rate mortgages with payment change limitations.

INTEREST RATE (IR)

The amount of interest charged on a monthly loan payment; usually expressed as a percentage.

INTEREST RATE BUYDOWN PLAN

An arrangement wherein the property seller or any other party deposits money to an account so that it can be released each month to reduce the borrower’s payments during the early years of a mortgage. During the specified period, the borrower’s effective interest rate is “bought down” below the actual mortgage interest rate.

INTEREST RATE CAP

For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note.

INTEREST RATE CHANGE DATE

The date on which the mortgage interest rate changes for an ARM/GPARM; the date on which interest begins to accrue at a new rate for an ARM MBS pool.

INTEREST-ONLY FEATURE

The interest-only feature allows borrowers to pay only the monthly interest due for a fixed period, followed by a fully amortizing period. Interest-only loans can have a fixed or adjustable interest rate.

INTERESTED PARTY CONTRIBUTIONS

Costs that are normally the responsibility of the property purchaser that are paid (directly or indirectly) by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property. These persons or entities include, but are not limited to, the property seller, the builder/developer, and the real estate agent or broker (or an affiliate who may benefit from the sale of the property and/or the sale of the property at the highest price possible).

INTERMEDIATE-TERM MORTGAGE

A mortgage loan with a contractual maturity at time of purchase equal to or less than 20 years.

INVESTMENT PROPERTY

An investment property is not owner occupied and is usually rented to produce an income. It is important to note that it is still considered investment property even though there may not be a positive cash flow of rental income. An investment property can be any type of dwelling, single or multi-family, condominium or cooperative unit.

INVESTOR CONCENTRATION

The percentage of units in a condominium sold to investors compared to the number of units sold to all owners.

IO

Interest Only 

IP

Investment Property 

IRRRL

Interest Rate Reduction Refinance Loan 

IRS

Internal Revenue Service 

JOINT TENANCY

A form of ownership or taking title to property, which means each party owns the whole property and that ownership is not separate. In the event of death of one party, the survivor owns the property in its entirety.

JTIC

Joint Tenants In Common 

JTWROS

Joint Tenants With Rights Of Survivorship 

JUDGEMENT

A decision made by a court of law. In judgments that require the repayment of debt, the court may place and lien against the debtor’s real property as collateral for the judgment’s creditor.

JUDICIAL FORECLOSURE

A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.

JUMBO LOAN

A loan that exceeds Fannie Mae and Freddie Mac’s loan limits, currently at $417,000 for a single-family loan.

K-NO APPLICABLE TERMS

LAPP

Lender Appraisal Processing Program 

LATE CHARGE

A penalty that a borrower must pay when a mortgage payment is made a stated number of days (usually a minimum of 15) after its due date.

LDP

Limited Denial of Participation 

LEASE

A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time. A way of holding title to property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

LEASE PURCHASE

Assist 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.

LEASEHOLD ESTATE

A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

LEGAL DESCRIPTION

A property description by law, that is sufficient to locate and identify the property without oral testimony.

LENDER

A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as “lenders”.

LES

Leave and Earnings Statement 

LIABILITIES

A person’s financial obligations. Liabilities include long-term and short term debt, as well as any other amounts that are owed to others.

LIABILITY INSURANCE

Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party

LIBOR

An index used to determine interest rate changes for certain ARM plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank Market.

LIBOR

London Interbank Offered Rate 

LIEN

A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

LIFE CAP

For an adjustable-rate mortgage (ARM), a limit of the amount that the interest rate can increase or decrease over the life of the mortgage.

LIFE OF LOAN CAP

The maximum interest rate that can ever be charged on an adjustable rate loan.

LIMITED CASH-OUT REFINANCE

A refinance transaction in which the mortgage amount generally is limited to the sum of the unpaid principal balance of the existing first mortgage, closing costs (including prepaid items), points, and the amount required to satisfy any mortgage liens if the documented proceeds of the subordinate financing were solely used to acquire the property (if the borrower chooses to satisfy them), and other funds for the borrower’s use (as long as the amount does not exceed the lesser of $2000 or 2% of the principal amount of the new mortgage).

LIMITED LIABILITY COMPANY (LLC)

A flexible form of business enterprise that blends elements of partnership and corporate structures.

LINE OF CREDIT

An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

LLC

Limited Liability Company 

LLPA

Loan Level Price Adjustment 

LO

Loan Officer 

LOAN ORIGINATIONS

How a lender refers to the process of obtaining new loans.

LOAN SERVICING

After a loan is obtained, the company the borrower makes the payments to “services” that loan. The company processes payments, sends statements, manages the escrow/impound account, provides collection efforts on delinquent loans, ensures that insurance and property taxes are made on the property, handles pay-offs and assumptions, and provides a variety of other services.

LOAN TO VALUE RATIO (LTV)

The ratio, expressed as a percentage, of the appraised value or purchase price of the mortgage property, whichever is lower, to the original outstanding principal balance of the mortgage loan. (When >80%, needs PMI)

LOAN-LEVEL PRICE ADJUSTMENT (LLPA)

LLPAs are assessed based on certain eligibility or other loan features, such as credit score, loan purpose, occupancy, number of units, product types, etc. For whole loan transactions, LLPAs will be deducted from (or credited to) the loan proceeds.

LOCK-IN

An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

LOCK-IN PERIOD

The time period during which the lender has guaranteed an interest rate to a borrower.

LOI

Letter Of Intent 

LOS

Loan Origination System 

LOSS MITIGATION

Activities designed to reduce either the likelihood of the corporation suffering financial losses on a loan or the final dollar value of those losses in the event of a borrower default.

LP

Loan Prospector Freddie Mac’s UW Engine 

LP (LOAN PROSPECTOR)

Freddie Mac LP Recommendations, an automated underwriting service, designed to help lenders make credit decisions by analyzing borrower and property data. Freddie Mac issues LP underwriting recommendation based on the data contained in the loan application and credit report and is used on various mortgage loans.

LPI

Last Paid Installment 

LPMI

Lender Paid Mortgage Insurance

LTV

Loan To Value 

MANDATORY

A designation of a rate commitment period requiring the correspondent to deliver each registered mortgage loan to FAMC with complete and accurate documentation within the delivery period indicated for the registered Rate Commitment Period, or else pay a pair-off fee as set forth in the Fees section of the Registration chapter.

MANDATORY COMMITMENT

The correspondent is obligated to deliver a specific dollar amount of a specified loan product within a stated time frame. Under the terms of a mandatory commitment, pair is assessed to the correspondent in the event of non-delivery of a loan in purchasable condition on or prior to the commitment expiration date.

MARGIN

The amount to be added to the index to calculate the new interest rate to be charged on an adjustable rate note.

MATURITY

The date on which the principal balance of a loan, bond or other financial instrument becomes due and payable.

MBB

Mortgage Backed Bond

MBS

Mortgage Backed Security 

MC

Market Conditions 

MCC

Mortgage Credit Certificate 

MERGED CREDIT REPORT

A credit report, which reports the raw data, pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

MERS

Mortgage Electronic Registration Systems, Inc. 

MGIC

MGIC Indemnity Corporation

MI

Mortgage Insurance 

MIC

Mortgage Insurance Certificate 

MIN

MERS Identification Number 

MIP

Mortgage Insurance Premium 

ML

Mortgagee Letter

MODIFICATION

Occasionally, a lender will agree to modify the terms of a mortgage without requiring refinancing. If any changes are made it is called a modification.

MORTGAGE

A security instrument or legal document that borrowers sign pledging real property as a security for repayment of a debt. Instead of mortgages, some states use First Trust Deeds.

MORTGAGE BROKER

A mortgage company that originates loans then places those loans with a variety of other lending institutions.

MORTGAGE INSURANCE (MI)

Insurance that specifically covers the lender against some of the losses incurred as a result of a default on a home loan, sometimes referred to as PMI – private mortgage insurance, (PMI is also the name of the larger mortgage insurers). Mortgage insurance is usually required on all loans that have a loan-to-value above 80%.

MORTGAGE INSURANCE PREMIUM (MPI)

The amount paid for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

MORTGAGE LOAN

The lending of money by a mortgagee, the institution granting the loan, to mortgagor, the person receiving the money, for the purpose of purchasing or refinancing real estate.

MORTGAGEE

The lender in a mortgage agreement.

MORTGAGOR

The borrower in a mortgage agreement.

MPC

Master Planned Community 

MSA

Metropolitan Statistical Area

MULTI-DWELLING UNIT CONDOMINIUMS

A project in which an owner may hold title (or stock ownership and the accompanying occupancy rights) to more than one dwelling unit, with ownership of all of his or her units as evidenced by a single deed and mortgage.

MULTI-DWELLING UNITS

Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

MULTI-FAMILY HOUSING

A building with more than four residential rental units.

NEGATIVE AMORTIZATION

Some adjustable rate mortgage allows the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called “deferred interest”. The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

NET CASH FLOW

The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense (which includes PITI for the mortgage, homeowners’ association dues, leasehold payments, and subordinate financing payments).

NET MORTGAGE CEILING

The mortgage ceiling for an adjustable-rate mortgage after the minimum servicing fee has been subtracted.

NET MORTGAGE INTEREST RATE

The mortgage interest rate less the lender’s servicing spread (which may be a minimum servicing fee plus any excess yield or a servicing fee and a guaranty fee, depending on whether the mortgage is a portfolio mortgage or an MBS mortgage).

NET MORTGAGE MARGIN

The mortgage margin shown in the ARM note and rider after the minimum servicing fee has been subtracted.

NET NOTE RATE

The mortgage interest rate after the applicable servicing fee and any guaranty fee for Fannie Mae’s various product types have been subtracted.

NET WORTH

The value of all of a company’s (or individual’s) assets—including cash—less its total liabilities. It is used to indicate financial strength.

NINA

No Income No Assets – A type of alternative document process mortgage.

NIVA

No Income Verified Assets – A type of alternative document process mortgage.

NO CASH-OUT REFINANCE (NCO)

A refinance transaction, which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any cost associated with obtaining the new mortgage. Often referred to as a “rate and term refinance”.

NON-CONFORMING

A non-conforming mortgage loan does not conform to agency guidelines due to either loan size or type. Non-conforming loans are not sold to Fannie Mae or Freddie Mac.

NOO

Non Owner Occupied 

NOTE

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

NOTE RATE

The interest rate published and closed on the mortgage note.

NOV

Notice of Value 

O/O

Owner Occupied 

OFAC

Office Of Foreign Assets Control 

ORIGINAL PRINCIPAL BALANCE

The total amount of principal owed on a mortgage before any payments are 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 fee(s) charged by a lender to prepare loan documents, make credit checks, inspect, and sometimes appraise a property. The fee(s) are usually computed as a percentage of the face value of the mortgage.

OWNER FINANCING

A property purchase transaction in which the property seller provides all or part of the financing.

P&I

Principal and Interest 

PAR

The face value of the mortgage (the unpaid principal balance) equals its selling price (100%—there are no discounts or premiums).

PAYMENT CHANGE DATE

The date on which the payment changes for an ARM/GPARM; the effective date that a new amount is due from a borrower. It must fall in the month immediately following an interest rate change date (unless an ARM or GPARM provides for the monthly payment to change more frequently than the interest rate).

PAYMENT RATE

The percentage rate used to calculate the mortgage payment when the payment will not fully amortize the mortgage. It differs from the interest accrual rate.

PERIODIC ADJUSTMENT CAP

The maximum change in interest rate on an adjustable rate mortgage for any one-adjustment date, based on the interest rate in effect prior to the adjustment date.

PERS

Project Eligibility Review Service 

PHA

Public Housing Administration 

PITI

Principal, Interest, Taxes, And Insurance 

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.

PITIA

Principal, Interest, Taxes, Insurance And Other Assessments 

PIW

Property Inspection Waiver 

PLANNED UNIT DEVELOPMENT (PUD)

A real estate project in which each unit owner has title to a residential lot and building and a nonexclusive easement on the common areas of the project. The project or subdivision consists of common property and improvements that are owned and maintained by an owners’ association for the benefit and use of the individual PUD units. To qualify as a PUD, each unit owner’s membership in the owners’ association must be automatic and on-severable, and the payment of assessments related to the unit must be mandatory.

PMAC

PMI Mortgage Assurance Company 

PMI

Private Mortgage Insurance 

POA

Power Of Attorney 

POC

Paid Outside of Closing 

POINT

A point is one percent of the mortgage.

POWER OF ATTORNEY (POA)

A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

PPP

Pre Payment Penalty 

PR

Principal Residence 

PREMIUM

An amount paid on a regular schedule by a policy holder that maintains insurance coverage.

PREPAYMENT

Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner’s decision to pay off the loan in full, or a foreclosure.

PREPAYMENT PREMIUM (PENALTY)

A charge or penalty that a borrower may be required to pay during the early years of a mortgage if he or she prepays the mortgage in full or pays large sums to reduce the unpaid balance.

PRIMARY RESIDENCE

A primary residence is where borrowers live the majority of the year. Borrowers can have only one primary residence. It may be a single or multi-family dwelling, condominium or cooperative unit.

PRINCIPAL

The loan amount paid on a regular schedule by a policy holder that maintains insurance.

PRINCIPAL & INTEREST (P&I)

The portion of the payment that includes the principal and interest.

PRINCIPAL BALANCE

The outstanding balance of principal on a mortgage. The principal balance does not include interest on any other charges.

PROMISSORY NOTE

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

PUD

Planned Unit Development 

PURCHASABLE

The status of a mortgage loan based on consideration that all underwritings, pre-purchase review and/or documentation conditions have been satisfied by the correspondent so the loan is approved for purchase by FAMC.

PURCHASE

The first and typically the most common reason for a mortgage lender to loan money to individuals is for the purchase of a home. Most people cannot afford to pay cash for a home and need to take out a loan using the home as collateral. The mortgage loan is a solution that allows people to realize the American dream of owning their own home.

PURCHASE ADVICE

The schedule detailing the monetary breakdown of the loan purchase transaction made by FAMC.

PURCHASE DATE

The date on which FAMC purchases a mortgage loan from the correspondent.

QUALIFYING RATIOS

Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The “top” or “front” ratios is a calculation of the borrowers monthly housing costs (principal, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing cost as well as all other monthly debt.

QUITCLAIM DEED

A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

RATE AND TERM REFINANCE

A refinance is defined as the renewing or repayment of an existing loan using the same property as collateral. Rate and Term-Refinance implies that only the interest rate and/or term of the mortgage changes. A rate and term refinance is also known as a “no cash out” refinance. A refinance is commonly referred to as a “refi” in the mortgage banking industry.

RATE COMMITMENT PERIOD

The term set forth at time of registration during which the required note rate/price of a registered mortgage loan is guaranteed.

RATE LOCK COMMITMENT

An agreement between FAMC and the correspondent to buy and sell loans under specific terms.

RATE LOCK EXPIRATION

The date by which an acceptable loan committed to FAMC must be closed, disbursed and delivered to FAMC.

RCD

Required Closing Documents 

RD

Rural Development 

REAL ESTATE OWNED (REO)

Other real estate owned by the borrower (such as an investment property).

REAL PROPERTY

Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals and the interest, benefits and inherent right thereof.

RECORDER

The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk”.

REFINANCE TRANSACTION

The repayment of a debt from the proceeds of a new loan using the same property as security. Fannie Mae also considers the current owner’s placement of financing on a property that is not financed as a refinance transaction.

REGISTRATION PERIOD

The time within which the correspondent may register mortgage loans within FAMC.

REHABILITATION MORTGAGE

A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.

REIT

Real Estate Investment Trust 

REMAINING TERM

Original term less the number of payments that have been applied.

REO

Real Estate Owned 

REPURCHASE PRICE

The repurchase price is defined as the sum of: (i) the current principal balance on the loan as of the paid-to date; (ii) the accrued interest calculated at the mortgage loan note rate from the mortgage loan paid-to date up to and including the repurchase date; (iii) all un-reimbursed advances (including but not limited to tax and insurance advances, delinquency and/or foreclosure expenses, etc) incurred in connection with the servicing of the mortgage loan, (iv) any price paid in excess of par by FAMC on the funding date, and (v) any other fees, cost or expenses charges by or paid to another investor in connection with the repurchase of the mortgage loan from such investor but only to the extent such fees, cost and expenses exceed the total of items (i) through (iv) above.

RESCISSION

The cancellation or annulment of a transaction or contact by the operation of law or by mutual consent.

RESPA

Real Estate Settlement Procedures Act 

RETAIL

A mortgage loan originated by a lender and underwritten and funded by that lender. The mortgage loan is closed in the lender’s name and if it is sold to Fannie Mae, it is sold by the lender who originated it.

RHS

Rural Housing Service 

RIGHT OF SURVIVORSHIP

In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

RMIC-NC

Republic Mortgage Insurance Company of North Carolina 

ROW/TOWNHOUSE

A project composed of individual units that are attached buildings (sharing common walls).

RURAL DEVELOPMENT (RD)

A government agency within the U.S. Department of Agriculture (USDA) that makes direct loans and guarantees mortgages secured by residential properties located in rural areas, concentrating on borrowers who meet income eligibility requirements. Formerly the Rural Housing Service (RHS).

SALES COMPARISON APPROACH TO VALUE (OR MARKET DATA APPROACH)

A method of measuring the value of a property based on an analysis of comparable sales, contract offerings, and listings of properties that are the most comparable to the property that is being appraised.

SALES CONTRACT

A contract for the purchase/sale, exchange, or other conveyance of real estate between parties. The contract must be in writing, contain the full names of the buyer(s) and seller(s), identify the property address or legal description, identify the sales price, and include signatures by the parties. Sales contracts are also known as agreements of sale, purchase agreements, or contracts for sale.

SEC

Securities and Exchange Commission 

SECOND MORTGAGE

A mortgage that has a lien position subordinate to the first mortgage.

SECONDARY RESIDENCE

A secondary residence is often referred to as a vacation home. Borrowers must occupy a second home at least two weeks per year. A second home may be a single-family dwelling, condominium or cooperative unit. It cannot be a multi-family dwelling.

SECURED LOAN

A loan that is backed by collateral.

SEGMENTED OWNERSHIP

A property right, under which the purchaser has access to a property “segment” for a specific time. Projects in a segmented ownership are ineligible.

SELLER TAKE-BACK

An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

SERVICING COMPENSATION

The income that a servicer receives for the collection of payments and management of operational procedures related to a mortgage. It includes a base servicing fee, plus late charges, fees charged for special services, yield differential adjustments or excess yield, and, sometimes, prepayment premiums.

SERVICING FEE

The monthly fee, generally expressed in basis points, that a lender retains from borrowers’ interest payments as compensation for servicing loans on an investor’s behalf.

SETTLEMENT DATE

The date that the sale of an MBS is settled and funds are paid or transferred. It may be the same day that the securities are issued to the designated book-entry account.

SFC

Special Feature Code 

SFHA

Special Flood Hazard Area 

SFR

Single Family Residence 

SINGLE INVESTOR CONCENTRATION

The percentage of units in a project owned by a single entity (same individual, investor group, partnership, or corporations) other than the developer during the initial sales period compared to the total number of units in the project.

SINGLE-FAMILY MORTGAGE LOAN

A mortgage loan secured by a property that contains one to four residential dwelling units.

SPECIAL FLOOD HAZARD AREA (SFHA)

The land in the flood plain within a community having at least a 1% chance of flooding in any given year, as designated by FEMA..

SRP

Service Release Premium 

SSA

Social Security Administration 

SSN

Social Security Number 

SUBDIVISION

A housing development that is created by dividing a tract of land into individual lots for sale or lease.

SUBORDINATE FINANCING

Any mortgage or other lien that has priority lower than that of the first mortgage.

SUPER JUMBO

A super jumbo mortgage exceeds $700,000. The top end of a super jumbo loan is 1.5 million. Occasionally loans are requested that exceed this limit. A credit exception can be made for loan amounts greater than 1.5 million. Loans over $1.5 million require the sign off by the senior credit / underwriting officer.

SURVEY

A drawing or map showing the precise legal boundaries of a property and the location of improvements, easements, rights of way, encroachments, and other physical features.

T&I

Taxes And Insurance 

TBA

To Be Announced 

TBD

To Be Determined 

TBE

Tenants By Entirety 

TEMPORARY INTEREST-RATE BUYDOWN

A temporary reduction in the effective interest rate that a borrower pays during the early years of a mortgage term, which is made possible by the property seller or another acceptable party depositing a lump sum of money into a buy down account so that it can be released each month to reduce the borrower’s payments.

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 Fannie Mae.

TIC

Tenants In Common 

TIL

Truth In Lending Disclosure 

TILA

Truth In Lending Act Of 1968 

TIN

Taxpayer Identification Number 

TITLE

A legal document evidencing a person’s right to ownership of a property.

TITLE INSURANCE

Insurance against loss resulting from defects in the title to real property.

TPO

Third Party Originator 

TRADE EQUITY

Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.

TRANSFER OF OWNERSHIP

Any means by which the ownership of property changes hands. Fannie Mae considers the transfer of all or any part of the property or any interest in the property to be a transfer of ownership, including: the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract, grant deed, or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, Fannie Mae also considers any transfer of a beneficial interest in the trust to be a transfer of ownership.

TREASURY INDEX

An index that is used to determine interest rate changes for certain ARM plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury’s daily yield curve, which is based on the closing market bid yields and actively traded Treasury securities in the over-the-counter market.

TWO- TO FOUR-UNIT PROPERTY

A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

TWO-FOUR UNIT CONDOMINIUM PROJECT

A condominium project consisting of four or fewer dwelling units.

UCC

Uniform Commercial Code 

UFMIP

Up Front Mortgage Insurance Premium 

UNDERWRITING DOCUMENTS

All of the documentation used to support the lending decision for a mortgage—such as the loan application and other documents used to verify a borrower’s employment, income, deposits, and credit history.

UNDERWRITING PERFORMANCE REVIEW

An after-the-fact review and risk assessment for a sampling of the mortgages Fannie Mae purchases or securitizes to ensure that they satisfy Fannie Mae’s mortgage eligibility criteria and underwriting guidelines.

UNIT MORTGAGE

A mortgage (or share loan) on an individual residential unit in a planned unit development, condo, or co-op project.

UPB

Unpaid Principal Balance 

URAR

Uniform Residential Appraisal Report 

URLA

Uniform Residential Loan Application 

USDA

United States Dept Of Agriculture 

USPAP

Uniform Standards Of Professional Appraisal Practice 

VA

U.S. Department Of Veterans Affairs 

VA-GUARANTEED MORTGAGE

A mortgage that is guaranteed by the U.S. Department of Veterans Affairs; may be referred to as a “government” mortgage.

VOD

Verification Of Deposit 

VOE

Verification Of Employment 

VOM

Verification Of Mortgage 

VOR

Verification Of Rent 

VVOE

Verbal Verification Of Employment 

WHOLE LOAN DELIVERY

The submission of a whole mortgage or a participation pool mortgage to Fannie Mae for purchase as a portfolio mortgage. Fannie Mae pays the mortgage seller cash for its mortgage delivery, rather than swapping the mortgage for a mortgage-backed security.

WORKING CAPITAL FUND

A fund (consisting of liquid assets) that is set aside to enable the homeowners’ association of a PUD or condo project to meet its liabilities for unforeseen expenditures or for the purchase of additional equipment or services. Generally, Fannie Mae requires the initial amount of this fund to equal at least two months’ worth of the estimated common charges for each unit in the project.

WRAPAROUND MORTGAGE

A refinancing technique involving the creation of a second mortgage, which includes the balance due on any existing mortgages, plus the amount of the new secondary or junior lien.

YIELD

Return on an investment.

YIELD DIFFERENCE (OR INTEREST RATE DIFFERENTIAL)

The difference between Fannie Mae’s required yield and the net note rate of an ARM. Fannie Mae limits the amount of this difference.

YIELD DIFFERENTIAL ADJUSTMENT

An amount paid to the servicer of a whole first mortgage when the initial interest rate of a mortgage exceeds Fannie Mae’s required yield for the commitment under which the mortgage was purchased. For adjustable-rate mortgages, a yield differential adjustment occurs if there is excess “margin” rather than yield.

YSP

Yield Spread Premium 

YTD

Year To Date