1003 - (loan application 1,2,3) Uniform
Residential Loan Application - contains all of the consumers
information for the loan (information on the borrower).
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1008 - (transmittal summary) - contains the
information regarding the specifics for the loan (rates etc)
(information on the loan)
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80-10-10 = 80 LTV on the first lien, 10 LTV on
the second lien, 10% down payment
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Acceleration clause - a provision in a written
mortgage, or note, such that the event of default the whole amount
of the principal becomes due and payable.
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ADA - Americans with Disabilities Act passed in
1990 - this prohibits discrimination against individuals with
disabilities. The employment of qualified job applicants, regardless
of disability is required.
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Alienation clause - "due on sale" clause states
that the balance of the secured debt becomes due if the property is
sold by the mortgagor without the mortgagee's approval.
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Amortization - To liquidate (a debt, such as a
mortgage) by installment payments or payment into a sinking fund.the
process used to calculate the payment amount on a loan. The amount
that needs to be paid on the loan. The interest rate because it
includes all fees and charges related to the loan.
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Appraisal - is an estimate of a properties value
on the day it was appraised.
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ARM - adjustable rate Mortgage - The interest
rate is tied to an index. The rate is subject to change as
conditions in the market change. There are generally 2 caps
annual and lifetime. These cap rates limit the amount of change in
the interest rate each year and over the life of the loan
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Balloon Loan - this is partially amortized with
a final payment substantially larger that the others. The benefit of
doing this type of loan is that you receive a lower interest rate at
the beginning of the loan term. The downside is you have to be
looking for permanent financing before the loan balloons at the end
of the term. Balloon notes are generally 1-5-10 year terms.
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Blanket Loan - covers more that one piece of
property
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CAP - a limit on how much an interest rate can
increase or decrease. It is calculated by the point method. If the
rate were capped at 1% per year, the rate could not exceed 1% over
the current rate for the coming year or decrease more that 1% for
the coming year. If the rate were 5% currently, the new rate could
not go past 6% or down 4% for the upcoming year. (.5 - 1.5 would
read that a .5 cap on the increase for the first year, and a 1.5 for
the life time cap) (could be stated 1.5-.5 would mean the same)
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Commissioner - the savings and loan commission.
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Compound Interest - is the interest paid on the
principal and on accrued interest
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Construction Loans - interim financing - short
term loans with funds advanced periodically during the stages of
construction. These interest rates are higher than rates on a loan
given to the borrower once the house is sold and goes into permanent
financing. A mortgage banker could close the construction loan.
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Conventional loans
are mortgage loans other than
those insured or guaranteed by a government agency such as
the FHA (Federal Housing Administration), the VA (Veterans
Administration), or the Rural Development Services (formerly
know as Farmers Home Administration, or FmHA). |
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CRA - Community Reinvestment Act - Banks must
meet the needs of the community in which they are chartered to do
business.
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CRV - Certificate of Reasonable Value - is the
name for the certificate from the appraiser upon the appraisal being
done on the vets property. The CRV must not exceed the sale price.
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CTLV - Combined Loan to value - the value of all
of the combined loans (1st mortgage + 2nd mortgage)
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Deed in lieu of foreclosure - friendly
foreclosure or voluntary deed. The lender accepts a deed from the
borrower giving the property back to the lender. (this is rarely
done except in small towns where everybody knows each other and it
is just good will on the part of the lender to take a deed in lieu.
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Deed of Trust - is the name for the mortgage -
the buyer or the borrower is the only one that signs
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Defeasance clause - allows the lender to raise
the existing interest rate. An escalation clause may be used to
overcome an alienation clause. This means the lender may permit a
loan assumption at an increased interest rate.
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Discount Point - is one percent of the loan
amount. The effect of points is to raise the return or yield to the
lender. Prepaid interest
is what it is called the dollar amount is on the HUD - 1 closing
statement and is collected at closing. It is tax deductible to the
buyer.
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Discount rate - is the rate a bank pays when it
borrows from the federal reserve bank.
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ECOA - Equal Credit Opportunity Act - this
prohibits discrimination in residential loans on the reg.
race,creed,religion etc. This also includes questions regarding a
persons income that might be regarded discriminatory such as -
concerning alimony, child support or separate funds unless the money
will be used to repay the loan.
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Equity - is the difference between the market
value and the principal. At closing the buyers equity is the amount
of the down payment The sellers equity is the difference between the
sales price of the property and his outstanding loan balance Escrow
is also known as a reserve, impound, or trust account
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Equity of Redemption - once the redemption is
done.
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Fannie Mae - Federal National Mortgage Association
- secondary market is the #1 buyer of loans from lenders who operate
in the primary market.
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FCRA - Fair Credit Reporting Act - Allows
individuals to inspect their files at a credit bureau, correct any
errors and make changes or attach explanatory statements to
supplement the file.
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FHA - Federal Housing Administration. - is to
aid in the home financing by insuring loans to lenders who allow
buyers to borrow from them.
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FHLMC - Federal Home Loan Mortgage Corporation - Freddie Mae
- buys mainly conventional loans but is also authorized to by FHA
and VA loan packages from primary lenders.
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Foreclosure - a legal process instituted by a
trustee or lien holder after a debtors default on his payments. The
lender takes back the property for non-payment of the amount owed on
the debt.
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GNMA - Government National Mortgage Association
- Ginne Mae - is most widely known for the tandem plan in which is
cooperates with Fannie Mae to buy low yield, high risk loans, thus
stimulating housing sales and production for price ranges that are
typically lower. They do buy and sell all price ranges in the
secondary market.
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GPM - Graduated Payment Mortgage - is not used
currently and is a negatively amortized mortgage. The payments are
less than the interest owed. The actual amount owed is added to the
balance of the principal. This causes the pricipal to increase in
stead of decrease, therefore it is called negative amortization
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Home Equity Liens - 1999 Texas passed a
Constitutional amendment to allow home equity loans. It is
restricted by the following. Once such loan at a time - No personal
Liability - No pre-payment penalty - Allows the homeowner a 3 day
right to resind
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Hypothecation - is the action of pledging real
property as security for a debt
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Interest - is the rent for the use of money.
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Leveraging - is a maximum financing using
minimum cash investment or equity or down payment form the buyer and
using as much of the lenders money to finance the purchase as
allowed by the lender. Residential mortgage loans do not fit this
category. Investor money for development of a neighborhood or
industrial park would be an example
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Loan Officer - an individual sponsored by a
licensed mortgage broker for the purposes of performing the acts of
a mortgage broker.
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Loan Processor - an individual who works under
the instruction of a loan officer or mortgage broker and performs
only clerical functions such as gathering information, word
processing, assembling files.
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Lock-in
refers to a written agreement guaranteeing a home buyer a
specific interest rate on a home loan provided that the loan
is closed within a certain period of time, such as 60 or 90
days. Often the agreement also specifies the number of
points to be paid at closing |
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LP/DU - Automated underwriting programs used to
provide "A: paper loan approval. Must
have this approval to proceed.
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Mid Score - Credit Bureaus are merged from all 3
credit bureaus (experian,equifax, ) and a credit score is
created. The high and low scores are thrown out and the Mid (middle)
score is used. |
MIP - mortgage insurance premium.
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Mortgage - is a pledge of real property as the
security for a debt. The terms of the debt are on a form called the
"Promissory Note" (the note)
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Mortgage Applicant - a person who is solicited
to use or who uses a mortgage broker to obtain a mortgage loan.
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Mortgage Banker - approved or authorized by HUD,
US department of housing and urban development as a mortgagee with
direct endorsement underwriting authority.
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Mortgage Broker - a person who receives an
application from a prospective borrower for the purposes of making a
mortgage loan from that person's own funds or from the funds of
another person.
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Mortgage Loan - a debt against real estate
secured by a first lien security interest against one to four family
residential real estate created by a deed of trust, security deed,
or other security instrument
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Mortgagee - is the lender
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Mortgagor - is the borrower or the buyer of the
property
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Open -end mortgage permits - additional
borrowing on the same note. This is sometimes called a home equity
line of credit
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Origination fee is called a front end fee.
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Origination fees - are points and are paid at
closing. They are considered processing fees by the IRS and are not
tax deductible to the buyer.
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Package mortgage or loan - includes both real
property and personal property
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Participation Loan - Two or more lenders won a
share in the property which reduces the risk. If a lender collects
principal and interest and shares in the profits when the property
is sold, this is called a shared appreciation mortgage.
This is against the law in the state of Texas
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PMI - private mortgage insurance - is the
lenders insurance so that in the event of a buyer default, the
lender has some additional money from the insurance provider. PMI is
paid in an amount added into the monthly house payment, there is
usually an amount that is paid in advance into the borrowers escrow
account at closing
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Pre - payment clause - a statement in a mortgage
that the mortgagor can pay the entire amount or the stated amount
prior to the due date in the note
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Prime rate - is the rate banks charge their
preferred or best customers.
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Principal - is the amount of the loan. The
borrowed money from the lender. The outstanding indebtedness.
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Promissory - the promise
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Promissory Note - is the promise to repay the
money loaned by the lender. The borrower is the only party signing
the note
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Property tax lien - is a first priority lien on
property
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Redemption - at any time up to the moment of the
foreclosure the borrower has the right to step in and pay what he
owes and reinstate the mortgage.
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Redlining - the refusal to lend in a particular
area - redlining
applies to lenders and if found guilty by the Federal investigators
could lose their charter to do business.
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RESPA - regulates closings on 1 - 4 family
residential property with federally regulated financing. They also
place restrictions on requirements for tax and insurance escrow
accounts.
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Reverse annuity mortgage - allows elderly
homeowners to borrow against their equity. The lender makes periodic
payments to the homeowner based on the equity in the property. The
loan is due ata specific date, upon the sale of the property, or the
death of the owner |
Right of Rescission - if the loan will result in
a lien on a personal residence, the consumer has 3 day right of
rescission. This means he can cancel the transaction up to midnight
of the third business day following the closing of the transaction.
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Straight Assumption - the new buyer is approve,
and takes over payments and liability. This is also called a
loan novation
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Subordination clause - allows a lender to move
to or take a lower lien position. This clause would be found in a
second mortgage or home equity loan
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Term Loan - interest only until the end of the
term, then the entire principal is repaid. This is also called zero
amortization loan.
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Truth in Lending (consumer credit protection
act) - it is administered by the federal trade commission - it
covers consumer credit for all real estate loans regardless of value
- the main purpose is to allow consumers to understand the true cost
of borrowing money
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Usury - is charging an interest rate in excess
of what is allowed go by law. Usury laws are to protect the consumer
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VA - Veterans Administration - they guarantee
repayment of the loan. This guarantee is for the top 25% of the
loan. The guarantee is free to the Veteran.
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VOE - Verification of employment
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Wraparound Mortgages - currently not used. A new
mortgage on a property is placed around an existing loan. The new
mortgage is in a secondary position to the existing mortgage. The
new loan amount includes the first mortgage and its interest rate
plus the second mortgage and its new interest rate. - This is not
the same thing as a second mortgage.
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Yield spread - must be disclosed on the HUD-1
settlement statement. Yield spread premium is called the back-end
fee.
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