Terms Glossary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

3/1, 5/1, 7/1 and 10/1 ARMs

Adjustable rate mortgages in which rate is fixed for three year, five year, seven year and 10-year periods, respectively, but may adjust annually after that.

7/23 and 5/25 Mortgages

Mortgages with a one time rate adjustment after being fixed for seven years and five years respectively.

Absolute Title
A clear title that is free of any liens or judgments. A clear title is normally required before a mortgage is granted.

Abstract of Title
A statement usually prepared by an attorney that traces the history of ownership of real property to determine the status of its present title, and includes all items of record that might impair the title, such as liens, charges or encumbrances.

Accelerated Amortization
The restructuring of an existing mortgage loan by increasing the monthly payments in order to pay off the loan in a shorter time than the original maturity.

Acceleration Clause
A clause commonly included in mortgages and bonds that gives the holder the right to demand the entire outstanding balance be paid in the event of default. Without this clause, the mortgagee may have to file separate foreclosure suits as each installment of the mortgage debt falls due and is in default.

Accrued Interest
Interest deemed to be earned on a security but not yet paid to the investor.

Acquisition Cost
The purchase price or appraised value of a property under an FHA loan, plus closing costs.

Adjustable Rate Mortgage (ARM)
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.

Adjusted Basis
The original cost of a property plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.

Adjustment Date
The date on which the interest rate changes on an adjustable rate mortgage.

Adjustment Interval
Involves the time between changes in the interest rate and/or monthly payment on an adjustable rate mortgage (usually one, three or five years, depending on the index).

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).

Amortization
Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years).

Amortization Schedule
A table indicating how much of each payment will be directed toward principal, and how much toward interest over the entire life of the loan; it also shows the gradual decrease of the balance of the loan.

Annual Percentage Rate (APR)
Calculated using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

Annuity
Income payments of receipts spanning a number of years.

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
The borrower’s fee to apply for a loan; does not guarantee that the loan will be approved.

Appraisal
Calculated using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

Appraised Value
An opinion of a property's actual market value; based primarily on comparable sales, the appraisal is usually revealed at the purchase price.

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

Appreciation
The increase in the value of a property, resulting from changes in market conditions, inflation, or other causes.

APR (Annual Percentage Rate)
Calculated using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the 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.

Assessed Value
The value of a property as determined by a public tax assessor for taxation purposes.

Assessment
A local tax levied against a property for a specific purpose, such as a sewer or street lights.

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

Asset
Items of value owned by an individual. Assets that can be quickly converted into cash are considered 'liquid assets.' These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Assignment
When ownership of a mortgage is transferred from one individual or company to another.

Assignor
A person or institution from whom an agreement, contract or property is transferred to another.

Assumable Mortgage
A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.

Assumption
An agreement between buyer and seller, whereby the buyer takes over the seller’s payments on an existing mortgage. This can sometimes save buyers money, because a new mortgage may be subject to a closing cost and new, probably higher, market-rate interest rates.

Average Life
The average amount of time that will elapse from the date of MBS purchase until principal is repaid based on an assumed prepayment forecast. Alternatively, average life is the average amount of time a dollar of principal is invested in an MBS pool.

Balloon Mortgage (Balloon Payment)
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 (Balloon 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 (also called 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 his or her ability to repay.

Baseline Program (Standard Program)
Another name for the standard program, under which the U.S. Federal Home Loan Mortgage Corporation purchases mortgages for cash.

Basis Point
One one-hundredth (1/100, or .01) of 1 percent. Yield differences among fixed-income securities are stated in basis points.

Beneficial Owner
One who benefits from owning a security, even if the security's title of ownership is in the name of a broker or bank ('street name').

Bid
The price at which a buyer is willing to buy a security.

Bill of Sale
A written document transferring title to personal property; lenders usually require a bill of sale (on an automobile, for example) in order to verify the source of the funds used as a down payment.

Biweekly Mortgage
A mortgage requiring payments every two weeks instead of every month. This reduces the time it takes to pay off a 30-year mortgage.

Blanket Mortgage
A mortgage covering at least two pieces of real estate.

Boilerplate
Slang for standard legal language used in loan forms, real estate closings, etc.

Bond
A written promise to pay a stipulated sum of money to a specified party under conditions mutually agreed upon. Also called a promissory note, promise, or bond.

Bond Market
The daily buying and selling of thirty year Treasury bonds; lenders follow this market very closely. Factors affecting the Treasury bond market also affect mortgage rates, which is why rates can change several times per day.

Book-Entry
A method of registering and transferring ownership of securities electronically, thereby eliminating the need for physical certificates.

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 (also called a mortgagor).

Bridge Loan
Rarely used today, bridge loans are used to purchase property by those who have not yet sold their previous property; they have become less popular as second mortgage lenders increasingly lend at a high loan to value, while sellers generally prefer buyers who have already sold their property.

Broker
An individual who assists in arranging funding or negotiating contracts for a client, although a broker does not loan the money itself. A broker typically charges a fee or receives a commission.

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

Budget Mortgage
A mortgage that can at least partially cover taxes, insurance, principal and interest.

Building Code
Based on agreed-upon safety standards within a specific area; regulations that determine the design, construction, and materials used in building.

Buy-Down
Occurs as the lender or the home builder subsidizes the mortgage, by lowering the interest rate over the first few years. To begin, the payments are low; however, they increase as the subsidy expires.

Buyer's Market
A market condition characterized by an oversupply of items for sale resulting in lower prices for the buyer. Opposite of a seller's market.

Buy-Sell Agreement
A written agreement between a homeowner/borrower, a construction lender and a permanent lender that assigns the mortgage to the permanent lender when the construction is completed. Also called a tri-party agreement.

Cadastral Map
A legal map for recording title to a property. The map indicates legal boundaries and the ownership of the property.

Call Option
Related to the acceleration clause.

Call Protection
A feature that provides assurance to an investor that early or unscheduled redemption of a particular security will not occur due to a decline in interest rates.

Call Provision
A clause in a mortgage giving the lender the right to demand and receive payment of the balance of the unpaid principal in full under certain conditions. A call provision is similar to an acceleration clause.

Callable Debt
A debt security whose issuer may redeem the security on or after a given date, but before the final maturity date.

Cap
A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.

Capital Improvement
A structure or major piece of equipment built or installed to permanently add value and capacity to property.

Carry-Back Loan
A loan wherein the seller finances the buyer, which allows a property sale to be completed.

Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc).

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

Cash-Out Refinance
When a borrower refinances a mortgage at a higher amount than the existing loan balance, intending to use the money for personal use.

Certificate of Claim
A written agreement to reimburse a lender for certain costs incurred in the event of a foreclosure, contingent on proceeds from the sale of the foreclosed property being sufficient to cover these costs.

Certificate of Completion
A document issued by an architect or engineer stating that a construction project has been completed in accordance with approved terms, conditions, plans and specifications.

Certificate of Deposit
A time deposit held in a bank that pays interest to the depositor.

Certificate of Eligibility
A document issued by the U.S. Veterans Administration that verifies a veteran’s eligibility for a VA loan.

Certificate of Reasonable Value (CRV)
Issued by the U.S. Veterans Administration when an appraisal has been performed on a property being purchased with a VA loan.

Certificate of Title
An official document showing that property legally belongs to the current owner; before the title is transferred at closing, there should be no liens or other claims associated with it.

Certificate of Veteran Status
A document allowing veterans to obtain lower down payments on some FHA-insured loans.

Chain of Title
An examination into the transfers of title to property over a number of years.

Chattel
Personal property. All property that is not real property (owned real estate).

Chattel Mortgage
A loan secured by personal property rather than real estate.

Clear Title
A title having no outstanding liens or legal issues pertaining to ownership of the property.

Closing (Settlement)
The time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.

Closing Costs (Settlement Costs)
Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.

Cloud
An encumbrance or outstanding claim that could impair the owner’s property title.

CMO (Collateralized Mortgage Obligation)
A type of bond having mortgages or mortgage-backed securities as collateral. Principal and interest payments from an underlying pool of mortgages are redirected to pay the CMO holders until the CMOs are retired. A single issue of CMOs contains two or more classes of bonds called tranches, each with a different length of maturity, providing a form of call protection to the holder of a CMO. A holder who wants to lock in a CMO investment for a specific length of time will buy into a tranche with a low risk of being retired early because the underlying mortgages are paid off early. Such low prepayment risk tranches are called planned amortization classes (PACs). Changes in prepayment rates in the underlying pool of mortgages are absorbed first by another tranche, so that the PAC remains unaffected by prepayment risk. CMOs generally pay principal and interest semiannually. CMO were first issued by the Federal Home Loan Mortgage Corporation (Freddie Mac) in June 1983.

Co-Borrower
An additional person who is obligated to the loan and is on the property’s title.

Collateral
The property associated to a home loan. Unless the loan is repaid according to the terms of the mortgage or deed of trust, the borrower risks losing the property.

Collateralized Mortgage Obligation (CMO)
A type of bond having mortgages or mortgage-backed securities as collateral. Principal and interest payments from an underlying pool of mortgages are redirected to pay the CMO holders until the CMOs are retired. A single issue of CMOs contains two or more classes of bonds called tranches, each with a different length of maturity, providing a form of call protection to the holder of a CMO. A holder who wants to lock in a CMO investment for a specific length of time will buy into a tranche with a low risk of being retired early because the underlying mortgages are paid off early. Such low prepayment risk tranches are called planned amortization classes (PACs). Changes in prepayment rates in the underlying pool of mortgages are absorbed first by another tranche, so that the PAC remains unaffected by prepayment risk. CMOs generally pay principal and interest semiannually. CMO were first issued by the Federal Home Loan Mortgage Corporation (Freddie Mac) in June 1983.

Collection
A loan goes to collection when lenders contact borrowers who have fallen behind, in order to collect their dues. The lender must maintain certain documentation, in case foreclosure may be required.

Combined Loan-to-Value
The relationship between the unpaid principal balances of a property's mortgages and its appraised value.

Commercial Mortgage Loan (Income Property Loan)
A mortgage loan secured by real estate used by a business or to generate income.

Commission
An amount, usually a percentage of the property sales price, which is collected by a real estate professional as a fee for negotiating the transaction. Realtors typically earn the largest commissions, followed by lenders.

Commitment
A written agreement by a lender to make a loan on specific terms, or an investor’s promise to purchase mortgages only from certain lenders with certain conditions.

Common Area Assessments (Homeowners Association Fees)
Charges to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD); these fees typically maintain the property and its common areas.

Common Areas
Areas of a property that are owned or managed by a planned unit development (PUD) or condominium project's homeowners' association that are shared among all unit owners; these areas could include recreational facilities or hallways, parking lots, etc.

Common Law
Used in some states, an unwritten body of law based on general English custom.

Community Property
Jointly owned property (such as property belonging to a married couple during their marriage, as is the case in some states).

Comparable Sales
Used to determine a property’s market value, based on the sales of other properties in the surrounding neighborhood. Also known as ‘comps.’

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.

Condominium Conversion
Switching the ownership of an existing building into condominium ownership.

Condominium Hotel
Individually owned condominiums operated as a hotel, with a registration desk, cleaning services, etc.

Conduit
(a) Industry term for a firm through which mortgages flow. The company issues mortgage-backed securities based on mortgage loans it buys from a number of primary lenders. (b) A type of roll-over IRA used by individuals to transfer all or any part of a lump-sum distribution from one retirement plan to another retirement plan. (c) Any intermediary between a lender and an investor.

Confirmation
A document used by securities dealers and banks to state in writing the terms and execution of an oral agreement to buy or sell a security.

Conforming Loan
A mortgage of up to $322,700 in the continental United States (higher limits Alaska and Hawaii).

Constant Payment
A periodic payment of a fixed amount that includes interest and principal. While the total amount of the payment remains the same, the ratio of principal and interest included in the payment changes. As the loan is paid off, the portion of the payment applied to the principal increases. Most home mortgages are constant payment loans.

Construction Loan
A short-term loan to finance construction costs. The lender makes payments to the builder at certain intervals during construction.

Contingency
A condition, such as a home inspection report, that must be met before a contract becomes legally binding.

Contract
A written or oral agreement.

Contract Sale or Deed
A form of installment sale, it is as contract between buyer and seller of real estate to convey title, after all conditions have been met.

Conventional Mortgage
A mortgage loan granted by a bank or thrift institution collateralized solely by real estate and not insured or guaranteed by a government agency.

Convertible ARM
An adjustable rate mortgage that enables the borrower to change the ARM to a fixed-rate mortgage.

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)
Is used to determine changes in the interest rate for certain adjustable rate mortgages, based on the averages of several financial institutions in savings, borrowings, and advances.

Coupon Rate
Stated annual percentage of interest paid on a fixed-income investment.

Credit
An agreement allowing a borrower to obtain something of value, by promising to repay the lender at a later date.

Credit Bureau Score
A number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

Credit History
History of an individual's debt payment; lenders use this information to gouge a potential borrower's ability to repay a loan.

Credit Report
A record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.

Credit Repository
An organization that stores and maintains information about the payment records of individuals being considered for credit.

Credit Risk
Risk of a default by the issuer or other party in its financial obligations to the investor.

Creditor
Someone to whom money is owed.

Current Face
The current monthly remaining principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.

CUSIP Number
A unique, nine-digit identification number permanently assigned by the Committee on Uniform Securities Identification Procedures to each publicly traded security at the time of issuance. If the security is in physical form, the CUSIP number is printed on its face.

Custom Pool
A pool issued under the Ginnie Mae II program, which has only one issuer.

Debt
An amount of money owed to another person or organization.

Debt Investment
Investment in the financing of property or of some endeavor, in which the investor loaning funds does not own the property or endeavor, nor share in its profits. If property is pledged, or mortgaged, as security for the loan, the investor may claim the property to repay the debt if the borrower defaults on payments. Also see equity investment.

Debt-to-Income Ratio
A comparison of gross income to housing and non-housing expenses; with the U.S. Federal Housing Administration, 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.

Deed
The document that transfers ownership of a property.

Deed of Trust
Essentially the same thing as a mortgage record, it is used by some states (such as California) as an alternative.

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 doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Default
The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.

Deferred Interest
Deferring unpaid interest by adding it to the loan balance; occurs when a mortgage’s monthly payment is less than adequate to cover the note rate (see negative amortization).

Delinquency
Failure of a borrower to make timely mortgage payments under a loan agreement.

Demand Note (Demand Mortgage)
A note or mortgage that the lender can call due at any time without prior notice.

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

Deposit (Earnest Money)
Money put down by a potential buyer to show that he or she is 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.

Depreciation
A decline in the value of a property. Can be listed as an expense to reduce taxable income; because no money is actually paid, lenders will count it as income for self-employed borrowers.

Discount
Amount by which the purchase price of a security is less than its par value, which raises the effective yield of the security above the coupon rate.

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.

Down Payment
The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.

Due-on-Sale Clause (Due-on-Sale Provision)
A provision in a mortgage or deed of trust enabling the lender to demand instant payment of the balance of the mortgage when the mortgagor sells the home.

Dwelling Unit
Living quarters consisting of contiguous rooms intended for convenient, long-term occupancy by one family and providing complete, independent facilities for living, eating, cooking, sleeping and sanitation.

Earnest Money Deposit
Money put down by a potential buyer to show that he or she is 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.

Easement
A right of way, which grants access to a property to those who are not the property’s owner.

ECOA (Equal Credit Opportunity Act)
A U.S. federal law preventing creditors and lenders from discriminating based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

EEM (Energy Efficient Mortgage)
A U.S. 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.

Effective Age
An appraiser’s estimate of the a building’s age, based on its current condition.

Eminent Domain
The government’s right to use private property upon payment of its market value; also the basis for condemnation proceedings.

Empowerment Zone
One of several urban areas in which properties are eligible for Ginnie Mae's Targeted Lending Initiative.

Encroachment
The act of intruding gradually and without permission upon the rights, land or other possessions of another. Encroachment is often used to describe the spread of one type of neighborhood into an adjoining but different type of neighborhood. A change made to one property may encroach upon the rights or value of a second property.

Encumbrance
Any kind of claim against property, such as mortgages, leases, easements, or restrictions.

Energy Efficient Mortgage (EEM)
A U.S. federal law preventing creditors and lenders from discriminating based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Entitlement
The U.S. Veterans Administration home loan benefit.

Equal Credit Opportunity Act (ECOA)
A U.S. federal law preventing creditors and lenders from discriminating 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.

Equity Investment
Investment in the ownership of property, in which the investor shares in gains or losses on the property.

Escalator Clause
A loan clause that provides payment or interest increases, according to a schedule or economic index (such as the consumer price index).

Escrow
The holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) to whom a homeowner pays money for taxes and insurance.

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.

Escrow Agent
The person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) and who performs the duties to complete the transaction and ensure that the terms of the purchase/sale (or loan) are carried out.

Escrow Analysis
Performed by lenders each year to ensure that they are collecting the proper amount of money necessary to cover their expenditures.

Escrow Closing
A type of loan closing in which an escrow agent accepts the loan funds and mortgage from the lender, the downpayment from the buyer and the deed from the seller, and completes the actions required by the transaction.

Escrow Company
An organization that performs the functions of an escrow agent.

Escrow Disbursements
Using escrow funds to pay real estate taxes, insurance, and other property expenses.

Estate
The total real and personal property owned by an individual at the time of his or her death.

Eviction
The removal of an occupant from real property, in accordance with the law.

Examination of Title
An abstract or report on the title of a property.

Exclusive Listing
A written contract giving a specific real estate agent the right to sell a property for a given period.

Exclusive Right to Sell
Same as exclusive listing, except that the owner agrees in writing to pay the full commission to the agent even if the owner himself sells or rents the property.

Exculpatory Clause
That part of a written agreement that relieves one party to the agreement of liability as a result of actions (or lack of actions) performed in the course of executing the terms of the contract. In a trust agreement, an exculpatory clause relieves the trustee of liability resulting from any act performed in good faith under the trust agreement. In a lease, the exculpatory clause relieves the landlord of liability for personal injury to tenants or damage to tenants' property.

Executor
A person named in a will to administer an estate. If no executor is named, the court will appoint one (feminine form: executrix).

Expropriation
The act of confiscating private property for a public use by a legally constituted governing body. For example, property taken under eminent domain is expropriated.

Extension Risk
Risk that prepayments will be slower than the assumed rate causing later-than-expected return of principal.

Face Value
The par value of a security, as distinct from its market value.

Factor
A decimal value reflecting the proportion of the outstanding principal balance of a mortgage security, which changes over time, in relation to its original principal value. The Bond Buyer publishes the 'Monthly Factor Report,' which contains a list of factors for Ginnie Mae, Fannie Mae and Freddie Mac securities.

Fair Credit Reporting Act
A consumer protection law regulating consumer credit reports by consumer/credit reporting agencies; further establishes procedures for correcting credit rating errors.

Fair Housing Act
A U.S. 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.

Fannie Mae (FNMA)
Federal National Mortgage Association; 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.

Farmers Home Administration (FmHA)
Provides financing to American farmers who may not be able to secure loans from other places; see 'RHS.'

Federal Home Loan Bank Board (FHLBB)
The former name of the regulatory agency for federally chartered savings institutions; it is now called the Office of Thrift Supervision.

Federal Home Loan Mortgage Corporation (FHLMC)
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 Freddie Mac.

Federal Housing Administration (FHA)
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.

Federal Housing Finance Administration (FNMA)
An independent federal agency established by the U.S. Congress in 1989 to regulate and supervise the 12 Federal Home Loan Banks.

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, FNMA supplies funds that lenders may loan to potential homebuyers. Also known as Fannie Mae.

Fee Simple
The greatest possible interest a person can have in real estate.

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.

FHA Mortgage
Mortgage loans insured by the U.S. Federal Housing Administration.

FHLBB (Federal Home Loan Bank Board)
The former name of the regulatory agency for federally chartered savings institutions; it is now the Office of Thrift Supervision.

FHLMC (Federal Home Loan Mortgage Corporation)
Federal Home Loan Mortgage Corporation (FHLMC); 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 Freddie Mac.

Finance Charge
The total amount that a loan will cost its borrower, including interest payments, origination fees, and other brokerage and lender charges; it does not include credit report, appraisal, and title search costs.

Finder's Fee
A fee or commission paid to a broker for obtaining a mortgage loan for a client or for referring a mortgage loan to a broker. It may also refer to a commission paid to a broker for locating a property.

Firm Commitment
A lender’s agreement to make loans available to a specific borrower for a specific property.

First Mortgage
The mortgage that is first among any loans against a property. Often refers to the date of the recording of the loan.

Fixed-Rate Loan (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.

Fixed-Rate Mortgage (Fixed-Rate Loan)
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 that becomes real property when permanently attached to real estate.

Float
The option for a borrower to choose a variable interest rate, instead of a locked rate; it is considered a significant risk, because it could result in a higher interest rate.

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.

Floor
Minimum rate of interest on an adjustable rate mortgage loan.

FmHA (Farmers Home Administration)
Provides financing to American farmers who may not be able to secure loans from other places. See 'RHS.'

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

Forebearance
Postponing some or all loan payments when a borrower is delinquent.

Foreclosure
A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

Freddie Mac
Federal Home Loan Mortgage Corporation; a federally chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.

Fully Amortizing Loan
A loan in which the principal and interest will be repaid fully through regular installments by the time the loan's term ends.

Future Advances Clause
A clause in a mortgage contract that allows a lender to advance additional funds without executing a new mortgage instrument.

Gap Financing
An interim loan made to provide funding during the time between the end of loans extended during the development stage of a project and the beginning of the permanent mortgage extended to the buyer.

Ginnie Mae (Government National Mortgage Association)
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.

Ginnie Mae guaranty
Ginnie Mae guarantees the timely payment of principal and interest on its securities, backed by the full faith and credit of the United States. Also see ‘Ginnie Mae’

Ginnie Mae I
Pass-through mortgage securities on which registered holders receive separate principal and interest payments on each of their certificates. Ginnie Mae I securities are single-issuer pools. Also see ‘Ginnie Mae.’

Ginnie Mae II
Pass-through mortgage securities on which registered holders receive an aggregate principal and interest payment from a central paying agent on all of their Ginnie Mae II certificates. Ginnie Mae II securities are collateralized by multiple-issuer pools or custom pools, which contain loans from one issuer, but interest rates that may vary within one-half percentage point in pools issued after July 1, 2003 or one percentage point in pools issued prior to July 1, 2003. Also see ‘Ginnie Mae.’

Ginnie Mae issuer
A mortgage lender who is eligible to participate in Ginnie Mae's MBS program. Also see ‘Ginnie Mae.’

GNMA (Government National Mortgage Association)
Also known as Ginnie Mae. 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.

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.

Good Title
Title to property that is free of defects and that will legally be accepted without objection. Also known as perfect title, clear title, and marketable title.

Government Loan
A mortgage insured by the U.S. Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are considered conventional loans.

Government National Mortgage Association (Ginnie Mae)
Also known as Ginnie Mae. 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.

Government National Mortgage Association (GNMA)
Also known as Ginnie Mae. 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.

GPM (Graduated Payment Mortgage)
A flexible mortgage for which the payments increase over a given period and then level off. Negative amortization is built into this mortgage.

Grace Period
A period in which late payments can be made without penalty (usually fifteen days).

Graduated Payment Mortgage (GPM)
A flexible mortgage for which the payments increase over a given period and then level off. Negative amortization is built into this mortgage.

Grantee
A person receiving an interest in property.

Grantor
An individual who establishes a trust by giving property to a trustee for the benefit of another.

Guarantor
An individual, institution or other entity that guarantees to repay a debt if the borrower defaults. Under the Federal Home Loan Mortgage Corporation's Guarantor Program, original lenders sell ('swap') loans to Freddie Mac in exchange for Participation Certificates.

Guaranty
A promise made to pay a debt or perform a contracted obligation if the original party does not act according to the contract.

Hard-Money Mortgage
A cash loan.

Hazard Insurance
Covers property from natural disasters, including fire, wind, vandalism, and other hazards.

HECM (Home Equity Conversion Mortgage)
Usually called 'Reverse Annuity Mortgage,' wherein the lender makes payments to the purchaser, not vice versa. This allows older home owners to convert their home equity into cash. This contrasts with traditional home equity loans, where a borrower must qualify on the basis of income; instead, one qualifies on the basis of the value of his or her home. The loan need not be repaid until the property is sold.

Hectare
A metric unit of land measurement equaling 100 ares, or 10,000 square meters, or 2.47 acres. There are 100 hectares in a square kilometer

HELP (Homebuyer Education Learning Program)
An educational program from the FHA that counsels people about the homebuying 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.

Hidden Defect
Any encumbrance on a title that is not apparent in the public records; for example, unknown heirs, secret marriages, forged instruments, mental incompetence, or infancy of a grantor.

Highest and Best Use
An appraisal and zoning concept that evaluates all the possible, permissible and profitable uses of a property to determine the use that will provide the owner with the highest net return on investment in the property, consistent with existing neighboring land uses.

Home Equity Conversion Mortgage (HECM)
Usually called 'Reverse Annuity Mortgage,' wherein the lender makes payments to the purchaser, not vice versa. This allows older home owners to convert their home equity into cash. This contrasts with traditional home equity loans, where a borrower must qualify on the basis of income; instead, one qualifies on the basis of the value of his or her home. The loan need not be repaid until the property is sold.

Home Equity Line of Credit (Home Equity Loan)
A mortgage, usually in second position, which allows the borrower to obtain cash against his or her home's equity.

Home Equity Loan (Home Equity Line of Credit)
A mortgage, usually in second position, which allows the borrower to obtain cash against his or her home's equity.

Home Inspection
An examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.

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

Homebuyer Education Learning Program (HELP)
An educational program from the FHA that counsels people about the homebuying 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.

Homeowners' Association Fees (Common Area Assessments)
Charges to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD); these fees typically maintain the property and its common areas.

Homeowner's Insurance
An insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence or inappropriate action that result in someone's injury or property damage.

Homeowners' Loan Corporation
A federally chartered corporation established in 1933 and administered by the Federal Home Loan Bank Board to refinance mortgages of economically distressed homeowners. The HOLC legally expired in 1954.

Homeowner's Warranty
Insurance that covers items in the home, such as heating or air conditioning, throughout the coverage period. Can be paid for by either the buyer or the seller as a condition of sale.

Homestead
the dwelling place, owned and occupied by a family, including the land, house and accessory buildings

Household
All persons occupying a separate housing unit that has either direct access to the outside or a public area, or separate cooking facilities. When the members are related by law or blood, the household constitutes a family.

Housing Counseling Agency
Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and homebuying.

Housing Expenses-to-Income Ratio
The ratio (expressed as a percentage) of a borrower’s housing expenses divided by his or her monthly income.

Housing Permit
A certificate issued by a local government authorizing residential construction, describing the type of structure to be built and its estimated cost.

Housing Start
The commencement of construction of a new housing unit. For multiple dwelling structures, each unit is counted as a start when excavation of the building site begins. For public housing, the awarding of the contract is counted as the start.

Housing Stock
The total number of residential units, including mobile homes, available for nontransient occupancy

HUD
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.

HUD-1 Settlement Statement
Also known as the 'settlement sheet,' it itemizes all closing costs; must be given to the borrower at or before closing.

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

Immediate Purchase Contract
An over-the-counter offer by a seller to a purchaser of a mortgage

Impound Account (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.

Improved Real Estate
Real property on which one or more structures have been built for either residential or business use, or a combination of both

In Fee
Ownership of land with all the rights and obligations of ownership including the right to sell or give away the land or pass it on to one's heirs.

Inalienable
Something that may not be sold, transferred or assigned to another.

Income Limits
Maximum amounts that families may earn in order to qualify for admission into low- and moderate-income housing projects or for rent supplement assistance. The limits, established by law, are based on family size and geographic location.

Income Property
Real estate owned or operated to produce revenue.

Income Property Loan (Commercial Mortgage Loan)
A mortgage loan secured by real estate used by a business or to generate income.

Index
A measurement used by lenders to determine changes to the Interest rate charged on an adjustable rate mortgage.

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.

Information Agent
A firm (such as one designated by Ginnie Mae) to make certain information about its securities is available to the public.

Insurance
Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.

Interest
A fee paid for using money that belongs to another, usually expressed as an annual percentage of the amount used. A financial institution makes periodic payments of interest to savers for the use of their deposited funds. A borrower pays interest to the financial institution for the use of its funds.

Interest Only
A term loan requiring interest only, without principal.

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

Interest Rate Swap
An agreement between two parties to switch payments of differing interest rates for a certain period.

Interim Loan
A short-term mortgage loan, often for the construction of a building.

Intermediate Term Mortgage
A mortgage with a maturity date of 20 years or less from its time of purchase.

Investor
An individual whose primary concerns in the purchase of a security are regular dividend income, safety of the original investment, and if possible, capital appreciation.

Involuntary Lien
A lien imposed on property without the consent of the owner. Examples include taxes, special assessments for such items as nearby sidewalks or sewers, and judgments.

Issue Date
The date on which a security is deemed to be issued or originated.

Issuer
An entity which issues and is obligated to pay amounts due on securities.

Joint Tenancy
A form of ownership by two or more parties who share equal rights in and control of property, with the survivor or survivors continuing to hold all such rights on the death of one or more of the tenants. Joint tenancy is a common form of ownership when two or more persons jointly open a savings account.

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.

Judgment Lien
A court order placing a claim on property of a debtor, making the property security for payment of the debt. When applied to personal property, it is known as an attachment.

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

Jumbo Loan (Non-conforming Loan)
A loan exceeding Fannie Mae and Freddie Mac’s loan limits.

Jumbo Pools
Ginnie Mae II pass-through mortgage securities collateralized by pools which are generally larger and contain mortgages that are often more geographically diverse than single-issuer pools. Mortgage loans in jumbo pools may vary in terms of the interest rate within one-half percentage point in pools issued after July 1, 2003 or one percentage point in pools issued prior to July 1, 2003.

Junior Mortgage (Second Mortgage)
A mortgage that is subordinate to claims of a prior lien or mortgage. Borrowers sometimes use junior mortgages to obtain additional funds needed for downpayments or closing costs. Lenders tend to discourage junior financing because the borrower has little or no equity in the home.

Kick-Out Clause
A provision of a lease that permits a tenant to cancel a lease if the landlord fails to comply with stated conditions, obligations or standards.

Land Contract
A type of mortgage in which the seller retains the original loan and the buyer makes monthly payments to the seller to cover the amount of the original loan and any new mortgage. No transfer of title occurs until the loan is fully paid, and thus no equity is established until the debt is completely paid off. Most loans of this type have below-market interest rates and a balloon payment of principal at the end of the term.

Land Development Loan
An advance of funds, secured by a mortgage, to finance the making, installing, or constructing of the improvements necessary to convert raw land into construction-ready building sites.

Land Flip
A technique to artificially increase the book value of a parcel of land. The land is sold several times in quick succession among persons acting in concert, with the price increasing each time the land is sold. In a land flip, multiple sales of the same property can occur within a few days.

Late Charge
A penalty fee imposed by a lender for delinquent payments.

Lease Option
An option for a tenant to purchase a property after a rental period; monthly rent payments also include an overage, which can later be applied to a down payment.

Lease Purchase
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.

Leasehold
An interest in an estate held by a tenant who possesses certain rights of occupancy and use by virtue of renting the real property, even though the tenant does not hold title to the property.

Legal Description
A description of a property’s location that, for legal purposes, does not require oral testimony.

Lender
An individual (such as a loan officer) or firm that makes a loan.

Lending Institution
An organization that makes loans.

Lending Policy
An institution's statement of its basic lending philosophy, including standards, guidelines, and limitations that are to be observed and adhered to in the process of deciding whether to grant a loan. The policy must adhere to applicable law and regulations.

Leniency Clause
A provision written into a promissory note spelling out the lender's willingness to adjust loan payments temporarily if a borrower is experiencing severe financial difficulties through no personal fault.

Lessee
A person, business or other organization that is granted the use and possession of property in return for payment of rent. When real estate is rented, the lessee is known as the tenant.

Lessor
The owner of property who allows another to use and possess it in return for payment of rent. When real estate is rented, the lessor is known as the landlord.

Letter of Credit
An arrangement in which a lender agrees to substitute its credit for a borrower's under specified conditions.

Level Payment Mortgage
A mortgage that provides for a constant, fixed payment at periodic intervals during its term. Part of each payment consists of interest with the balance of the payment used to reduce the principal. See constant payment.

Leverage
Purchasing property with money belonging to someone else.

Liability
An item of value that is part of the overall debt or obligation of a person or business. For example, a mortgage is a liability of the homeowner/borrower, but the same mortgage is an asset of the savings and loan/lender. At savings institutions, savings deposits and all borrowed money are considered liabilities. Net worth, or regulatory capital, is accounted for as a liability because it is an obligation of the institution to its owners.

Liability Insurance
Insurance offering protection from claims that a homeowner or property owner’s negligence resulted in injury or property damage to someone else; it is usually part of a homeowner’s insurance coverage.

Lien
A legal claim against property that must be satisfied when the property is sold.

Lien Holder
A person or institution holding a mortgage or having a legal claim on the specific property of another person as security for a debt.

Lien Theory
An assumption of real estate law, which holds that a mortgage conveys to the lender a claim to, or lien on, the mortgaged property.

Lien Waiver
A document signed by a contractor, subcontractor, or other supplier of goods or services stating that the supplier has been paid for the work performed or goods supplied and waiving the supplier's right to file a claim against the property.

Life Estate
A freehold estate giving a beneficiary all property rights except the right to sell. The right to the estate is terminated upon the death of the beneficiary.

Life of Loan
The agreed upon length of time in which a loan must be repaid.

Life of Loan Cap
The limit beyond which the rate of interest may not rise throughout the term of an adjustable rate loan.

Line of Credit
A preestablished loan authorization with a specified borrowing limit extended by a lending institution to an individual or business based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit.

Liquid Asset
An asset made up of cash, or easily converted to cash.

Liquidity
Capability to sell an asset or investment.

Listing
A written authorization by the owner to sell or lease real property.

Loaded Couponing
The practice of a lender including the cost of mortgage insurance in the interest rate stated in the loan note, rather than listing it as a separate monthly charge. The practice permits a lender to cancel the mortgage insurance at a later date, while continuing to collect the monthly insurance premium from the homeowner/borrower. The practice was prohibited in 1985 by the Federal Home Loan Mortgage Corporation.

Loan
Money borrowed that is usually repaid with interest.

Loan Discount Points (Mortgage Discount)
The amount paid by the borrower to increase the yield of a mortgage to the lender. Sometimes called points, loan brokerage fee, or new loan fee. The discount is computed on the amount of the loan, not the selling price of the property.

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
Solicits loans and represents his or her lending institution, to which the loan officer represents the borrower.

Loan Origination
The steps by a lending institution up to the time a loan is placed on its books, including solicitation and processing of applications and loan closing.

Loan Origination Fee
The initial service charge imposed by a lending institution on a borrower for placing a loan on the institution's books.

Loan Participation
(a) The buying of portions of outstanding loans by investors, who then participate on a pro rata basis in collecting interest and principal payments. (b) the sharing by two or more lenders in the ownership of a loan or package of loans.

Loan Proceeds
The net amount of funds that a lending institution disburses under terms of a loan, and which the borrower then owes.

Loan Processing
All the steps taken by a lending institution from the time a loan application is received to the time the loan is closed and placed on the books, including taking the application, conducting the credit investigation, evaluating the loan terms and other steps.

Loan Servicing
The acts performed to collect and process loan payments during the life of a loan. They include billing the borrower; collecting payments of principal, interest, and payments into an escrow account; disbursing funds from the escrow account to pay taxes and insurance premiums; and forwarding funds to an investor if the loan has been sold in the secondary market.

Loan Settlement Statement
A document prepared for and presented to the borrower at the loan closing showing all disbursements to be made, such as payment to the seller.

Loan Terms
The specifications in a loan agreement that prescribe the loan amount, interest rate, length of time in which to repay the loan, and any other enforceable agreements entered into by the borrower and lender to effect the advance of funds.

Loan Workout
A series of steps taken by a lender with a borrower to resolve the problem of delinquent loan payments. Steps can include rescheduling loan payments into lower installments over a longer period of time so that the entire outstanding principal is eventually repaid.

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 Clause
A clause in a loan agreement that prevents the borrower from repaying the loan until a specified date.

Lock-In Period
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.

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.

Margin
An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.

Market Data Approach to Value
The estimation of the market value of a property by comparing it with similar properties in the general area that have sold recently under comparable conditions.

Market Price (Market Value)
For securities traded through an exchange, the last reported price at which a security was sold; for securities traded 'over-the-counter,' the current price of the security in the market.

Market Value (Market Price)
For securities traded through an exchange, the last reported price at which a security was sold; for securities traded 'over-the-counter,' the current price of the security in the market.

Marketable Title
Title to property that is free of defects and that will legally be accepted without objection. Also known as perfect title, clear title, and good title.

Maturity
(a) The end of the period of time for which credit, an insurance contract, or a mortgage loan is written. (b) The date(s) on which some types of investments such as bonds may be redeemed at face value. (c) The date on which a note, time draft, bill of exchange, bond, certificate of deposit or other negotiable instrument becomes due and payable.

Maturity Date of MBS
The last possible date on which the last payment of the longest loan may be paid (also known as 'stated maturity').

Mechanic's Lien
A legal, enforceable claim for payment to a person who has performed work or supplied materials used in the construction or repair of a building. The building and land is attached as security for payment of the claim. Mechanic's liens are permitted by the laws of most states. Also called a materialmen's lien.

Merged Credit Report
Reports the raw data from two or more major credit repositories.

MI (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.

Minimum Gross Yield
The sum of the required net yield and the required servicing spread in a Freddie Mac purchase contract.

Minimum Servicing Spread
The minimum amount of mortgage interest income to be retained by the originating lender (seller/servicer) as compensation for servicing mortgages purchased in whole by Freddie Mac.

MIP (Mortgage Insurance Premium)
The money paid for mortgage insurance, either to a government agency (such as the FHA) or to a private company.

Mobile Home Loan
A loan to finance the purchase of a mobile home, secured by the lender's claim on the mobile home. The loan may include funds for associated costs such as transportation of the mobile home and setup on a new site.

Modification Agreement
A written agreement between a financial institution and a borrower that changes one or more terms of an existing mortgage loan such as the interest rate, number of years allowed for repayment, or amount of monthly payment.

Monthly Housing Expense
The total monthly expenses, including principal, interest, taxes and insurance, paid by the borrower. Can establish affordability when used with total income.

Mortgage
A lien on the property that secures the Promise to repay a loan.

Mortgage Banker
A company that originates loans and resells them to secondary mortgage lenders (such as Fannie Mae or Freddie Mac).

Mortgage Bond
A bond secured by a mortgage on real property.

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

Mortgage Derivative
Any of several types of securities that pay their investors with cash flows generated by the payments of principal and interest to an underlying pool of mortgages. Mortgage derivative products include collateralized mortgage obligations (CMOs), real estate mortgage investment conduits (REMICs), stripped mortgage-backed securities such as interest-only securities (IOs) and principal-only securities (POs), and pass-through mortgage-backed securities with senior/subordinated structures.

Mortgage Discount
The amount paid by the borrower to increase the yield of a mortgage to the lender. Sometimes called points, loan brokerage fee, or new loan fee. The discount is computed on the amount of the loan, not the selling price of the property.

Mortgage Insurance (MI)
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.

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

Mortgage Life and Disability Insurance
An insurance policy on the life of a borrower that repays an outstanding mortgage debt upon the death of the insured.

Mortgage Loan
An advance of funds from a lender, called the mortgagee, to a borrower, called the mortgagor, secured by real property and evidenced by a document called a mortgage. The mortgage sets forth the conditions of the loan, the manner and duration of repayment, and reserves to the mortgagee the right to repossess the pledged property if the mortgagor fails to repay any portion of principal and interest.

Mortgage Loans Outstanding
The total dollar amount of money that is owed by mortgagors.

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 written promise to repay a specified sum of money plus interest at a specified rate. While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and makes the borrower who sign's the note personally responsible for repayment.

Mortgage Origination
The making of a new mortgage, including all steps taken by a lender to attract and qualify a borrower, process the mortgage loan, and place it on the lender's books.

Mortgage Participation
The division of a mortgage or pool of mortgages into units that are sold to one or more investors, each of whom participates in receiving payments of principal and interest.

Mortgage Pool
A group of mortgages assembled to form the collateral for securities. Mortgage payments of principal and interest into the pool are used to pay those who invest in the securities.

Mortgage Portfolio
The total of all mortgage loans held by a lender or investor.

Mortgage Revenue Bonds
Tax exempt bonds issued by state and local governments. Funds raised by the sale of the bonds are used to finance home mortgages. Revenue from mortgage payments is used to repay the bonds.

Mortgage Servicing
The activity of keeping a mortgage loan current, including collecting monthly mortgage payments, forwarding principal and interest payments to the current mortgage holder (if the loan has been sold), maintaining escrow accounts, paying taxes and insurance premiums, and taking steps to collect overdue payments. Mortgage servicing may be performed by the original lender, or the lender may sell the right to service a mortgage to another company, which performs the service for a fee. Some companies, including some savings associations, specialize in servicing mortgages, both their own and those made by other lenders. The original lender may sell the mortgage servicing rights to one company and sell the mortgage itself to another company. See mortgage servicing rights. See recourse servicing. See PMSR.

Mortgage Servicing Rights
The right to service a mortgage. See Mortgage Servicing.

Mortgage Take Back
A mortgage loan issued by the seller of the mortgaged property.

Mortgage-Backed Bonds
Bonds that are secured by mortgages. Unlike mortgage-backed passthrough securities, mortgage-backed bonds do not convey ownership of any portion of the underlying pool of mortgages. However, mortgage-backed bonds do offer a more predictable maturity and thus offer a form of call protection.

Mortgage-Backed Passthrough Securities
Securities that convey ownership of a fractional part of each mortgage in a pool of mortgages backing the securities. Mortgage payments are sent to the issuer of the securities and then passed through to those who bought the securities. Each security owner shares proportionally the interest and principal payments generated by the underlying pool of mortgages.

Mortgagee
The institution, group or individual that lends money secured by pledged real estate; the lender. See mortgagor.

Mortgagor
The owner of real estate who pledges the property as security for the repayment of a debt; the borrower. See Mortgagee.

Multidwelling Units
Properties that acquire a single mortgage, but provide housing units for two or more families.

Multiple Issuer Pool
A mortgage-backed securities pool, formed as a Ginnie Mae II MBS, normally consisting of more than one loan package. All of the loan packages in the pool will have similar characteristics. The resulting pool backs a single issuance of securities.

Mutual Fund
An organization that creates a portfolio by investing funds in securities, such as Ginnie Mae securities. Mutual funds are 'open-ended' so that the portfolio investment may change. Ginnie Mae does not directly guarantee owners of fund shares; therefore, these owners must look to their mutual fund for payment, even if the portfolio consists solely of Ginnie Mae securities.

Nationwide Loan
A mortgage loan on improved real property located outside a lending institution's normal business territory but within the United States, its territories or possessions.

Negative Amortization
The result of a mortgage repayment plan in which the borrower makes payments that amount to less than the interest due. Unpaid interest is then added to the outstanding loan balance, causing the outstanding loan balance to increase instead of decrease.

Neighborhood Housing Services Programs
Programs aimed at halting the further decline of neighborhoods that have begun to deteriorate. They are based on a partnership of community residents, lenders, and local government. NHS is administered by the Neighborhood Reinvestment Corporation.

Neighborhood Reinvestment Program
Created by the Housing and Community Development Act of 1978 to help establish locally run self-help coalitions of business leaders, residents, and local government officials, called Neighborhood Housing Services (NHS) programs, that encourage communities to revitalize depressed urban neighborhoods and thus make home financing more attractive in these areas.

Net Effective Income
A borrower’s total after tax income.

Net Rentable Area
The actual square footage of a building that can be rented. Halls, lobbies, stairways, elevator shafts, maintenance areas and the like are not included.

No Cash-Out Refinance
A refinance transaction that calculates a new balance to cover the balance due on the present loan, instead of providing cash to the borrower.

No-Cost Loan
Loans offered without costs normally paid to the lender, and/or covering other purchase and refinance transactions (such as escrow fees, settlement fees, notary fees, etc.).

Non Assumption Clause
A statement in a mortgage contract that forbids assumption of the mortgage, unless the lender’s approval has been obtained.

Nonconforming Loan (Jumbo Loan)
A loan exceeding Fannie Mae and Freddie Mac’s loan limits.

Nonmortgage Loan
An advance of funds not secured by a real estate mortgage.

Nonperforming Loan
A loan that is not earning income and: (a) full payment of principal and interest is no longer anticipated, (b) principal or interest is 90 days or more delinquent, or (c) the maturity date has passed and payment in full has not been made.

Nonrecourse Loan
A type of loan in which the only remedy available to the lender in the event of the borrower's default is to foreclose on the collateral; the borrower is not personally liable for repayment.

Nonresidential Mortgage Loan
A mortgage loan secured by nonresidential property such as an office building, store, factory, or church.

Note
A written promise to pay a stipulated sum of money to a specified party under conditions mutually agreed upon. Also called a promissory note, promise, or bond.

Note Rate
The interest rate on a mortgage note.

Notice of Commencement
A document used in some states and recorded after a construction loan mortgage has been recorded. All mechanics' liens relate back to the date the notice of commencement was recorded, thus enabling the construction mortgage to remain a first lien, not subordinated to any labor or supplier claim for nonpayment of bills.

Notice of Completion
Legal notice recorded after completion of construction. Mechanics' liens must be filed within a specified period thereafter.

Notice of Default
Formal notice given to a borrower that a default has taken place, and of possible legal action.

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

Office of Thrift Supervision (OTS)
A bureau of the Treasury Department that was authorized by Congress in the Financial Institutions Reform, Recovery and Enforcement Act of 1989, to charter, regulate, examine and supervise savings institutions.

Offsite Improvements
Improvements in land development that are off the development site, such as utility lines, sidewalks, gutters and curbs, that enhance the value of the development.

On Account
Describes the application of a payment to reduce the outstanding principal of a loan.

Onsite Improvements
Any construction of buildings or other improvements within the boundaries of a property that increases the value of the property.

Open Mortgage
A mortgage loan that can be paid off, without penalty, at any time prior to maturity.

Open-End Credit
A consumer line of credit that may be used repeatedly up to an established overall limit. Commonly known as revolving credit or a charge account, in which the customer may pay in full or in installments that include a finance charge. The term does not include negotiated advances under an open-end real estate mortgage or a letter of credit.

Open-End Lease
A lease that requires a balloon payment based on the value of the leased property when the lease expires.

Open-End Mortgage Clause
A provision in mortgage contracts in some states, that declares the mortgaged real estate may be used as security for future additional advances from the original lender, if the lender and borrower agree. All subsequent advances under this clause represent a claim on the property dating back to the time of recording the original mortgage.

Original Face
The face value or original principal amount of a security on its issue date.

Original Principal Balance
The total principle owing on a mortgage before regular payments commence.

Original-Issue Discount
The amount by which a security's price at issuance is lower than its par value.

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.

OTS (Office of Thrift Supervision)
A bureau of the Treasury Department that was authorized by Congress in the Financial Institutions Reform, Recovery and Enforcement Act of 1989, to charter, regulate, examine and supervise savings institutions.

Overages
The difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.

Owner Financing
A property purchase for which the seller provides at least part of the financing.

Owners' Title Policy
A policy that protects a buyer from any future title disputes.

P & I (Principal and Interest)
Refers to regularly scheduled payments or prepayments on mortgage securities.

Package Provision
An optional mortgage clause that allows the borrower to finance chattels such as major household appliances, carpeting, drapery and equipment under the original home mortgage and make a single monthly payment for the entire package.

PAM (Pledged Account Mortgage)
A type of mortgage loan in which the borrower's payments are supplemented by payments from a savings account pledged as additional collateral for the loan. The savings account is established with part of the downpayment.

Paper Profit
An increase in the value of property or a security still held. Paper profits become realized profits only when the property or security is sold.

Par
A price equal to the face amount of a security, as distinct from its market value. On a debt security, the par or face value is the amount the investor has been promised to receive from the issuer at maturity.

Parity Clause
A provision in a mortgage contract stating that all notes are equally secured and that no holder of the collateral will receive preferential treatment in the event of default or foreclosure.

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 his or her mortgage payments up to date.

Partial Payment
An insufficient monthly payment on a mortgage; can be allowed under extenuating circumstances.

Partially Amortizing Loan
A loan in which the periodic payments cover all of the interest charges but only part of the principal, therefore leaving an unpaid principal balance when the loan matures.

Participation
(a) Ownership by two or more lenders or investors of all or a portion of a single mortgage or a package of mortgages. (b) The cooperative origination by two or more lenders of a single (usually large) mortgage loan.

Participation Certificate
A document setting forth the description of a package of loans and the share of the package that is being bought or sold.

Paying Agent
An entity responsible for making the payment of interest and principal to bondholders on behalf of the bond's issuer.

Payment Change Date
The date on which a new payment amount will take effect on an adjustable rate mortgage (ARM) or graduated payment mortgage (GPM). Will normally happen in the month following the interest rate adjustment date.

Payment Date
The date that actual principal and interest payments are paid to the registered owner of a security.

Perfect Title
Title to property that is free of defects and that will legally be accepted without objection. Also known as marketable title, clear title, and good title.

Perfecting a Title
The elimination of any claims against a title.

Period of Redemption
The period during which a mortgagor may reclaim the title and possession of his or her property by paying the debt the property secures.

Periodic Payment Cap
The limit by which payments can increase or decrease, within an adjustment period, for an adjustable rate mortgage whose interest rate and minimum payment fluctuate independently.

Periodic Rate Cap
A limit on an adjustable rate mortgage by which the interest rate can increase or decrease within one adjustment period.

Permanent Loan
A long-term loan of not less than 10 years that is fully amortized and made to purchase, rather than to construct, real property.

Personal Property
Any property that is not real property. While state laws vary on the definitio