A B C D E F G H I J L M N O P Q R S T U V W Y
Acceleration clause
A provision in the mortgage note that gives a lender the right to demand repayment of the entire balance of the loan if specific actions transpire, such as failure to make timely payments or a transfer of the property.
Additional principal payment
An amount paid by the borrower before it is due that is used to reduce the principal balance of the loan and shorten the term of the loan. Also called curtailment.
Adjustable-rate mortgage (ARM)
A mortgage that permits the lender to periodically adjust the interest rate on the basis of movement in a specified index.
Adjustment period
For an adjustable-rate mortgage, the time period between interest rate change dates, as stated in the mortgage note.
Allonge
An attachment to the mortgage note that is used for endorsements when there is not space for them on the document itself.
Alt-A loan
A category of slightly higher-risk mortgages; Fannie Mae allows qualified lenders to deliver such loans provided they are underwritten by Desktop Underwriter.
Amortization
Gradual reduction of the mortgage debt through regularly scheduled payments over the term of the loan.
Annual percentage rate (APR)
The annualized cost of credit, expressed as a percentage, that results from an equation that takes into account the amount financed, the finance charge, and the term of the loan.
Appraisal
A written estimate or opinion of a property's value prepared by a qualified appraiser.
ARM (adjustable-rate mortgage)
A mortgage that permits the lender to periodically adjust the interest rate on the basis of movement in a specified index.
Assessed valuation
The value placed on property for the purpose of taxation.
Assets
Items of value including cash, real estate, securities, and investments
Assignment of mortgage
A document evidencing the transfer of mortgage ownership from one person to another.
Assignment of rents
A written agreement wherein the owner of a property gives another party, such as the mortgage servicer, the right to collect rents, manage the property, pay expenses, and apply the net income toward delinquent mortgage payments.
Assumption
A transaction in which the purchaser of real property takes over the seller's existing mortgage; the seller remains liable for the mortgage unless released by the lender from this obligation. If the mortgage contains a due-on-sale clause, the loan may not be assumed without the lender's consent.
Assumption fee
A fee charged by the lender for permitting a homebuyer to assume the seller's existing mortgage
Automated underwriting
An application, such as Fannie Mae's Desktop Underwriter®, that streamlines the processing of loan applications and provides a recommendation to the lender to approve the loan or refer it for manual underwriting.
Balloon mortgage
A loan in which the borrower's monthly payments are amortized over a longer period than the actual term of the mortgage; as a result, the borrower must pay off the outstanding balance with a lump-sum payment or refinance the loan at the end of the mortgage term.
Balloon payment
The outstanding principal balance due when a balloon mortgage reaches maturity.
Bankruptcy
A legal proceeding in federal court in which an insolvent debtor can obtain relief from payment of certain obligations. This affects the borrower's personal liability for a mortgage debt, but not the lien of the mortgage.
Basis point
1/100 of 1 percent. For example, 2 1/2 basis points equal .025 percent or .00025.
Biweekly mortgage
A mortgage in which payments are made every two weeks, rather than monthly; the payments, which are equal to one-half the standard monthly payment, are automatically drafted from the borrower's bank account.
Borrower
The person to whom credit is extended. The borrower on a mortgage loan has an ownership interest in the security property, signs the security instrument, and signs the mortgage or deed of trust note (if his or her credit is used for qualifying purposes). See also co-borrower.
Bridge loan
A short-term loan that enables home buyers to close on a new home before their present home is sold. Also called swing loan.
Broker
An individual or firm that acts as an agent between providers and users of products or services. See also mortgage broker.
Buydown
1) An MBS option whereby lenders can reduce or eliminate excess servicing and place loans in a higher-priced security by buying down the guaranty fee in exchange for a onetime, upfront fee to Fannie Mae.
2) An arrangement whereby the property developer or another third party provides an interest subsidy to reduce the borrower's monthly payments in the early years of the loan.
Cap
For an adjustable-rate mortgage, a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note. For example, an ARM may have a +1 percent per-adjustment cap and a +5 percent lifetime cap.
Capitalization
The addition of delinquent interest (or other amounts due under a mortgage) to the unpaid principal balance of the mortgage.
Capital market
The financial market in which long-term investments such as mortgages, mortgage-backed securities, Treasury bonds, and certificates of deposit are traded.
Cash-out refinance
A refinance transaction in which the borrower receives additional funds over and above what is needed to repay the existing mortgage, closing costs, points, and any subordinate liens.
Certificate of deposit index
An index that is used to determine interest rate changes for certain ARM plans; it is based on the interest rates of six-month negotiable certificates of deposit (CDs).
Charge-off
The outstanding balance of a loan that is written off because it is deemed to be uncollectible.
Clear title
Ownership that is not subject to liens, defects, or other legal encumbrances.
Closing
The process of completing a loan transaction at which time the mortgage documents are signed, funds are disbursed, and the property is transferred to the buyer. Also called settlement.
Closing costs
Money paid by the borrower to effect the closing of a mortgage loan, generally including a loan origination fee, title insurance, survey, attorney's fees, and prepaid items such as taxes and insurance escrow payments.
CLTV (combined loan-to-value) ratio
The relationship between the total amount of the first mortgage and any subordinate financing and the value of the property (the lower of the property's sales price or appraised value), expressed as a percentage of the property's value. This ratio is a major determinant in assessing the comprehensive risk of a mortgage.
Co-borrower
Any borrower other than the first borrower whose name appears on the mortgage note, even when that person owns the property jointly with the first borrower and shares liability for the note.
COFI (Cost of Funds Index)
An index that is used to determine interest rate changes for certain ARM plans. It is based on the weighted monthly average cost of deposits, advances, and other borrowings of members of the Federal Home Loan Bank of San Francisco.
Coinsurance clause
A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- in order for the insured to collect the full amount of a loss.
Collection
The procedures a lender takes to collect past-due payments.
Combined loan-to-value (CLTV) ratio
SEE CLTV ration.
Commitment
1) A legally binding contract in which a loan originator agrees to deliver a specified dollar amount of loans to Fannie Mae for an agreed-upon price within a specified time; also called forward sale.
2) An agreement by a lender to loan money at a future date subject to the borrower's compliance with stated conditions.
Community Homebuyer's ProgramSM
An initiative under which Fannie Mae encourages lenders to offer underwriting flexibilities to increase the buying power of low- and moderate-income borrowers.
Comparable
A property used as a comparison in determining the current value of a property that is being appraised.
Comparative market analysis
An appraisal method in which the value of a property is based on an analysis of sales of properties with similar characteristics.
Compensating factor
An underwriting consideration that may justify using debt-to-income ratios that exceed Fannie Mae's benchmark ratios.
Condominium
A real estate project in which each unit owner holds title to an individual unit and an undivided interest in the common areas.
Conforming loan
A loan that can be purchased or securitized by Fannie Mae or Freddie Mac because it meets our eligibility requirements.
Construction loan
A short-term loan for financing the cost of construction or improvements to a property; the lender disburses payments to the builder periodically during construction.
Construction-to-permanent loan
A mortgage that combines financing for the purchase of land, the construction of a new home, and a permanent mortgage in one loan with one closing.
Consumer Credit Counseling Service (CCCS)
A nationwide, nonprofit organization that helps consumers get out of debt and improve their credit profile.
Contingency
A condition specified in a purchase contract, such as a satisfactory home inspection.
Contingent liability
A potential debt that an individual or business incurs as a result of cosigning, or guaranteeing, a loan; the cosigner is obligated only if the borrower defaults on the loan.
Conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
Conversion option
A provision of some adjustable-rate mortgages that allows the borrower to change the ARM to a fixed-rate mortgage in the early years of the loan.
Convertible ARM
A type of adjustable-rate mortgage that allows the borrower to convert the loan to a fixed-rate mortgage in the early years of the loan.
Conveyance
The transfer of title to real property.
Cooperative mortgage
A mortgage related to a cooperative project. This usually refers to a multifamily mortgage covering the entire project, rather than the share loans on the individual units.
Cooperative project
A project in which a corporation holds title to a residential property and sells shares representing individual units to buyers who then receive a proprietary lease as their title.
Cosigner
An individual who signs the mortgage note along with the borrower and is jointly liable with the borrower for repayment of the loan, but does not have an ownership interest in the property. Compare with co-borrower.
Cost approach to value
An appraisal method in which a property's value is based on the cost of constructing a substitute residence similar to the property being appraised.
Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for certain ARM plans. It is based on the weighted monthly average cost of deposits, advances, and other borrowings of members of the Federal Home Loan Bank of San Francisco.
Credit bureau
An independent agency that gathers and maintains information on the debts and repayment records of individuals and businesses.
Credit history
The record of an individual's debts and repayment record. Fannie Mae considers a borrower's credit history to be a primary risk factor in determining the default risk for a mortgage.
Credit report
A document provided by a credit-reporting agency containing information about a loan applicant's previous mortgage history, bank loans, credit cards, and public records dealing with financial matters.
Credit repository
A company that gathers financial and credit information from various sources about individuals who have applied for credit.
Credit risk
The risk that a borrower will default on a loan.
Credit score
A numerical value that ranks a borrower's credit risk at a given point in time based on a statistical evaluation of information in the individual's credit file that has been proven to be predictive of loan performance. See also FICO score.
Creditworthiness
An assessment of the borrower's ability to successfully manage his or her finances and make timely payments on debt, as demonstrated by the borrower's credit history
Debt
Borrowed money, the repayment of which may be either secured or unsecured.
Debt-to-income ratio
The relationship between a borrower's total monthly debt payments (including proposed housing expenses) and his or her gross monthly income; this calculation is used in determining the mortgage amount that a borrower qualifies for. Also called qualifying ratio.
Deed
The legal document that transfers the ownership of real property from one party to another.
Deed-in-lieu of foreclosure
The transfer of title from a delinquent borrower to the lender in satisfaction of the mortgage debt to avoid foreclosure. Also called voluntary conveyance.
Deed of trust
A legal document that conveys title to real estate to a disinterested third party (trustee) who holds the title until the borrower has repaid the debt. In some states, this is used in place of a mortgage.
Default
The failure to make a scheduled payment or otherwise comply with the terms of a mortgage loan or other contract.
Deficiency judgment
A personal judgment created by court decree for the difference between the amount of the mortgage indebtedness and any lesser amount recovered from the foreclosure sale. The judgment is against any person who is liable for the mortgage debt.
Delinquency
The condition of a loan when a scheduled payment has not been received by the due date, but generally used to refer to a loan for which a payment is 30 or more days past due.
Depository
A financial institution that accepts demand deposits from consumers (including banks, credit unions, and savings and loans).
Desktop Originator®
A Fannie Mae application that connects brokers and other loan originators with loan underwriters, enabling them to originate mortgage loans more efficiently.
Desktop Underwriter®
Fannie Mae's automated underwriting system.
Discount points
A fee paid by the borrower at closing to reduce the interest rate. A point equals 1 percent of the loan amount.
Down payment
The amount of cash a buyer puts toward a purchase.
Due-on-sale clause
A provision in a mortgage that allows the lender to demand full payment of the outstanding balance if the property securing the mortgage is sold.
Earnest money
Money included with an offer to purchase real estate to show that the buyer's offer is being made in "good faith." Also called deposit.
Easement
A right to the enjoyment of, or access to, land owned by another (for example, a right of way over another person's land).
Encroachment
An improvement (such as a fence or other structure) that intrudes illegally on a neighboring property.
Encumbrance
Any claim on a property, such as a lien, mortgage, or easement, which complicates the title process.
Endorsement
The signature placed on a negotiable instrument that transfers the instrument to another party.
Equal Credit Opportunity Act
A federal law passed in 1974 that requires lenders to grant credit without discrimination based on the applicant's sex, marital status, race, religion, national origin, age, or receipt of public assistance.
Equifax
A major, nationwide credit-reporting bureau.
Equity
The owner's interest in a property, calculated as the value of the property less the amount of existing liens.
Equity investment
The borrower's ownership interest in a property, as measured by the loan-to-value ratio (or combined loan-to-value ratio, if subordinate financing exists). Fannie Mae considers a borrower's equity investment to be a primary risk factor in determining the default risk for a mortgage.
Escrow account
An account established by the servicer to hold funds collected from the borrower for the payment of property taxes and insurance premiums when they come due.
Experian
A major, nationwide credit-reporting bureau (formerly known as TRW).
Fair Credit Reporting Act
A federal law passed in 1970 that guarantees individuals access to their credit files and specifies procedures for challenging erroneous information.
Fair Debt Collection Practices Act
A federal law passed in 1977 that regulates the collection of debt by third-party debt collectors.
Fair Housing Act
A landmark federal civil rights law passed in 1968 that prohibits housing discrimination (denial to rent or refusal to sell) based on race, color, religion, sex, or national origin. A 1988 amendment expanded the protections to include family status and disability.
Fair market value
The price at which property would be transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent facts and is not under any compulsion to buy or sell.
Fallout risk
The risk that borrowers will fail to close on loans that the lender has already committed for a forward sale into the secondary market.
Federal Emergency Management Agency (FEMA)
A federal agency that provides assistance in areas that have incurred extensive natural disasters. It also identifies special flood hazard areas in which flood insurance is required.
Federal Housing Administration (FHA)
An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages made by private lenders.
FHA mortgage
A mortgage that is insured by the Federal Housing Administration.
FHA Section 203(b) program
A HUD program that makes available below-market-rate mortgages to buyers who make a down payment as small as 3 percent.
FICO score
A numerical score based on a system developed by Fair, Isaac and Company that uses the borrower's credit history and other factors to predict the creditworthiness of borrowers.
Fidelity bond insurance
A type of bond that protects employers against economic loss from dishonest acts of their employees.
First mortgage
A mortgage that is the primary lien against a property.
First-time home buyer
A person with no ownership interest in a principal residence during the three-year period preceding the purchase of the security property.
Fixed-period ARM
An adjustable-rate mortgage that offers a fixed rate for an initial period, typically three to seven years, then adjusts annually for the remaining term.
Fixed-rate mortgage
A mortgage loan in which the interest rate does not change for the entire term.
Float
The time between a lender's collection of payments from borrowers and the remittance of those funds to Fannie Mae, which provides an opportunity to earn additional interest income.
Flood certification fee
A fee charged by independent mapping firms to identify properties located in areas designated as flood zones.
Flood Disaster Protection Act of 1977
A federal law that requires lenders to notify borrowers if the property securing a loan is located in a flood zone; if so, borrowers in participating communities must purchase flood insurance.
Flood insurance
Insurance that compensates for property damage resulting from flooding; it is required in federally designated flood zones.
Forbearance
The postponement of foreclosure or other legal action, giving a delinquent borrower additional time to bring the mortgage current.
Foreclosure
The legal process by which property that is mortgaged as security for a severely delinquent loan may be sold at auction and the proceeds of the sale applied to the mortgage debt.
Forfeiture
The relinquishing of property rights by a delinquent borrower.
Fully amortizing mortgage
A mortgage in which the borrower's monthly payments are designed to retire the obligation at the end of the mortgage term.
Gift letter
A letter or affidavit that indicates that part of a borrower's down payment is supplied by a gift that does not have to be repaid.
Good faith estimate
A listing of each service for which the borrower will be charged at closing, and the estimated cost of each.
Government loan
A mortgage that is insured or guaranteed by a federal government entity such as the Federal Housing Administration, Veterans Administration, or Rural Housing Service
Graduated-payment adjustable-rate mortgage (GPARM)
A mortgage that combines the features of a GPM and an ARM; payment increases during the graduated-payment period do not necessarily reflect changes in the interest rate.
Graduated-payment mortgage (GPM)
A mortgage with initial monthly payments set at an amount lower than required to fully amortize the debt; the borrower's payments increase gradually during the early years of the loan and then remain constant for the remaining term of the loan.
Gross note rate
The interest rate that the borrower pays on a loan.
Ground rent
Payment for the use of land when title to a property is held as a leasehold estate (that is, the borrower does not actually own the property, but has a long-term lease on it).
Hazard insurance
A type of insurance that compensates for physical damage to a property by fire, wind, or other natural disaster.
Homebuyer education
A requirement of certain Fannie Mae loan programs intended to prepare first-time homebuyers for the ongoing responsibilities of homeownership; early delinquency counseling may also be required
Home equity line-of-credit loan
A type of loan that enables home owners to obtain multiple advances up to an amount that represents a specified percentage of their equity in the property.
Home inspection
An examination of the construction, condition, and internal systems of a home prior to purchase; a satisfactory home inspection may be a condition of purchase.
Homeowner's insurance
Insurance coverage available for owner-occupied properties to protect against personal liability and physical property damages for a dwelling and its contents.
Homeowners' warranty
Insurance offered by the seller that covers certain home repairs and fixtures for a specified amount of time
Housing expense ratio
The percentage of a borrower's gross monthly income that is devoted to housing costs.
HUD
The U.S. Department of Housing and Urban Development, a federal agency that oversees the Federal Housing Administration and numerous housing and community development programs.
HUD-1 Uniform Settlement Statement
A closing statement or settlement sheet that lists all closing costs on a real estate purchase or refinance transaction.
Improvement
Any permanent structure on land such as buildings, fences, and driveways, as well as landscaping, drainage, and utilities.
Income approach to value
An appraisal method in which the property's value is based on the rental income the property can be expected to earn.
Index
A published interest rate used to determine the interest rate payable on adjustable-rate mortgages.
In-file credit report
A computer-generated report of a borrower's credit and public record information obtained from a credit repository.
Initial interest rate
The original interest rate, or "start rate," of an adjustable-rate mortgage.
Installment debt
A loan that is repaid via scheduled payments for a specified term (such as an automobile loan).
Institutional lender
A financial institution that invests in mortgages and keep them in its own portfolio.
Interest
A charge for borrowing money, usually expressed as an annual percentage rate.
Interest accrual rate
The percentage rate at which interest accrues on the mortgage.
Interest differential
Any difference (shortage or surplus) between the amount of interest collected from the borrower and the amount of interest due to Fannie Mae.
Interest-only mortgage
A mortgage loan in which the borrower makes monthly payments that cover only the interest due on the loan for a specified period; during this period, the outstanding balance of the loan does not decline.
Interest rate buydown plan
An arrangement whereby the property developer or another third party deposits money to an account to reduce a borrower's monthly payments during the early years of a mortgage.
Interest rate cap
For an adjustable-rate mortgage, a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note. For example, an ARM may have a +1 percent per-adjustment cap and a +5 percent lifetime cap.
Interest rate ceiling
The maximum interest rate for an adjustable-rate mortgage, as stated in the mortgage note. Also called lifetime cap.
Interest rate change date
The date on which the interest rate for an adjustable-rate mortgage changes.
Interest rate floor
The minimum interest rate for an adjustable-rate mortgage, as stated in the mortgage note. Fannie Mae ARM plans do not include a floor.
Interest rate risk
The risk that a rise in interest rates will cause a loan or MBS pool to decrease in value before the lender takes down a commitment to sell. Also called price risk.
Intermediate-term mortgage
A mortgage that amortizes over an original term of 10, 15, or 20 years.
Investment property
A property purchased to generate rental income, tax benefits, and profitable resale rather than to serve as the borrower's primary residence
Joint tenancy
Ownership by two or more people that gives them equal shares of a piece of property, with rights passing to the surviving owner or owners.
Judicial foreclosure
A type of foreclosure used in some states that is handled as a civil lawsuit.
Jumbo mortgage
A loan that exceeds the amount eligible for purchase by Fannie Mae or Freddie Mac.
Junior mortgage
A loan that is subordinate to the primary loan, such as a second or third mortgage.
Late charge
A penalty fee imposed by the lender when a borrower fails to make a scheduled payment on time.
Late payment
A payment received by the lender after the due date.
Leasehold estate
An arrangement in which the borrower does not own a property but possesses a recorded long-term lease, usually 99 years.
Lender
A bank, savings institution, mortgage company, or other entity that offers home loans.
Lender-purchased MI
Mortgage insurance for a conventional mortgage that the lender pays for using its own funds.
Letter of intent
A formal statement that the buyer intends to purchase a property for a stated price on a specified date.
Liabilities
A borrower's debts and financial obligations.
Liability insurance
A type of insurance that protects property owners against claims of negligence, personal injury, or property damage to another party.
LIBOR (London Interbank Offered Rate) index
An index used to determine interest rate changes for certain ARM plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank market.
Lien
A legal encumbrance or claim on the property of another person as security for a debt.
Lifetime cap
A limit on the amount the interest rate can increase over the life of an adjustable-rate mortgage, as stated in the mortgage note.
Limited cash-out refinance
A refinance transaction in which the mortgage amount is limited to the sum of the unpaid principal balance of the first mortgage, closing costs, points, and the amount required to satisfy any mortgage liens, and other funds for the borrower's use not to exceed 2 percent of the principal amount of the new mortgage.
Loan officer
An official representative of a lending institution who is empowered to act on behalf of the lender within certain limits.
Loan term
The repayment period, as stated in the mortgage note.
Loan-to-value (LTV) ratio
The relationship between the loan amount and the value of the property (the lower of the appraised value or sales price), expressed as a percentage of the property's value. This ratio is a major determinant in assessing the comprehensive risk of a mortgage.
Lock-in
An agreement in which a lender agrees to "lock in" the borrower's interest rate for a set period of time before closing.
LTV (loan-to-value) ratio
The relationship between the loan amount and the value of the property (the lower of the appraised value or sales price), expressed as a percentage of the property's value. This ratio (or combined loan-to-value ratio, if subordinate financing exists) is a major determinant in assessing the comprehensive risk of a mortgage.
Manual underwriting
The process of reviewing and approving a mortgage application without the use of an automated underwriting system.
Margin
For an adjustable-rate mortgage, the amount that is added to the index value to determine the mortgage interest rate, as stated in the note.
Maturity date
The date a mortgage loan is scheduled to be paid in full, as stated in the note.
Mechanic's lien
A lien against a property filed by a contractor or supplier who is seeking payment for work performed or materials provided.
Merged credit report
A credit report issued by a credit reporting company that draws information from the three major credit-reporting bureaus: Equifax, Experian, and TransUnion Corp.
MERS® (Mortgage Electronic Registration System)
An electronic clearinghouse that assists lenders and investors in tracking mortgages, servicing rights, and security interests.
MI (mortgage insurance)
Insurance for conventional mortgage loans that protects lenders against loss in the event of default by the borrower.
Military indulgence
A relief provision available to borrowers who are called to active military duty.
MIN (mortgage identification number)
An 18-digit number assigned by MERS to each registered mortgage.
Modification
Any change to the terms of a mortgage, including changes to the interest rate, loan balance, or loan term. Modifications are sometimes used to enable a borrower to avoid foreclosure.
Monthly conversion option
An option that allows a borrower to convert an adjustable-rate mortgage to a fixed rate at the beginning of any month in the early years of the loan. Compare with periodic conversion option.
Monthly payment
The total payment of principal and interest and any required escrow funds due from the borrower each month.
Mortgage
Collectively, the security instrument, note title evidence, and all other documents and papers that evidence a secured debt.
Mortgage-backed security (MBS)
An investment security that represents an undivided interest in a pool of mortgages; Fannie Mae guarantees that the borrowers' monthly payments on the mortgages underlying the security will be passed through to investors at the pass-through rate.
Mortgage banker
A company that specializes in originating, selling, and servicing real estate loans.
Mortgage broker
An individual or firm that matches lenders with prospective borrowers, and receives a commission if a loan closes. Brokers take applications and may process loans, but the mortgage is closed in the name of the lender that commissioned the broker's services.
Mortgage differential payment
The payment a borrower who is being relocated may receive from an employer to compensate for higher housing prices in the relocation area.
Mortgagee
The institution or individual to whom a mortgage is given; the lender.
Mortgage insurance (MI)
Insurance for conventional mortgage loans that protects lenders against loss in the event of default by the borrower. MI is typically required if the borrower's down payment is less than 20 percent of the purchase price.
Mortgage life insurance
A type of insurance that will pay off a mortgage if the borrower dies while the loan is outstanding; a form of credit life insurance.
Mortgage margin
For an adjustable-rate mortgage, the amount that is added to the index value to determine the mortgage interest rate, as stated in the note.
Mortgage note
The note or other evidence of indebtedness for a mortgage loan.
Mortgagor
The owner of real estate who pledges property as security for the repayment of a debt; the borrower.
Multifamily mortgage
A residential mortgage on a building with more than four apartment units.
Multiple listing service (MLS)
A service that lists all available homes for sale in an area in one directory or database.
Negative amortization
An increase in the balance of a loan caused by adding unpaid interest to the loan balance; this occurs when the monthly payment does not cover the interest due.
Net worth
The value of a company's or individual's assets, including cash, less total liabilities.
Nonconforming mortgage loan
A loan that cannot be purchased or securitized by Fannie Mae because it fails to meet their requirements.
Nontraditional credit history
An alternative or supplemental credit history that can be developed for borrowers who don't use the types of credit that traditionally are reported to credit repositories (for example, rent and utility payments).
Note
A written promise to pay a specified amount under the agreed-upon conditions. Also called promissory note.
Office of Thrift Supervision (OTS)
The regulator of thrift institutions; it replaced the Federal Home Loan Bank Board (FHLBB).
Original term
The period of time over which a mortgage is to be repaid, as stated in the note (for example, 360 months).
Origination
The process of generating mortgage loans -- from taking down the loan application through loan closing.
Origination fee
The amount charged by a lender for processing a loan application, usually computed as a percentage of the loan amount.
Owner financing
A transaction in which the seller of a property finances all or part of the purchase.
Owner-occupied property
A property that serves as the borrower's primary residence.
Owner of record
The entity that appears in the public records as the owner of a mortgage; usually the mortgage originator, unless the mortgage is subsequently assigned to someone else and that assignment is recorded.
Par price
A selling price that is equal to the unpaid principal balance of the mortgage.
Partial payment
A payment that is less than the borrower's scheduled monthly mortgage payment.
Payment change date
For an adjustable-rate mortgage, the date on which a new payment amount is due from the borrower.
Payment change interval
The period between payment change dates for an adjustable-rate mortgage, as stated in the note.
Payment in full
A payment that pays off the total indebtedness of a mortgage loan at or before maturity. Also called payoff.
Payoff
Payment in full of a loan at or before maturity.
Per-adjustment cap
For an adjustable-rate mortgage, a restriction on the amount that the payment or interest rate can change at any one adjustment period, as specified in the mortgage note.
Periodic conversion option
An option that allows a borrower to convert an adjustable-rate mortgage to a fixed-rate loan in the early years of the loan at any scheduled interest rate change date. Compare with monthly conversion option.
PITI (Principal, Interest, Taxes, Insurance)
The components that are commonly included in a monthly mortgage payment.
Planned unit development (PUD)
A real estate project in which individuals hold title to a residential lot and home while the common facilities are owned and maintained by a homeowners' association.
Point
An amount equal to 1 percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan.
Pool
A group of mortgages backing an issue of mortgage-backed securities; also the act of swapping a group of loans with similar characteristics for mortgage-backed securities.
Portfolio
Mortgages or mortgage-backed securities held by an institution for investment purposes.
Portfolio lender
A lender that makes loans with its own funds and keeps them on the company's books rather than selling them on the secondary market.
Portfolio mortgage
A whole mortgage or a participation pool mortgage that Fannie Mae purchases to hold in our mortgage portfolio.
Predatory lending
A deceptive or abusive lending practice in which unsophisticated or vulnerable borrowers are steered to loans they can't afford or to higher-priced loans than they would qualify for based on their credit history.
Preforeclosure sale
A transaction in which the borrower is allowed to satisfy his debt by selling a property for less than the amount owed in order to avoid a foreclosure.
Premium price
An above-par price for a mortgage or mortgage security.
Prepaid expenses
Amounts paid by the buyer to reimburse the seller for taxes, insurance, and assessments already paid for periods extending beyond the closing date.
Prepaid interest
Interest paid by borrowers before it is due - typically interest paid at closing for the period prior to the first monthly payment.
Prepayment penalty
A charge that may be imposed in the early years of a mortgage if a borrower repays the mortgage in full or pays large sums to reduce the unpaid balance.
Prepayment risk
The risk that homeowners will refinance their mortgages when interest rates are low, thereby returning principal to holders of mortgage-backed securities at a time when investment yields are also low.
Prequalification
A preliminary assessment by a lender of the amount it will loan to a potential homebuyer.
Primary wage earner
The borrower whose income represents the majority of the income used in qualifying for a mortgage.
Principal
The amount borrowed, or the outstanding balance of the loan.
Principal and interest (P&I)
The portion of a borrower's monthly mortgage payment that represents repayment of the amount borrowed plus interest charges.
Private mortgage insurance (PMI)
Insurance for conventional mortgage loans that protects lenders against loss in the event of default by the borrower. Also called mortgage insurance.
PUD (Planned Unit Development)
A real estate project in which individuals hold title to a residential lot and home while the common facilities are owned and maintained by a homeowners' association.
Purchase agreement
A document that details the purchase price and conditions of a transaction.
Purchase-money mortgage
A mortgage that enables the borrower to acquire a property, rather than refinance or pay for home improvements.
Qualifying ratio
A calculation used in determining the mortgage amount that a borrower qualifies for; most commonly used is a comparison of the borrower's total monthly debt payments to his or her monthly income.
Rate cap
For an adjustable-rate mortgage, the maximum rate that may be charged; the cap may be set by the loan documents or by law.
Rate lock
An agreement in which a lender "locks in" an interest rate with a prospective borrower for a set period of time prior to closing.
Rate-reduction pricing
A pricing option available for some adjustable-rate mortgages wherein the commitment yield is reduced in exchange for an increase in the commitment margin.
Real estate owned (REO)
Property acquired by Fannie Mae through foreclosure or acceptance of a deed-in-lieu.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring lenders to provide home mortgage borrowers with information about transaction-related costs prior to settlement. RESPA also outlaws kickbacks in the real estate business.
Real property
Land and anything permanently affixed thereto -- including buildings, fences, trees, minerals, and air space above the land.
Recording
The filing of a lien or other legal document in the appropriate public record.
Recording fee
A fee charged for conveying the sale of a piece of property into the public record.
Recourse
The obligation of the issuer or seller of a note to cover losses the buyer incurs as a result of a default on the note.
Redemption period
The period in which a borrower can reclaim foreclosed property by making full payment of the mortgage debt under a legally enforceable right of redemption in some states.
Redlining
The illegal practice of refusing to offer credit, insurance, or other services in areas of a community that are considered a poor investment risk, particularly if such areas are selected on the basis of residents' race or ethnicity.
Refinance transaction
The repayment of debt from the proceeds of a new loan using the same property as security.
Regulation Z
A Federal Reserve Board regulation that prescribes uniform methods of computing the cost of credit and disclosing credit terms, pursuant to the provisions of the Truth-in-Lending Act.
Relative
The borrower's spouse, child, or other dependent or any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship.
Release from liability
A formal agreement absolving a borrower from responsibility for a mortgage because another party has agreed to assume the mortgage obligations
Remaining term
The original term of the loan less the number of payments that have been applied.
Reserves
A borrower's verified liquid assets after making the down payment and paying closing costs.
Residential mortgage credit report
A detailed account of a borrower's credit, employment, and residence history (as well as public records information).
Reverse mortgage
A mortgage that enables older homeowners to withdraw the cash equity from their home; it is not due and payable as long as the borrower occupies the property, and is usually repaid in a lump sum (from the proceeds of the sale of the house or settlement of the borrower's estate).
Revolving debt
A credit arrangement in which the customer receives goods or services on an ongoing basis prior to payment; repayment is usually at regular intervals but not for a specified amount or term (for example, credit card debt).
RHS mortgage
A mortgage guaranteed by the Rural Housing Service under its guaranteed rural housing loan program.
Rural Housing Service (RHS)
A unit of the U.S. Department of Agriculture that guarantees mortgages secured by residential properties in rural areas; formerly known as the Farmers Home Administration.
Sale-leaseback
A transaction in which the buyer leases back the property to the seller for a specified period of time.
Sales comparison approach
An appraisal method in which a property's market value is based on an analysis of sales and listings of comparable properties in the same neighborhood or in similar neighborhoods.
Seasoned loan
A mortgage that has been closed for more than one year.
Secondary market investor
A financial institution, government-sponsored enterprise, or government agency that buys mortgages and MBS and either holds them in portfolio or sells them to other investors in the capital market.
Secondary mortgage market
The market in which mortgages and mortgage securities are bought and sold.
Second mortgage
A mortgage that has a lien position subordinate to the first mortgage.
Secured loan
Any loan backed by collateral.
Securitization
The process of converting mortgages into mortgage-backed securities that can be easily traded in an established securities market.
Seller take-back
An agreement in which the seller provides financing for a home purchase.
Serious delinquency
A single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months or more past due.
Servicer
A firm that performs servicing functions, including collecting mortgage payments and managing borrowers' escrow accounts.
Servicing
The tasks a lender performs to protect the mortgage investment, including the collection of mortgage payments, escrow administration, and delinquency management.
Settlement
1) The process of completing a loan transaction at which time the mortgage documents are signed and recorded, funds are disbursed, and the property is transferred to the buyer. Also called closing.
2) The completion of a trade by the simultaneous transfer of securities and funding.
Settlement date
The date that the sale of a mortgage-backed security is settled and funds are paid or transferred.
Settlement statement
A report detailing closing costs that must be given to each buyer and seller under the Real Estate Settlement Procedures Act.
Single-family mortgage
A mortgage on a dwelling that is designed to house one to four families.
Soft second loan
A second mortgage whose repayment is forgiven or deferred until resale of the property.
Soldiers' and Sailors' Civil Relief Act
A federal law that restricts enforcement of civilian debts against military personnel whose ability to pay has been severely hampered by entry into military service.
Special flood hazard area
A federally designated land area that has been identified as having a significant likelihood of flooding; properties in such an area require flood insurance.
Special forbearance
A relief provision that provides for a period of reduced or suspended payments, followed by a period of larger than normal payments, to enable the borrower to cure a delinquency.
Subordinate financing
Any mortgage or other lien with lower priority than the first mortgage.
Subprime loan
A higher-cost loan made to a borrower with a higher-than-average risk profile.
Survey
A precise measurement of a piece of property by a licensed surveyor, showing the location and dimensions of any improvements.
Sweat equity
A borrower's contribution to the down payment in the form of labor or services rather than cash. Also called work equity.
Table funding
The funding of a mortgage loan at closing by a source other than the originator.
Taxes and insurance (T&I)
Funds collected as part of the borrower's monthly payment and held in escrow for payment of the borrower's property taxes and insurance premiums.
Temporary interest-rate buydown
A temporary reduction in the effective interest rate that a borrower pays during the early years of a loan, made possible by the seller or another party depositing a lump-sum of money into a buydown account that is used to reduce the borrower's payments.
Term
The repayment period, as stated in the mortgage note.
Third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to Fannie Mae.
Third-party sale
A foreclosure sale at which the successful purchaser of the property is someone other than the lender or the borrower or their representatives.
Thrift institution
A depository institution that accepts savings account deposits and invests most of the proceeds in mortgages. Savings banks and savings and loan associations are examples of thrifts.
Title
The legal document conferring ownership of real property.
Title insurance
A type of insurance that protects against losses arising from defects in the title not listed in the title report or abstract.
Title search
A check of public title records to ascertain whether the seller is the legal owner and to identify any claims or liens against the property.
Tolerance
The percentage, or dollar amount, by which lenders can overdeliver or underdeliver and still satisfy the terms of a mandatory commitment or MBS trade.
Trade equity
Real estate or assets given to the seller as part of the down payment for a property.
Transfer tax
An assessment by state or local authorities when a piece of property changes hands.
Trans-Union
One of three major, nationwide credit-reporting bureaus.
Treasury index
An index that is used to determine interest rate changes for certain ARM plans; it is based on the results of auctions by the U.S. Treasury of treasury bills and treasury securities.
Treasury-indexed ARM
An ARM for which the interest rate is based on the weekly average yield of U.S. Treasury securities adjusted to a constant maturity.
Truth-in-Lending Act
Federal legislation that requires lenders to provide borrowers with specific information on the cost of obtaining credit.
Two- to four-family property
A residential property that provides living space for up to four households although ownership is evidenced by a single deed; a loan secured by such a property is considered to be a single-family mortgage.
Underwriting
In mortgage lending, the process of approving or denying a loan application and setting loan terms based on an evaluation of the borrower's creditworthiness and ability to repay the loan and the value of the property securing the loan.
Underwriting documents
All the documentation used to support the lending decision for a mortgage -- such as the loan application and documents used to verify a borrower's employment, income, deposits, and credit history.
Uniform Standards of Professional Appraisal Practice
Appraisal standards established by professional appraisal organizations and accepted by the profession.
Unpaid principal balance (UPB)
The outstanding balance on a mortgage loan.
Unscheduled principal
Any amount collected from the borrower to reduce the principal balance of a loan before its due date.
Unsecured loan
Any loan that is not backed by collateral.
U.S. Department of Housing and Urban Development (HUD)
A federal agency that oversees the Federal Housing Administration (FHA) and numerous housing and community development programs.
VA-guaranteed loan
A mortgage that is guaranteed by the U.S. Department of Veterans Affairs.
Verification of deposit
A form sent to a depository to confirm the borrower's account balances and history.
Verification of employment
A form sent to the borrower's employer to confirm the borrower's employment history and salary.
Veterans Administration
A unit of the U.S. Department of Veterans Affairs that oversees the VA loan program.
Walk-through
A buyer's final inspection of the home to determine if conditions in the purchase agreement have been satisfied.
Yield
The return on an investment.
