zoning variance
A one-time modification of existing zoning law.
Mortgage
Terms
Adjustable-rate
mortgage (ARM):
A mortgage with an interest rate and payment that change periodically
over the life of the loan based on changes in a specified index.
Callable debt:
A debt security whose issuer has the right to redeem the security at
a specified price on or after a specified date, but prior to its stated
final maturity.
Charge-off:
The portion of principal and interest due on a loan that is written off
when deemed to be uncollectible.
Common stock:
A security that represents ownership in a company but gives no legal
claim to a definite dividend or to a return of capital.
Conventional mortgage:
A mortgage loan that is not insured or guaranteed by the federal government.
Credit enhancement:
A method to reduce credit risk by requiring collateral, letters of credit,
mortgage insurance, corporate guarantees, or other agreements to provide
an entity with some assurance that it will be recompensed to some degree
in the event of a financial loss.
Credit loss ratio:
The ratio of credit-related losses to the dollar amount of MBS outstanding
and total mortgages owned by the corporation.
Credit-related expenses:
The sum of foreclosed property expenses plus the provision for losses.
Credit-related losses:
The sum of foreclosed property expenses plus charge-offs.
Credit scoring:
A process that uses recorded information about individuals and their
loan requests to assess - in a quantifiable, objective, and consistent
manner - their future performance regarding debt repayment.
Debt security:
A security in which the issuing company generally agrees to repay the
principal (typically, the original amount borrowed) and make interest
payments according to an agreed schedule.
Default:
The failure of a borrower to comply with the terms of a note or the provisions
of a mortgage.
Delinquency:
A mortgage loan on which a payment has not been made by the due date.
Derivative:
A financial instrument which derives its value from an underlying security
or notional amount.
Duration:
The weighted-average life of the present value of all future cash flows,
both principal and interest, of a security. It is used as a measure of
the sensitivity of the value of a security to changes in interest rates.
Earnings per share (EPS):
The net earnings of a corporation divided by the average number of shares
of its common stock outstanding during a period. A common method of expressing
a corporation's profitability.
Fixed-rate mortgage:
A mortgage loan in which the interest rate does not change during the
entire term of the loan.
Forbearance:
The lender's postponement of legal action when a borrower is delinquent.
It is usually granted when a borrower makes satisfactory arrangements
to bring the overdue mortgage payments up to date.
Foreclosure:
The legal process by which property that is mortgaged as security for
a loan may be sold to pay a defaulting borrower's loan.
Global Debt Facility:
A debt issuance facility through which U.S. dollar and foreign currency
debt securities may be offered to investors worldwide with the feature
of clearing and settlement through a variety of clearing systems.
Guaranty fee:
Compensation paid by a lender to Fannie Mae for the guarantee of timely
payments of principal and interest to MBS security holders.
Interest rate swap:
A transaction between two parties in which each agrees to exchange payments
tied to different interest rates or indices for a specified period of
time, generally based on a notional principal amount.
Intermediate-term mortgage:
A mortgage loan with a contractual maturity at time of purchase equal
to or less than 20 years.
Lender option commitments:
An agreement giving a lender the option to deliver loans or securities
by a certain date at agreed-upon terms.
Loan servicing:
The tasks a lender performs to protect a mortgage investment, including
collecting monthly payments from borrowers and dealing with delinquencies.
Loan-to-value (LTV) ratio:
The relationship between the dollar amount of a borrower's mortgage loan
and the value of the property.
Loss mitigation:
Activities designed to reduce either the likelihood of the corporation
suffering financial losses on a loan or the final dollar value of those
losses in the event of a borrower default.
Mandatory delivery commitment:
An agreement that a lender will deliver loans or securities by a certain
date at agreed-upon terms.
Medium-term notes:
Unsecured general obligations of Fannie Mae with maturities of one day
or more and with principal and interest payable in U.S. dollars.
Modification:
Any change to the original terms of a mortgage.
Mortgage:
A legal document that pledges property to a lender as security for the
repayment of the loan. The term also is used to refer to the loan itself.
Mortgage-Backed Security (MBS):
A Fannie Mae security that represents an undivided interest in a group
of mortgages. Principal and interest payments from the individual mortgage
loans are grouped and paid out to the MBS holders.
Multifamily housing:
A building with more than four residential rental units.
Nonperforming asset:
An asset such as a mortgage that is not currently accruing interest or
on which interest is not being paid.
Notional principal amount:
The hypothetical amount on which interest rate swap payments are based.
The notional principal amount in an interest rate swap generally is not
paid or received by either party.
Preferred stock:
Stock that takes priority over common stock with regard to dividends
and liquidation rights. Preferred stockholders typically have no voting
rights.
Preforeclosure sale:
A procedure in which the borrower is allowed to sell his or her property
for an amount less than what is owed on it to avoid a foreclosure. This
sale fully satisfies the borrower's debt.
Real Estate Mortgage Investment Conduit
(REMIC):
A security that represents a beneficial interest in a trust having multiple
classes of securities. The securities of each class entitle investors
to cash flows structured differently from the payments on the underlying
mortgages.
Repayment plan:
An agreement between a lender and a borrower who is delinquent on his
or her mortgage payments, in which the borrower agrees to make additional
payments to pay down past due amounts while still making regularly scheduled
payments.
Return on average common equity:
Net income available to common stockholders, as a percentage of average
common stockholders' equity.
Reverse mortgage:
A financial tool which provides seniors with funds from the equity in
their homes. Generally, no payments are made on a reverse mortgage until
the borrower moves or the property is sold. The final repayment obligation
is designed to not exceed the proceeds from the sale of the home.
Risk-based capital:
The amount of capital necessary to absorb losses throughout a hypothetical
ten-year period marked by severely adverse circumstances.
Secondary mortgage market:
The market in which residential mortgages or mortgage securities are
bought and sold.
Security:
A financial instrument showing ownership of equity (such as common stock),
indebtedness (such as a debt security), a group of mortgages (such as
MBS), or potential ownership (such as an option).
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.
Stockholders' equity:
The sum of proceeds from the issuance of stock and retained earnings
less amounts paid to repurchase common shares.
Stripped MBS (SMBS):
Securities created by "stripping" or separating the principal
and interest payments from the underlying pool of mortgages into two
classes of securities, with each receiving a different proportion of
the principal and interest payments.
Transfer agent:
A bank or trust company charged with keeping a record of a company's
stockholders and canceling and issuing certificates as shares are bought
and sold.
Underwriting:
The process of evaluating a loan application to determine the risk involved
for the lender. It involves an analysis of the borrower's ability and
willingness to repay the debt and the value of the property.
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)
Annual
Percentage Rate (APR): calculated by 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.
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.
Appraisal: a
document that gives an estimate of a property's
fair market value; an appraisal is generally required
by a lender before loan approval to ensure that
the mortgage loan amount is not more than the value
of the property.
Appraiser: a
qualified individual who uses his or her experience
and knowledge to prepare the appraisal estimate.
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.
Assessor: a
government official who is responsible for determining
the value of a property for the purpose of taxation.
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.
B
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.
Bankruptcy: a
federal law Whereby a person's assets are turned
over to a trustee and used to pay off outstanding
debts; this usually occurs when someone owes more
than they have the ability to repay.
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.
Building
code: based on agreed upon safety standards
within a specific area, a building code is a regulation
that determines the design, construction, and materials
used in building.
Budget: a
detailed record of all income earned and spent during
a specific period of time.
C
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.
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.
Certificate
of title: a document provided by a qualified
source (such as a title company) that shows the
property legally belongs to the current owner;
before the title is transferred at closing, it
should be clear and free of all liens or
other claims.
Closing: also
known as settlement, this is 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: 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.
Commission: an
amount, usually a percentage of the property sales
price, that is collected by a real estate professional
as a fee for negotiating the transaction..
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.
Conventional
loan: a private sector loan, one that is not
guaranteed or insured by the U.S. government.
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.
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
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.
D
Debt-to-income
ratio: a comparison of gross income to
housing and non-housing expenses; With the FHA,
the-monthly mortgage payment should be no more
than 29% of monthly gross income (before taxes)
and the mortgage payment combined with non-housing
debts should not exceed 41% of income.
Deed: the
document that transfers ownership of a property.
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.
Delinquency: failure
of a borrower to make timely mortgage payments under
a loan agreement.
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.
E
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.
EEM: Energy
Efficient Mortgage; an FHA program that helps homebuyers
save money on utility bills by enabling them to
finance the cost of adding energy efficiency features
to a new or existing home as part of the home purchase
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.
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.
F
Fair
Housing Act: a law that prohibits discrimination
in all facets of the homebuying 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: Federal National Mortgage Association
(FNMA); a federally-chartered enterprise owned
by private stockholders that purchases residential
mortgages and converts them into securities for
sale to investors; by purchasing mortgages, Fannie
Mae supplies funds that lenders may loan to potential
homebuyers.
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.
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.
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.
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
(FHLM); a federally-chartered corporation that
purchases residential mortgages, securitizes them,
and sells them to investors; this provides lenders
With funds for new homebuyers.
G
Ginnie
Mae: Government National Mortgage Association
(GNMA); a government-owned corporation overseen
by the U.S. Department of Housing and Urban Development,
Ginnie Mae pools FHA-insured and VA-guaranteed
loans to back securities for private investment;
as With Fannie Mae and Freddie Mac, the investment
income provides funding that may then be lent to
eligible borrowers by lenders.
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.
H
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.
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.
Homeowner's
insurance: an insurance policy that .combines
protection against damage to a dwelling and Is
contents with protection against claims of negligence
)r inappropriate action that result in someone's
injury or )property damage.
Housing
counseling agency- provides counseling and
assistance to individuals on a variety of issues,
including loan default, fair housing, and homebuying.
HUD: the
U.S. Department of Housing and Urban Development;
established in 1965, HUD works to create a decent
home and suitable living environment for all Americans;
it does this by addressing housing needs, improving
and developing American communities, and enforcing
fair housing laws.
HUD1
Statement: also known as the "settlement
sheet," 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.
I
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.
Interest: a
fee charged for the use of money .
Interest
rate: the amount of interest charged on a monthly
loan payment; usually expressed as a percentage.
Insurance: protection
against a specific loss over a period of time that
is secured by the payment of a regularly scheduled
premium.
J
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.
L
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.
Lien: a
legal claim against property that must be satisfied
When the property is sold
Loan: money borrowed that is usually repaid
with interest.
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-to-value
(LTV) ratio.- a percentage calculated by dividing
the amount borrowed by the price or appraised value
of the home to be purchased; the higher the LTV,
the less cash a borrower is required to pay as
down payment.
Lock-in: since
interest rates can change frequently, many lenders
offer an interest rate lock-in that guarantees a
specific interest rate if the loan is closed within
a specific time.
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
M
Margin: an
amount the lender adds to an index to determine
the interest rate on an adjustable rate mortgage.
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 like
:Fannie Mae or Freddie Mac.
Mortgage
broker: a firm that originates and processes
loans for a number of lenders.
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.
Mortgage
insurance premium (MIP): a monthly payment
-usually part of the mortgage payment - paid by
a borrower for mortgage insurance.
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.
O
Offer: indication
by a potential buyer of a willingness to purchase
a home at a specific price; generally put forth
in writing.
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.
P
Partial
Claim: a loss mitigation option offered
by the FHA that allows a borrower, with help from
a lender, to get an interest-free loan from HUD
to bring their mortgage payments up to date.
PITI: Principal,
Interest, Taxes, and Insurance - the four elements
of a monthly mortgage payment; payments of principal
and interest go directly towards repaying the loan
while the portion that covers taxes and insurance
(homeowner's and mortgage, if applicable) goes into
an escrow account to cover the fees when they are
due.
PMI: Private
Mortgage Insurance; privately-owned companies that
offer standard and special affordable mortgage insurance
programs for qualified borrowers with down payments
of less than 20% of a purchase price.
Pre-approve: lender
commits to lend to a potential borrower; commitment
remains as long as the borrower still meets the
qualification requirements at the time of purchase.
Pre-foreclosure
sale: allows a defaulting borrower to
sell the mortgaged property to satisfy the loan
and avoid foreclosure.
Pre-qualify: a
lender informally determines the maximum amount
an individual is eligible to borrow.
Premium: an
amount paid on a regular schedule by a policyholder
that maintains insurance coverage.
Prepayment: payment
of the mortgage loan before the scheduled due date;
may be Subject to a prepayment penalty.
Principal: the
amount borrowed from a lender; doesn't include interest
or additional fees.
R
Radon: a
radioactive gas found in some homes that, if occurring
in strong enough concentrations, can cause health
problems.
Real
estate agent: an individual who is licensed
to negotiate and arrange real estate sales; works
for a real estate broker.
REALTOR: a
real estate agent or broker who is a member of the
NATIONAL ASSOCIATION OF REALTORS, and its local
and state associations.
Refinancing: paying
off one loan by obtaining another; refinancing is
generally done to secure better loan terms (like
a lower interest rate).
Rehabilitation
mortgage: a mortgage that covers the costs
of rehabilitating (repairing or Improving) a property;
some rehabilitation mortgages - like the FHA's
203(k) - allow a borrower to roll the costs of
rehabilitation and home purchase into one mortgage
loan.
RESPA: Real
Estate Settlement Procedures Act; a law protecting
consumers from abuses during the residential real
estate purchase and loan process by requiring lenders
to disclose all settlement costs, practices, and
relationships
S
Settlement: another
name for closing .
Special
Forbearance: a loss mitigation option
where the lender arranges a revised repayment plan
for the borrower that may include a temporary reduction
or suspension of monthly loan payments.
Subordinate: to
place in a rank of lesser importance or to make
one claim secondary to another.
Survey: a
property diagram that indicates legal boundaries,
easements, encroachments, rights of way, improvement
locations, etc.
Sweat
equity: using labor to build or improve a property
as part of the down payment
T
Title
1: an FHA-insured loan that allows a borrower
to make non-luxury improvements (like renovations
or repairs) to their home; Title I loans less than
$7,500 don't require a property lien.
Title
insurance: insurance that protects the
lender against any claims that arise from arguments
about ownership of the property; also available
for homebuyers.
Title
search: a check of public records to be
sure that the seller is the recognized owner of
the real estate and that there are no unsettled
liens or other claims against the property.
Truth-in-Lending: a
federal law obligating a lender to give fuII written
disclosure of aII fees, terms, and conditions associated
with the loan initial period and then adjusts to
another rate that lasts for the term of the loan.
Underwriting: the
process of analyzing a loan application to determine
the amount of risk involved in making the loan;
it includes a review of the potential borrower's
credit history and a judgment of the property value.
VA: Department
of Veterans Affairs: a federal agency which guarantees
loans made to veterans; similar to mortgage insurance,
a loan guarantee protects lenders against loss that
may result from a borrower default. |
