Mortgage 101 / Mortgage Glossary
View our in-depth Mortgage Glossary below.
View our in-depth Mortgage Glossary below.
A federal law that deals with discrimination (Regulation “B”).
The difference between a property’s fair market value and the current indebtedness.
The reversion of property to the state if the owner dies intestate and without heirs.
Documents entrusted to a disinterested third party who assumes responsibility for disbursement of paperwork and funds.
That portion of a mortgagor’s monthly payment held by the lender to pay for real estate taxes, hazard insurance, and mortgage insurance, as the become due.
The ownership interest of an individual in real property which is measured by its potential duration; the degree, quantity, nature, and extent of interest that a party has in real property.
A written statement that bars the signer from making a claim that is inconsistent with that party’s prior statement. An estoppel certificate verifies the loan balance and is sometimes referred to as a “payoff letter.”
A provision in a mortgage or note in which the lender waives the right to a deficiency judgment against the borrower and the borrower is relived of personal liability to repay the loan.
To sign or to ratify a document.
1968 act (amended in 1974 and 1988) providing the HUD Secretary with fair housing enforcement and investigation responsibilities. 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.
The developer of a credit scoring system used by many credit-reporting agencies.
Primarily used to determine payment standard amounts for the Housing Choice Voucher program, to determine initial renewal rents for some expiring project-based Section 8 contracts, to determine initial rents for housing assistance payment contracts in the Moderate Rehabilitation Single Room Occupancy program, and to serve as a rent ceiling in the HOME rental assistance program.
The amount of money that would probably be paid for a property in a sale between a willing seller, who does not have to sell, and a willing buyer, who does not have to buy.
HUD regulates two housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac, which were chartered by Congress to create a secondary market for residential mortgage loans. They are considered “government-sponsored” because Congress authorized their creation and established their public purposes. ?
A government agency that guarantees mortgages secured by a residential properties located in rural areas if the borrower’s income is less that HUD’s local median income for the area.
A federal agency that provides assistance to victims of natural disasters. FEMA publishes Flood Insurance Rate Maps.
A private corporation authorized by Congress in 1970 to provide secondary mortgage market support for conventional mortgages originated by Savings & Loan Associations. Commonly known as “Freddie Mac”. Today, FHLMC is a publicly owned corporation.
Provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single-family, multifamily, and manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
A privately owned corporation created by Congress in 1938 to support the secondary mortgage market by purchasing and selling government underwritten residential mortgages. Today, FNMA purchases more conventional mortgages than FHA or VA and their stock is publicly traded. Commonly known as “Fannie Mae.”
Published by the Office of the Federal Register, National Archives and Records Administration (NARA), the Federal Register is the official daily publication for rules, proposed rules, and notices of federal agencies and organizations, as well as executive orders and other presidential documents.
A federal agency that monitors advertising practices and investigates and prosecutes unfair and deceptive trade practices.
The most complete ownership in land with indefinite duration, freely transferable, and inheritable.
A party in a position of trust and confidence for another.
An economic measurement of the cost of funds used as a base to determine the periodic interest rate adjustments for Adjustable Rate Mortgages. Common indexes include 1 year Treasury Bills, and both the 4th and 11 Federal Home Loan Bank District Cost of Funds.
A mortgage having priority over all other voluntary liens against certain property, as evidenced by recording; the earliest recorded mortgage remaining unpaid.
A mortgage in which the interest rate and monthly payments remain constant over the life of the loan.
A fee paid to an independent third party to determine whether or not property improvements are located in a flood zone.
Insurance subsidized by the federal government required for property improvements located in federally designated flood areas (A & V zones).
The act of refraining from taking legal action despite the fact that a mortgage is in default.
The legal procedure undertaken by a mortgagee for the purpose of having property sold and the proceeds applied to the payment of a defaulted debt.
HUD regulates two housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac, which were chartered by Congress to create a secondary market for residential mortgage loans. They are considered “government-sponsored” because Congress authorized their creation and established their public purposes. ?
The disbursement of funds to complete a transaction that occurs when a lender provides money to close a loan, or an investor provides funds to the lender to purchase a mortgage loan.
The process of identifying the coordinates of a location given its address.
A computer system for the input, storage, processing, applications development, retrieval, and maintenance of information about the points, lines, and areas that represent the streets and roads, rivers, railroads, geographic entities, and other features on the surface of the earth — information that previously was available only on paper maps.
Securities guaranteed by GNMA that are issued by mortgage bankers, commercial bankers, savings and loan associations, savings banks, and other institutions. The GNMA security holder is protected by the “full faith and credit of the U.S.” GNMA securities are backed by FHA, VA, or FMHA mortgages.
A government agency (Division of HUD) that administers the mortgage-backed securities program which channels new funds into residential financing through the sale of privately issued securities carrying a GNMA guarantee. Commonly known as “Ginnie Mae.”
HUD regulates two housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac, which were chartered by Congress to create a secondary market for residential mortgage loans. They are considered “government-sponsored” because Congress authorized their creation and established their public purposes. ?
A residential mortgage loan which has initial low monthly payments that increase gradually and then level off for the duration of the loan term. A GPM with an adjustable interest rate may result in initial negative amortization.
A generic term applicable to transfers of real property.
The party who receives a deed; the buyer.
The party who signs and gives a deed; the seller.
A contract whereby an insurer, for a premium, undertakes to compensate the insured for a loss on a specific property due to fire, windstorm, and other natural hazards.
A principle of value that focuses on the most profitable, legal use to which a property can be put.
A revolving line of credit against the equity in one’s home allowing the homeowner to borrow as needed, up to a predetermined maximum amount.
Provides formula grants to states and localities that communities use — often in partnership with local nonprofit groups — to fund a wide range of activities that build, buy, and/or rehabilitate affordable housing for rent or homeownership, or to provide direct rental assistance to low-income people.
Activities or programs designed to prevent the incidence of homelessness, including, but not limited to: (1) short-term subsidies to defray rent and utility arrearages for families that have received eviction or utility termination notices; (2) security deposits or first month’s rent to permit a homeless family to move into its own apartment; (3) mediation programs for landlord-tenant disputes; (4) legal services programs that enable representation of indigent tenants in eviction proceedings; (5) payments to prevent foreclosure on a home; and (6) other innovative programs and activities designed to prevent the incidence of homelessness.
A federal law requiring automatic cancellation of Private Mortgage Insurance (PMI) when the loan-to-value ratio is reduced to 78%.
Allows communities to reclaim vacant and blighted properties, increase homeownership, and promote economic revitalization by creating entire neighborhoods of new, single-family homes, called HOZs.
The Florida Constitution allows a tax exemption from assessed property value. The standard homestead tax exemption is $25,000 for all qualifying homestead and is deducted from the assessed value when calculating taxable value.
Established in 1965 to implement and administer government and urban development programs. The range of programs include, community planning, equal opportunity in housing and FHA mortgage loans.
State or local agencies responsible for financing and preserving low- and moderate-income housing within a state.
Provides housing assistance and supportive services to low-income people with HIV/AIDS and their families. HOPWA funds may also be used for health care and mental health services, chemical dependency treatment, nutritional services, case management, assistance with daily living, and other supportive services.
Indicates that only a portion of the OMB-defined core-based statistical area (CBSA) is in the area to which the income limits or FMRs apply. HUD is required by OMB to alter the name of metropolitan geographic entities it derives from the CBSAs when the geography is not the same as that established by OMB.
An information resource from HUD’s Office of Policy Development and Research offering a wide range of low- and no-cost content of interest to housing and community development researchers, government officials, academics, policymakers, and the American public. HUD USER is the primary source for federal government reports and information on housing policy and programs, building technology, economic development, urban planning, and other housing-related topics.
To give a thing as security without the necessity of relinquishing title or possession.
Determines the eligibility of applicants for HUD’s assisted housing programs. The major active assisted housing programs are the Public Housing program, the Section 8 Housing Assistance Payments program, Section 202 housing for the elderly, and Section 811 housing for persons with disabilities.
A financial institution that invests in mortgages typically carried in its own portfolio, such as savings & loan associations, commercial banks, life insurance companies, and pension and trust funds.
A state tax on certain items of intangible personal property such as mortgages.
Consideration paid for the use of money, usually expressed as an annual percentage.
The process whereby financial middlemen consolidate small savings accounts of individual depositors and invest those funds in large, stable, diversified projects; the opposite of disinter mediation.
A lien placed on property involuntarily as a result of a court action.
A loan amount above the industry-standard definition of conventional conforming loan limits. This standard is set by the two largest secondary market lenders, Fannie Mae and Freddie Mac. Loans above the conforming limits may be offered by seller servicers of these wholesale institutions, as well as Wall Street conduits who provide warehouse financing for mortgage lenders. As of 2006, the limit is $417,000, or $625,500 in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
Any lien subsequent to the claims of the holder of a prior senior mortgage as evidenced by the time and date of recording.
A penalty computed on the principal & interest which a borrower is required to pay for failure to pay a regular installment when due.
Paint or other surface coatings that contain lead equal to or exceeding 1.0 milligram per square centimeter or 0.5 percent by weight or 5,000 parts per million (ppm) by weight.
A property description sufficient to locate and identify the property. Legal descriptions are found on all loan applications, appraisals, real estate contracts, mortgages, surveys, and deeds.
The use of borrowed funds to finance the purchase of an asset; the use of another’s money to make more money.
A legal hold or claim of one person on the property of another as security for a debt or charge. A mortgage is a voluntary lien.
A concept followed in several states, including Florida, providing that a mortgage represents a lien on the property with the mortgagor retaining legal title.
A notice recorded in the official records of a county to indicate there is a pending suit affecting property in that jurisdiction; notice of intent to file foreclosure proceeding or to place a lien on the property.
A sum of money provided by a lender to be repaid with or without interest.
The process of formulating, executing, and delivering all documents required by a permanent investor, the disbursement of the mortgage funds, and providing for the protection of the investor’s security.
The assembling of a mortgage loan application and related documents for consideration for the purpose of making a mortgage loan.
Documentation delivered to a prospective lender for review and consideration for the purpose of making a mortgage loan.
The relationship between the mortgage amount and the appraised value (or sales price if lower) of the security property, and expressed as a percent.
A clause in an insurance policy listing the priority of claims in the even of damage to the insured property. A mortgagee is generally the party appearing in the clause being paid the amount owed under the mortgage before the owner is paid.
A tax incentive intended to increase the availability of low-income housing. The program provides an income tax credit to owners of newly constructed or substantially rehabilitated low-income rental housing projects. ?
A structure, transportable in one or more sections, which in the traveling mode is 8 body feet or more in width, or 40 body feet or more in length, or which when erected onsite is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained in the structure. This term includes all structures that meet the above requirements except the size requirements and with respect to which the manufacturer voluntarily files a certification pursuant to 24 CFR 3282.13 and complies with the construction and safety standards set forth in this 24 CFR 3280. The term does not include any self-propelled recreational vehicle. Calculations used to determine the number of square feet in a structure will include the total of square feet for each transportable section comprising the completed structure and will be based on the structure’s exterior dimensions measured at the largest horizontal projections when erected onsite. These dimensions will include all expandable rooms, cabinets, and other projections containing interior space, but do not include bay windows. Nothing in this definition should be interpreted to mean that a manufactured home necessarily meets the requirements of HUD’s Minimum Property Standards (HUD Handbook 4900.1) or that it is automatically eligible for financing under 12 U.S.C. 1709(b).
The number of basis points a lender adds to the index to determine the interest rate for an Adjustable Rate Mortgage.
A lien placed against property by unpaid workmen or material suppliers.
The most accurate method of land description; “metes” means measurements and “bounds” means boundaries.
A large population nucleus, together with adjacent communities that has a high degree of economic and social integration with that nucleus.
An area with at least one urbanized area of 50,000 or more population, plus adjacent territory that has a high degree of social and economic integration with the core, as measured by commuting ties.
An area with at least one urban cluster of at least 10,000 but less than 50,000 population, plus adjacent territory that has a high degree of social and economic integration with the core, as measured by commuting ties.
The measure used to express a real estate property tax rate; One-tenth of one percent.
A mortgage is the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender’s security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.
A pledge of real property given as security for the payment of a debt. Most mortgages mature in more than one year and are considered capital market instruments.
Bond-type instruments representing an undivided interest in a pool of mortgages.
A licensee who brings a borrower and lender together and receives a fee for services performed.
An insurance policy to protect a lender against loss caused by a borrower’s default.
Fees paid by FHA borrowers to obtain a loan (upfront and annual).
The aggregate of mortgage loans held by an investor, or serviced by a mortgage lender.
The party in a mortgage transaction who receives and holds the mortgage as security; the lender.
The party in a mortgage transaction who gives the mortgage as security for the debt; the borrower.
A situation where the loan balance increases over time, rather than decreases. Monthly mortgage payments may be less than required to pay both the interest and principal and the unpaid interest is added to the loan balance.
Provides emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. The Neighborhood Stabilization Program (NSP) provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes. The program is authorized under Title III of the Housing and Economic Recovery Act of 2008.
The value of all assets less total liabilities.
A county-based area designated by the federal Office of Management and Budget to provide an alternative to the county subdivision-based metropolitan areas in New England. ?
A conventional mortgage loan that does not comply with the underwriting criteria established by “Fannie Mae” and “Freddie Mac.”
A written promise to pay a sum of money at a stated interest rate during a specified term; sometimes referred to as a “mortgage note.