Mortgage Glossary

 

Although the terms contained herein may have other meanings, they are presented here in the context of the mortgage lending industry, specifically as relates to FHA insured mortgages.

1003
See “Uniform Residential Loan Application”

Adjustable Rate Mortgage (ARM)
A mortgage that permits the lender to adjust its interest rate once or more on the basis of movement in a specified index.

Affiliated Business Arrangement
When one settlement service provider refers a borrower to an affiliate for a settlement service, such as when a real estate broker refers a mortgage broker affiliate. When an ABA exists, RESPA mandates a special ABA disclosure.

ALTA
American Land Title Association. An association of title professionals. ALTA establishes standard procedures and uniform title insurance policy forms.

Alternate Documentation
A documentation alternative that allows lenders to obtain documentation related to a borrower's income, employment, etc. directly from the borrower rather than through a 3rd party.

Amenity
Something not essential, but adds value, can be natural (stream, mature trees, etc.) or man made (pool, tennis court, etc.)

Amortization
A gradual reduction of the mortgage debt through periodic payments made through the term of the mortgage loan.

Annual Percentage Rate (APR)
A percentage that reflects the total cost of the mortgage loan expressed as an annual rate. The APR will nearly always be higher than the note rate because it considers the cost of obtaining the loan such as the origination fee, discount points, etc. along with the interest rate.

Applicant
The person(s) applying for the loan.

Appraisal
A written report containing a description of the subject property along with an estimate of the fair market value of a property. FHA appraisals must be prepared by an appraiser approved by HUD.

Appraiser
Provides a written report containing both a detailed and accurate description of the property in addition to an adequately supported estimate of fair market value. FHA appraisers must be approved by HUD, and must also check the property for compliance with HUD MPS/MPR requirements.

Appreciation
An increase in the value over time.

Attached Unit
Usually refers to living spaces that are attached to one another, as opposed to detached. For instance: An attached duplex is two living spaces sharing a common wall. A detached duplex is two separate structures on the same parcel of land.

Automated Clearing House (ACH)
Program mandated by FHA for lenders to electronically remit periodic mortgage insurance premiums to HUD.

Automated Underwriting (AU)
The process of an electronic risk assessment of a loan file.

Automated Underwriting System (AUS)
The platform by which loans are electronically assessed or underwritten. FHA has approved both Fannie Mae's Desktop Underwriter TM and Freddie Mac's Loan Prospector TM for underwriting FHA mortgages. Lenders may also use other AU systems as long as the lenders accepts liability for compliance with FHA guidelines.

Back Ratio
See “Debt Ratio”

Balloon Mortgage
A mortgage with payments that amortize over a certain term, but requires a lump sum payment of the remaining balance at the end of an earlier specified term. As of this writing, there are no approved FHA balloon mortgage programs.

Basis Point
1/100 of 1.0% expressed as 0.01%

Bridge Loan
A loan that is secured by the borrower's current home, which is usually for sale, in order to provide funds to purchase and close a new home before the first loan is sold.

Broker (Mortgage Broker)
A person or entity who originates and packages mortgage loans on behalf of mortgage applicants, then 'shops' among various lenders for programs, prices and terns to meet the needs of the particular borrower in the placement of the mortgage loan. Brokers must be approved by FHA in order to originate FHA mortgage loans.

Buydown (Temporary)
A fixed rate mortgage loan with payments that are temporarily bought down in the first few years of the mortgage.

CAIVRS
Credit Alert Interactive Voice Response System. HUD system in which lenders check all prospective borrowers via their social security number. Verifies whether or not the applicant has any past due federal indebtedness.

Caps
Limits on increases in payments or interest rates for adjustable rate mortgages (ARM). Specifics are dependent upon the loan program.

Cash-Out refinance
A refinance loan in which the lender disburses cash to the borrower for purposes over and above those allowed by a no cash-out refinance.

Certificate of Reasonable Value (CRV)
VA's estimate of value or appraisal. Under certain circumstances, FHA will accept VA CRV in lieu of an FHA appraisal.

Charge-off
An action taken by a creditor when they have determined that the cost of collecting debt is prohibitive, or exceeds the amount that they expect to collect. Considered derogatory credit.

Circular Letters
Letters of policy and instruction issued by HUD Homeownership Centers in reference to FHA loans. Typical deal with issues specific to local areas, and do not see national policy.

Closed End Debt
Debt which is characterized by installment payments of a fixed amount for a specified period of time.

Closing Costs
Monies paid by the borrower to pay for various settlement services in order to effectuate the closing of a mortgage loan. Costs are reflected on the 700,800,1100,1200 & 1300 series on the HUD-1 Settlement Statement, and are subject to strict limitations for FHA insured mortgages.

Co-Mortgagor
Any additional person to be obligated on the mortgage loan, may be an occupant or not. As opposed to a co-signed, co-mortgagor signs all loan documents and also hold title.

Comparable
The term used to describe the properties an appraiser uses to compare the subject property when determining market value. Properties should be similar in market appeal. Often referred to as “comps.”

Comprehensive Valuation Package (CVP)
The FHA appraisal package. Introduces by FHA in 1999, the CVP includes the URAR, the FHA VC Sheet (HUD form 92564-VC), and the Homebuyer Summary (HUD form 92564-HS). The CVP is to be completed by the appraiser and submitted to the leader.

Computerized Home Underwriting Management System (CHUMS)
FHA's electronic single family origination system that takes the application process from case number through endorsement.

Conditional Commitment (928005b)
FHA's statement of appraised value. The conditional commitment, or 928005b is an commitment, issued by either a HUD office of an approved direct endorsement underwriter, that FHA will insure said property subject to the conditions on the form and subject to an acceptable borrower.

Condominium
A legal form of fee simple ownership in a real estate project in which each unit owner has a title to a unit in a building and an undivided interest in the common areas of the project.

Conventional Mortgage
As opposed to an FHA loan, conventional implies a mortgage that is not insured or guaranteed by the federal government.

Convey
To transfer.

Correspondent Lender
In reference to FHA, a lender who is approved by FHA to originate FHA loans, but cannot underwrite or service said loans. Correspondents must have a direct endorsement lender to act as a sponsor to underwrite and fund FHA loans.

Co-Sign
To sign on the promissory note, but not the deed of trust or mortgage. A co-signer is obligated on the debt, but does not have ownership of the property.

Cost Approach
A method of valuation used by appraisers to determine what it would cost to replace the subject property.

Covenants, Conditions and Restrictions (CC&Rs)
Typically recorded, they are a set of specifications that dictate what is and is not acceptable in a particular subdivision and/or a condominium project.

Credit Life Insurance
Insurance obtained by a borrower to pay off their mortgage in the event of death and/or disability. Not to be confused with mortgage insurance which protects the lender.

Credit Score
A numerical value that summarizes a borrower's credit history.

Credit Watch
In relatiuonship to FHA, Credit Watch is an FHA program that 'watches' the deliquency statuts of all approved lenders, and places sanctions on those with higher thatn normal delinquencies.

Debarment
In relationship to FHA loans, debarment is the exclusion of a person or company from doing business with HUD. Parties who are on the debarment list cannot typically buy or sell properties using the fHA program.

Debt to Income (DTI) Ratio
All monthly obligations, including housing compared to gross inclome. Expressed as a percentage.

Deed-in-lieu
A deed voluntarily given by the property owner or mortgagor to the lender or mortgages in order to void foreclosure proceedings.

Deed of trust
A legal document used to encumber land as security for a deal. Mortgage.

Default
Non-compliance with the Note or Deed of Trust.

Deficiency Judgement
Occurs when a lender forecloses on a property, experiences a financial loss and sues to recover the deficiency from the borrower.

Delinquency
When payments are not made in accordance with the Promissory Note.

Department of Veteran's Affairs (VA)
A department of the federal government that includes a progra, to guaranty lenders against loss for loans to qualified veterans.

Depreciation
Loss of value over time.

Desktop Originator®
Fannie Mae's automated underwriting software for brokers.

Desktop Underwriter®
Fannie Mae's automated underwriting software.

Detached
A term used to describe a structure that is not attached to another. For instance, a garage may be attached or detached from a single family residence.

Direct Endorsement (DE)
A program established by HUD in the early 1980's which allows an approved lender to directly underwrite and approve FHA loans for endorsement on behalf of HUD. Previously, FHA loans were not endorsed unless they were underwritten and approved by a HUD employee.

Direct Endorsement Underwriter
An underwriter who is authorized by HUD to sign FHA loans for endorsement on behalf of an approved lender. See 'Direct Endorsement', previous.

Discount
The amount by which the sales price of a note is less that its face value. The purpose of a discount is to adjust the yield upward in lieu of interest.

Discount Points
Discount points, discounts, points: Monies paid in advance to adjust the yield in lieu of interest. One discount point is equal to one percent of the loan amount.

Down Payment
The difference between the sales price and the loan amount.

Duplex
A two-unit property on one legal description. Units may be attached or detached.

Equal Credit Opportunity Act
A law that prohibits discrimination in the extension of credit. For more information, go to the internet at
www.ftc.gov/credit.

Earnest Money
A term used to reference the actual monetary deposit made when the real estate purchase contract is signed.

Easement
An interest in land owned by another that entitles its holder to a specific limited use, such as utility easements, or crossing the property for other purposes.

Encroachment
Something that trespasses on the property rights of another.

Encumbrance
A lien or liability on the property rights of another.

Endorsement
Can be either:

a. In reference to title insurance, additional coverage (purchased for a fee) to a standard title policy; or

b. In reference to an FHA insured mortgage, endorsement is the process by which HUD agrees to pay the lender any losses incurred when a borrower defaults, and the FHA mortgage is foreclosed. Lenders receive a “Certificate of Endorsement” from HUD. Also called 'insured.”

Energy Efficient Mortgage (EEM)
An FHA program wherein a borrower can refinance a part of the FHA loan 100 percent of the cost of certain energy efficient improvements.

Equity
The difference between the market value of the subject property and the amount of the mortgage and other liens.

Escrow
Can be either:

  1. A trust account established to hold funds allocated for the payment of real estate taxes, hazard or mortgage insurance premiums;or
  2. An account of funds held by a third party, ie. A title company, to ensure repairs or completion of a property after closing; or
  3. A procedure where a third party handles legal documents and funds on behalf of a seller and buyer.

Escrow Agent
3rd party that properly handles legal documetns and funds on behalf of a buyer and seller.

Fair Credit Reporting Act (FCRA)
Law passed to promote the fairness, accuracy, and privacy of information in the files of credit reporting agencies. See
www.ftc.gov/credit for more info.

Fair Isaac and Company (FICO)
The company that developed the FICO credit scoring model.

Fannie Mae
Formerly the Federal National mortgage Association. Stockholder owned, congressionally chartered government sponsored, investor of mortgage loans.

Federal Emergency Management Agency (FEMA)
Formerly independent agency that became part of the new Department of Homeland Security in March 2003, tasked with responding to, planning for, recovering from and mitigating against disasters.

Federal Housing Administration (FHA)
A division of Housing and Urban Development (HUD). Among other things, it insures mortgages made by private lenders.

Federal Home Loan Mortgage Corporation (FHLMC)
See “Freddie Mac.”

Federal National Mortgage Association (FNMA)
See “Fannie Mae.”

Fee Simple
The greatest interest in real estate that it is possible to own.

FICO Scores
A type of credit score created by Fair Isaac and Company. Often used in mortgage lending.

Final Application
The application that reflects changes after all verifications and updates are completed.

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
Passed in 1989, it modified federal laws governing thrift and bank regulation. Title XI of the Act includes real estate appraisal reform amendments.

Firm Commitment
An approval on a borrower for an FHA insured mortgage, issued on HUD form 92900-A, pt. 3

First Mortgage
A mortgage that is the primary lien or in first place against real estate.

Fixture
Personal property that becomes real property by virtue of being permanently attached to real property.

Flood Disaster Protection Act (FDPA)
A federal law created to provide low cost flood insurance for property owners in flood areas, and to ensure that properties in flood areas have adequate flood insurance.

Foreclosure
Legal process whereby the lender takes back the property, usually a result of nonpayment or other default.

Four-plex
A 4-unit property on one legal description. Considered residential real estate.

Fraud
Intentional deception for gain.

Freddie Mac
Formerly the Federal Home Loan Mortgage Corporation. A government sponsored entity. Stockholder owned, congressionally chartered investor of home mortgages.

Front Qualifying Ratio
See 'housing ratio'

Fully Indexed Rate
In reference to an adjustable rate mortgage, the value of the index rate plus the margin.

Garnishment
Involuntary deduction from payroll to pay a debt. A judgment or court order is usually required.

General Service Agency (GSA)
In reference to FHA loans, the General Services Administration publishes a “List of Parties Excluded from Federal Procurement and Nonprocurement Programs” list. Parties on this list are not eligible for buying or selling homes with FHA insurance.

Gift Letter
A written document that includes explicit verbiage that is required by most lenders and/or investors when gift funds are used to purchase a home.

Ginnie Mae
Ginnie Mae guarantees government loans, which allows lenders to obtain a better price for their mortgage loans in the secondary market.

Good Faith Estimate (GFE)
A written estimate of the costs incurred in the acquisition of a mortgage loan. Provided to the borrower by the lender or broker within three days of application. Required by the Real Estate Settlement and Procedures Act (RESPA).

Government National Mortgage Association (GNMA)
See Ginnie Mae

Government Sponsored Enterprise (GSE)
HUD regulates two housing government-sponsored enterprises, Fannie Mae and Freddie Mac (the GSEs) which were chartered by Congress to create a secondary market for residential mortgage loans. The are considered “government-sponsored” because Congress authorized their creation and established their public purposes.

Graduated Payment Mortgage (GPM)
A mortgage that has its initial monthly payments set at an amount lower than required for full amortization of the loan. Payments are increased by a specified percentage each year during the graduated payment period. At the end of the period, payments are in an amount to fully amortize the (increased) balance over the remaining term.

FHA GPM mortgages are originated under the 245 Section of the act.

Gross Income
Income before deductions.

Grossing Up
The process of increasing non-taxable income for the purpose od calculating qualifying rations, thereby providing a more equitable comparison to gross taxable income..

Home Energy Rating System (HERS)
HERS rating is an evaluation of the energy efficiency of a home, compared to a computer-simulated reference house of identical size and shape. Ratings are to verify that efficiency meets minimum requirements of the Model Energy Code (MEC).

Home Equity Conversion Mortgage (HECM)
Reverse mortgage. Used for elderly people with substantial equity in a home, whereas the lender encumbers the property and disburses the proceeds by making monthly payments to the owner.

Home Equity Line of Credit (HELOC)
An open ended mortgage loan, typically in a subordinate position, that allows the borrowers to draw the loan proceeds incrementally at his own discretion, up to the full amount of the note.

Home Mortgage Disclosure Act (HMDA)
Law that requires mortgage lenders to report information to the federal government about loan applications for purchases and home improvement loans.

Homeownership Center (HOC)
One of 4 HUD regional offices that provide support and assistance to lenders in the states within their jurisdiction. HUD HOCs are located in Philadelphia, Atlanta, Denver and Santa Ana.

Homeowner's Association (HOA)
A legal entity, whose by-laws are recorded, usually formed for the purpose of maintaining common areas for condominium units or planned unit developments (PUDs).

Housing and Urban Development (HUD)
A division of the federal government that was created to make decent, safe, and sanitary home and suitable living environment for every American.

Impounds
A trust account established to hold funds allocated for the payment of real estate property taxes, hazard, or mortgage insurance premiums.

Improvements
Anything added to raw land.

Index
A number derived from a formula used to characterize a set of data, which serves as an indicator for determining the interest rate changes on adjustable rate loans.

Index Rate
The value of the index at any given time.

In-file Report
A credit report accessed directly from one of the three credit repositories revealing credit data that is on file for an individual at any given time.

Installment Debt
Closed end loan. A debt wherein the proceeds are disbursed, and the indebtedness is amortized over a defined period.

Insured
In reference to FHA loans, insured is often used interchangeably with endorsed. As with FHA Title II mortgages, HUD insures the lender against potential foreclosure losses.

Interest Rate
The amount charged,expressed as a percentage, for the use of money.

Interim Financing
Short term loan, Usually less than one year.

Investment Property
Property that is owned with the intent of earning a profit. Rental property. Non-owner occupied property.

Investor
Can be either:

  1. a. A person who has purchased a property that will not be owner occupied; or
    b. The lender or entity that purchases the mortgage.

Jumbo
Used in reference to mortgages with loan amounts exceeding Fannie Mae and/or Freddie Mac maximum allowable loan limits.

Joint Tenancy
Where two or more persons hold real estate jointly for life, the survivors to take the interest of the one who dies.

Judgment
A decree of a court placing a lien or charge on the lands of a debtor resulting from the court's award of monies to a creditor.

Junior Lien
A mortgage lien that is subordinate to the prior, or primary lien.

LDP
Limited Denial Participation. A list of parties who have been sanctioned, and are denied participation in HUD programs.

Leasehold Property
A form of title vesting in real estate where the title holder does not actually own the property, but rather leases it for a long term.

Lender
The entity actually funding the loan on the subject property. In FHA terms, lender often refers to the originating party, whether the originator is a broker or a lender.

Lien
A hold, or claims allowed a creditor upon the lands of a debtor. Examples are mortgage liens, judgment liens, mechanic's liens.

Loan Origination System (LOS)
One of various software systems used to originate and process mortgage loans.

Loan Prospector® (LP)
Freddie Mac's automated underwriting system.

Loan-to-value (LTV)
The relationship between the loan amount divided by the lesser of the appraised value or sales price.

Long Term Debt
Installment debt wherein the remaining payments exceed a specified number of months, usually ten, if payments are made as scheduled.

Manufactured Housing
A unit constructed at a factory on a steel chassis, then transported to a permanent site where it is attached to a permanent foundation. The steel chassis remains as part of of the structural support.

Margin
The amount, expressed as a percentage that is added in an index value to create the mortgage interest rate for an adjustable rate mortgage. Often represents the investor's profit.

Market Approach
A method of valuation used by an appraiser that relies upon a comparison of subject property to other similar recently sold properties.

Market Value
The best estimate of what a property would sell for in a reasonable amount of time in a normal market given an arms-length transaction.

Master Certificate of Reasonable Value (MCRV)
Master appraisal issued by VA. Often accepted in lieu of an FHA appraisal for FHA insured mortgages.

Mechanic's Lien
A lien filed by contractors, laborers etc., against a piece of real estate upon which work has been performed or materials provided.

Metes & Bounds
A description of land by courses and distances, as opposed to a lot number and subdivision name.

Metropolitan Statistical Area (MSA)
The federal Office of Management and Budget (OMB) defines metropolitan areas for purposes of collecting, tabulating and publishing federal data. Metropolitan statistical areas consist of one or more counties.

Minimum property requirements (MPR)
Minimum requirements that all homes insured by FHA must meet, with emphasis on health, safety and marketability.

Minimum property standards (MPS)
Basic standards that all homes insured by FHA must comply with, with emphasis with emphasis on health, safety and marketability.

Modular Home
A factory built home that is transported to and assembled at the site on a permanent foundation.

Mortgage
A security instrument used to encumber land as security for a debt. The term mortgage is also used collectively to mean all of the documents and papers that encumber land as security for a debt.

Mortgage Backed Security (MBS)
Mortgage-backed securities are debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property.

Mortgage Credit Analysis Worksheet (MCAW)
HUD form 92900-WS, for refinances, and HUD form 92900-PUR, for purchases. FHA's underwriting worksheet.

Mortgage Insurance (MI)
A form of insurance that insures the lender against default. MI often refers to private mortgage insurance for conventional loans as opposed to FHA;s MIP.

Mortgage Insurance Certificate (MIC)
The certificate of insurance or endorsement issued from HUD to the lender after an FHA loan is closed, The MIC is the actual declaration of insurance.

Mortgage Insurance Premium (MIP)
The premium paid for insurance to insure the lender against potential losses from default. The term MIP is typically used to describe the FHA mortgage insurance premium, as opposed to private mortgage insurance for conventional loans.

Mortgagee
Mortgage lender.

Mortgagee Letter (ML)
Letters of instruction to lenders that assign FHA policies and procedures on a national basis.

Mortgagor
The mortgage borrower.

Negative Amortization
When scheduled payments are insufficient to fully amortize the loan over the remaining term of the loan. Shortages are added to the loan balance resulting in an increase to the principal balance of the mortgage. Can occur with several of FHA's GPM programs.

Net Cash Flow
In reference to income property, the difference between the monthly operating income and the monthly housing expense of said property. Can be a positive or a negative number, and is used as income or a debt for qualifying purposes.

No Cash-Out Refinance
A refinance for the purpose of reducing the interest rate and/or payment of the first mortgage loan. With FHA, can also include a seasoned second and other costs.

Non-conforming
A mortgage loan that does not conform with the guidelines of Fannie Mae and/or Freddie Mac.

Non-Owner Occupied (NOO)
A property occupied by someone other than the borrower, usually a tenant. Also referred to as a rental property or investment property.

Non-Supervised Lender
In reference to FHA, a category of lender approval that is able to originate, underwrite and service FHA loans. As opposed to supervised, a non-supervised lender is a mortgage banker, and not a supervised financial institution. Non-supervised lenders may act as sponsors for correspondent lenders.

Note
The legal contract evidencing the borrower's promise to pay the lender as well as the terms of the loan. Also known as the promissory note.

Notice of Default (NOD)
The document required to be sent to the borrower informing them of their rights and responsibilities upon the occasion of their loan entering default status. Default status occurs when a borrower has not met the terms of the note and/or trust deed.

Notice of Return (NOR)
The notice sent by HUD to the lender when the lender's request for mortgage insurance case binder is returned to the lender due to incompleteness or a deficiency in the loan package.

Open End Credit
A debt which allows for the addition of principal within certain limits. Payments fluctuate in accordance with the change in principal balance.

Overage
The amount earned on a rate that is above par.

Owner Occupied (OO)
When the owner uses the property as his primary residence. Owner occupancy sometimes includes occupants of secondary residences.

Owner's Policy
Policy of title insurance typically paid by the seller of the property, insuring the owner against loss by reason of defects, liens and encumbrances or lack of marketability of the title. Does not insure against exceptions listed on policy.

Par
When the face value of the mortgage equals its selling price, and there are no discount points nor yield differentials.

Par Pricing
Pricing a loan such that the borrower does not pay discount points and the lender doesn't earn overage.

Payment Shock
When a new housing payment materially increases from the current housing payment.

Permanent Financing
Financing that is expected to be in place for more than a year.

Personal Property
Furniture, fixtures and equipment that is not attached to real property.

Principal and Interest (PI)
Refers to the monthly principal and interest payment.

Piggy Back
A second mortgage closed in conjunction with a first mortgage.

Planned Unit Development (PUD)
Real estate project in which each unit owner has title to a residential lot and building and a nonexclusive easement on the common areas of the project.

Power of Attorney
A legal document allowing one person to act on behalf of another.

Prepaid Finance Charges (PFC)
As defined by the Truth in Lending Act, any finance charge paid separately before or at closing, or withheld from proceeds. Prepaid Finance Charges are excluded from the amount financed on the Truth-In-Lending Disclosure Statement, and included in the calculations of the Annual Percentage Rate (APR). There are sometimes disagreements between lenders regarding the interpretation of what costs are, and are not finance charges.

Preliminary Report (PR)
Also preliminary title report. A commitment from a title company for title insurance. Preliminary report details all liens, easements, defects, etc., recorded against a legally described parcel of improved or unimproved real property.

Premium Pricing
Pricing a loan above the par rate in order to secure additional funds for either the borrower or the lender.

Prepaids
Can be either:
a. As opposed to closing costs, prepaids are part of the total costs paid by the borrower to effect the closing of a mortgage loan that includes the 900 and the 1000 series on the HUD-1 Settlement Statement; or

b. Monies paid by the applicant in advance to start the mortgage loan process. Funds can be for credit checks, appraisal, application fees, lock fees, title searches, etc.

Prepayment Penalty
A clause in a note that requires a borrower to pay additional monies if a loan is paid off before a given time period.

Primary Residence
The property that a borrower resides in at least 6 months each year. Each applicant can have only one primary residence. If in doubt as to which home is the primary residence, use the address reported in IRS tax returns.

Principal, Interest, Taxes and Insurance (PITI)
Expression of the entire total housing expense including payment for first mortgages and secondary financing; all insurances including hazard, flood and mortgage insurances; and homeowner association dues, if applicable.

Private Mortgage Insurance (PMI)
Mortgage insurance provided by a private agency as opposed to government mortgage insurance.

Processing (Loan Processing)
Some or all of the document gathering and processing of a mortgage loan package.

Porate
To divide in proportionate shares.

Qualify
The process used to determine if a borrower and the subject properly meet lender and/or investor underwriting standards.

Qualifying Ratios
The percentage of housing expense to gross income, and/or the total indebtedness to gross income used by lenders and insurers to determine if a borrower meets underwriting standards.

Quit Claim Deed
A deed used to transfer title by way of terminating, or 'quitting' the current interest of the person/entity transferring title.

Rate and Term Refinance
Often used interchangeably with 'no cash out' refinance. Refinance for the purpose of reducing the rate and/or the term of the first mortgage loan.

Ratio
The relationship between two similar magnitudes with respect to the number of times the first contains the second. In mortgage lending it is often used to mean the qualifying ratios.

Real Estate Purchase Contract (REPC)
The Utah approved purchase contract for residential real estate.

Real Estate Settlement and Procedures Act (RESPA)
A law enacted in 1974 provided consumers with a better understanding of the home purchase and the settlement process to assist in reducing settlement costs.

Real Property
Land and anything that is permanently attached thereto.

Realtor®
The term REALTOR® is a registered collective membership mark that indentifies a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics.

Refinance
A new mortgage loan on a property already owned by the borrowers, often used to pay off one or more outstanding liens.

Regulation B
The regulatory requirement that implements and enforces the Equal Credit Opportunity Act (ECOA).

Regulation Z
The regulatory requirement that implements and enforces the Truth in Lending Act (TILA)

Regulation X
The regulatory requirement that implements and enforces the Real Estate Settlement Procedures Act (RESPA).

Rescission
To cancel.

Residential
One to four family, owner occupied, second home and non-owner occupied.

Residential Mortgage Credit Report (RMCR)
An updated mortgage credit report. When a credit reporting agency accesses, merges and updates information from the three national credit repositories along with updating employment, addresses and public records.

Reverse Mortgage.
See Home Equity Conversion Mortgage

Revolving Debt
Debt that is open ended. Monthly payments fluctuate as a percentage of the outstanding principal balance.

Right of Way
The recorded right which one has to pass across lands of another.

Rolling Lates
A term used to describe a condition wherein a Borrower misses a payment yet continues to make monthly payments. Therefore, while their credit report may indicate 5x30, they may have only missed one payment.

Rural Housing Services (RHS)
The Rural Housing Service helps rural communities and individuals by providing loans and grants and lender guarantees for housing and community facilities.

Seasoned Mortgage
A mortgage that had been recorded for a specific amount of time, typically one full year.

Seasoning
a. Ownership seasoning:When the mortgagor has owned the property for a specified amount of time, typically one full year.

b. Mortgage seasoning: See Seasoned Mortgage, above.

Second Home
An owner occupied, single family residence used exclusively by a borrower for some portion of the year.

Second Mortgage
A mortgage that has a second in lien priority, generally because it is a recorded second.

Secondary Market
Broadly used to describe lenders, investors and agencies that purchase mortgage loans after the loan is closed.

Security Instrument
The legal document that is recorded and evidences the lender's interest. Usually a deed of trust or mortgage.

Servicing
Managing the loan after closing, including, but not limited to collection of payments, monitoring escrows, etc.

Servicing Release Premium (SRP)
A fee, paid to brokers or other lenders for payment of the servicing rights for a mortgage.

Settlement Statements
An itemization of costs incurred prepared at closing. The Real Estate Settlement & Procedures Act mandates that all federally related transactions use form HUD-1.

Short Term Debt
Installment debt wherein the loan will be paid in full in less than a specified number of months, usually ten, if payments are made as scheduled.

Single Family Insurance System (SFIS)
HUD's single family insurance computerized system that monitors all information that HUD needs to manage FHA loans on a national basis.

Single Family Residence (SFR)
Real estate with one residential living unit. Can include detached units, condominiums or PUDs.

Sponsor
In relation to FHA, a sponsor is a lender who is authorized to underwrite and fund FHA loans for an approved correspondent lender.

Straw Borrower
A person(s) posing as a borrower for another party who is really purchasing the property in an effort to circumvent investor requirements. A form of fraud.

Streamlined Refinance
A type of FHA refinance that requires little or no qualifying, and sometimes no appraisal.

Subject Property
A term used to reference the property for which the loan is being acquired.

Supervised Lender
In reference to FHA, a category of lender approval that is able to originate, underwrite, and service FHA loans. As opposed to non-supervised, a supervised lender is a bank or financial institution who is under oversight of the FDIC, the Federal Reserve, or the NCUA. Supervised lenders may act as sponsors correspondent lenders.

Subordinate Lien
Any lien against real property that has less, or subordinate priority to the first mortgage. Junior lien.

Sub-prime
A mortgage loan that is a high risk to the lender.

Sweat Equity
Contribution to the construction or rehabilitation of a property in the form of labor services rather than cash.

Table Funding
The process in which a broker originated a mortgage loan and the lender funds the loan at the closing table (often subject to recording.)

The FHA Connection
An interactive system on the Internet that gives approved lenders real time access to FHA's single family origination systems.

Third Party Originations (TPO)
A process by which a lender uses the services of a broker, or other lender for the purposes of partially or completely originating, processing, packaging, underwriting, closing, and/or funding a mortgage loan. A correspondent lender for FHA is a third party originator.

Time Share
A minimal interest in a property which allows for usage of said property for a given time period each year. A time share may not be used as security for a conventional or FHA loan.

Title Insurance
Insurance in which the title company agrees to pay up to a specified amount of money in case of losses incurred for defects, clouds, or claims against title of a legally described parcel of property.

Title Search
The process of searching public records to determine liens, encumbrances, and ownership facts regarding a specified parcel of real property.

Total Loan to Value (TLTV)
A combination of all liens recorded against real estate as compared to the lesser of the sales price or appraised value.

Town home
A structure that includes a living space taking up two or more stories. Often attached in a row of two or more units. Town home is a description rather than a form of ownership.

Trade Equity
Giving an item of value to a real property seller in exchange for all or some of the down payment.

Treasury Index
An index that is used to determine interest rate changes for certain adjustable rate mortgage plans, including FHA mortgages. It is based on the results of actions that the US Treasury holds for its treasury bills and securities or is derived from the US Treasury's daily yield curve.

Tri-Merged Report
A credit report that accesses all three of the national credit repositories and merges the information into one report. Information is presented as is currently on file and does not benefit from updated information.

Triplex
A structure or property with three separate residential living spaces. Units may be attached or detached.

Truth In Lending Act (TILA or TIL)
A law that was implemented as part of the Consumer Protection Act in 1968 and revised in 1980. The purpose was to assure meaningful disclosure of credit terms so that consumers could compare costs, terms and conditions of obtaining credit.

Twin Home
Two attached residential units with a common wall wherein each unit sits on a different legal description and is sold and owned separately.

Underwriter
A person who determines whether any given loan meets eligibility requirements and the guidelines of the investor and/or insurer; and analyzes the overall risk of the borrower and the property for the lender.

Uniform Residential Appraisal Report (URAR)
Fannie Mae form 1004. Standardized report form required for most residential appraisals for first mortgage loans, including FHA loans.

Uniform Residential Loan Application (URLA)
Fannie Mae form number 1003; Freddie Mac Form number 65; FHA form number HUD-92900. This is a four page standardized form used to obtain information on borrowers applying for a residential home loan. It is used for Fannie Mae, Freddie Mac, FHA, VA and most other conventional loan applications. Most commonly called the '1003'.

Uniform Standards of Professional Appraisal Practice (USPAP)
Standards that have become recognized throughout the US as the generally accepted standards of Appraisal practice. These standards have been adopted by most local, state and federal agencies.

Upfront MIP (UFMIP)
A percentage of the loan amount collected up-front from each FHA insured loan. Monies are then used to insure the lender against potential losses due to default. As of this writing, most FHA loans require Upfront and Annual MIP.

Valuation Condition (VC)
FHA repair conditions required of the conditional commitment or appraisal. Items must be completed or escrowed before an FHA loan can be closed.

Verification of Deposit (VOD)
Form used to verify an applicant's funds at a depository institution. Fannie Mae Form 1006 is most commonly used.

Verification of Employment (VOE)
Form used to obtain verification of an applicant's current and previous employment directly from the employer. Fannie Mae Form 1005 is most commonly used.

Verification of Mortgage (VOM)
Form used to verify an applicant's credit history and balance on a mortgage loan directly from the lender.

Warranty Deed
An instrument used to transfer or convey title by way of warranting current ownership in the property being transferred.

Yield Spread Premium (YSP)
An amount paid to the broker for a first mortgage loan when the initial interest rate of the loan exceeds the investor's required yield.