Interest rate in excess of maximum legal limits.
Adjustable-rate mortgage (ARM)
Mortgage loan with a variable interest rate that periodically adjusts. (Note rate = index + margin).
Secondary mortgage market player, buys a broad range of mortgage loans originated in local markets. Quasigovernmental agency that issues common stock.
Secondary mortgage market player, similar to Fannie Mae, buys primarily conventional loans. Doesn't guarantee payment of Freddie Mac mortgages.
Mortgage loan with payments that include both interest and principal which amortizes (kills off) the principal balance over time. (i.e. A fully amortized loan would pay off the loan with the last regular payment. A partially amortized loan would be only partially paid off and would require a "balloon" payment to fully retire the debt).
Secondary mortgage market player that is entirely a governmental agency, Department of Housing and Urban Development (HUD)
When the interest rate of a mortgage loan has been reduced through the payment of discount points or other fees paid at closing.
Loan-to-value (LTV) ratio
The ratio of loan amount to market value. Indicates the percentage of the purchase price that is borrowed.
Mortgage loan insured by the Federal Housing Administration (FHA) and originated through approved local lenders.
Transaction in which the seller immediately leases back the property from the buyer.
Mortgage loan where the collateral includes both the real property as well as personal property such as appliances and window treatments.
Secondary Mortgage Market
Market place where mortgage loans originated in local markets are pooled and sold to investors. (i.e. Fannie Mae, Freddie Mac and Ginnie Mae).
A mortgage loan originated at the time of purchase. Not a refinance. (Term typically applies to a note and mortgage from the buyer to the seller as part of the purchase price).
AKA term or interest only loan. Mortgage loan where periodic payments are "interest only." The original principal balance is not reduced or repaid by regular payments, but added to the final interest payment.
Reverse-annuity Mortgage (RAM)
Mortgage loan made in periodic payments or draws from the lender to the borrower. Accumulating draws are not to exceed an agreed to LTV. (Allows borrowers with substantial equity in their home to create a periodic cash flow to be repaid in one lump sum upon sale or owners death).
Mortgage loan for qualified veterans originated by local lenders but insured through the Veterans Administration. Key feature is zero money down.
Primary Mortgage Market
Marketplace where mortgage loans are originated by local lenders like banks and mortgage brokers.
AKA Swing loan or Bridge loan. Mortgage loan where borrowers with an existing home and mortgage loan can borrow additional funds to purchase the next home prior to selling the current residence.
Private Mortgage Insurance
AKA- PMI Insurance policy that protects the lender in case of borrower default underwritten by private carriers, not the government. (Often associated with insured conventional loans when down payments are less than 20%.)
Final payment in a partially amortized loan. Borrowers would make smaller periodic payments with one final "balloon payment" that pays off the debt.
Regulation Z (reg Z) Truth-in-Lending Act
Federal disclosure law requiring lenders to disclose the true and effective cost of borrowing by using a standardized APR (annual percentage rate) which is a recalculation of the note rate to include other lender revenue such as points, finders fees etc. (Allows borrowers to more easily comparison shop).
Mortgage loan covering multiple parcels that anticipates the sale of individual parcels. (Enables developers to have one "master loan" over the entire development and sell individual lots without refinancing the entire loan).
Mortgage loans not insured by the Federal government, but meeting basic credit and risk criteria. (Includes conventional and insured conventional loans).