A
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.
Abstract of Title: documents recording the ownership of property throughout time.
Acceleration: the right of the lender to demand payment on the outstanding balance of a loan.
Additional Principal Payment: money paid to the lender in addition to the established payment amount used directly against the loan principal to shorten the length of the loan.
Adjustable-Rate Mortgage (ARM): a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).
Adjustment Date: the actual date that the interest rate is changed for an ARM.
Adjustment Index: the published market index used to calculate the interest rate of an ARM at the time of origination or adjustment.
Adjustment Interval: the time between the interest rate change and the monthly payment for an ARM. The interval is usually every one, three or five years depending on the index.
Amortization: a payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest-only. The monthly amount is based on the schedule for the entire term or length of the loan.
Annual Percentage Rate (APR): a measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.
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.
Application Fee: a fee charged by lenders to process a loan application.
Appraisal: a document from a professional that gives an estimate of a property’s fair market value based on the sales of comparable homes in the area and the features of a property; 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.
Appraisal Fee: fee charged by an appraiser to estimate the market value of a property.
Appraised Value: an estimation of the current market value of a property.
Appraiser: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appreciation: an increase in property value.
As-is Condition: the purchase or sale of a property in its existing condition without repairs.
Assessed Value: the value that a public official has placed on any asset (used to determine taxes).
Assessments: the method of placing value on an asset for taxation purposes.
Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.
Assets: any item with measurable value.
Assumable Mortgage: when a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. An assumable mortgage can help you attract buyers if you sell your home.
Automated Underwriting: loan processing completed through a computer-based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer.
B
Back End Ratio (debt ratio): a ratio that compares the total of all monthly debt payments (mortgage, real estate taxes and insurance, car loans, and other consumer loans) to gross monthly income.
Balloon Loan or 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.
Balloon Payment: the final lump sum payment due at the end of a balloon mortgage.
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.
Biweekly Payment Mortgage: a mortgage paid twice a month instead of once a month, reducing the amount of interest to be paid on the loan.
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.
Bridge Loan: a short-term loan paid back relatively fast. Normally used until a long-term loan can be processed.
Broker: a licensed individual or firm that charges a fee to serve as the mediator between the buyer and seller. Mortgage brokers are individuals in the business of arranging funding or negotiating contracts for a client, but who does not loan the money. A real estate broker is someone who helps find a house.
Buy Down: the seller pays an amount to the lender so the lender provides a lower rate and lower payments many times for an ARM. The seller may increase the sales price to cover the cost of the buy down.
C
Cap: a limit, such as one placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease, either at each adjustment period or during the life of the mortgage. Payment caps do not limit the amount of interest the lender is earning, so they may cause negative amortization.
Capacity: The ability to make mortgage payments on time, dependant on assets and the amount of income each month after paying housing costs, debts and other obligations.
Capital Gain: the profit received based on the difference of the original purchase price and the total sale price.
Capital Improvements: property improvements that either will enhance the property value or will increase the useful life of the property.
Cash-Out Refinance: when a borrower refinances a mortgage at a higher principal amount to get additional money. Usually this occurs when the property has appreciated in value. For example, if a home has a current value of $100,000 and an outstanding mortgage of $60,000, the owner could refinance $80,000 and have additional $20,000 in ‘cash out’.
Cash Reserves: a cash amount sometimes required of the buyer to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
Chapter 7 Bankruptcy: a bankruptcy that requires assets be liquidated in exchange for the cancellation of debt.
Chapter 13 Bankruptcy: this type of bankruptcy sets a payment plan between the borrower and the creditor monitored by the court. The homeowner can keep the property, but must make payments according to the court’s terms within a 3 to 5 year period.
Charge-Off: the portion of principal and interest due on a loan that is written off when deemed to be uncollectible.
Clear Title: a property title that has no defects. Properties with clear titles are marketable for sale.
Closing: the final step in property purchase where the title is transferred from the seller to the buyer. Closing occurs at a meeting between the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property. Also known as settlement.
Closing Costs: fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes. A common estimate of a Buyer’s closing costs is 2 to 4 percent of the purchase price of the home. A common estimate for Seller’s closing costs is 3 to 9 percent.
Cloud On The Title: any condition which affects the clear title to real property.
Co-Borrower: an additional person that is responsible for loan repayment and is listed on the title.
Co-Signed Account: an account signed by someone in addition to the primary borrower, making both people responsible for the amount borrowed.
Co-Signer: a person that signs a credit application with another person, agreeing to be equally responsible for the repayment of the loan.
Collateral: security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral and can be taken away from the borrower if mortgage payments are not made.
Collection Account: an unpaid debt referred to a collection agency to collect on the bad debt. This type of account is reported to the credit bureau and will show on the borrower’s credit report.
Comparative Market Analysis (COMPS or CMA): a property evaluation that determines property value by comparing similar properties sold within the last year.
Compensating Factors: factors that show the ability to repay a loan based on less traditional criteria, such as employment, rent, and utility payment history.
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.
Conforming loan: conventional loans unwritten to the standards of Freddie Mac and/or Fannie Mae loans are referred to as conforming loans.
Construction Loan: a short-term loan, to finance the cost of building or renovating a new home. Some constructions loans are ‘one closing’ they modify to become a regular mortgage after the construction is complete.
Contingency: a clause in a purchase contract outlining conditions that must be fulfilled before the contract is executed. Both, buyer or seller may include contingencies in a contract, but both parties must accept the contingency.
Conventional Loan: a private sector loan, one that is not guaranteed or insured by the U.S. government.
Conversion Clause: a provision in some ARMs allowing it to change to a fixed-rate loan at some point during the term. Usually conversions are allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed rate mortgages. There may be additional cost for this clause.
Convertible ARM: an adjustable-rate mortgage that provides the borrower the ability to convert to a fixed-rate within a specified time.
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.
Cost of Funds Index (COFI): an index used to determine interest rate changes for some adjustable-rate mortgages.
Counter Offer: a rejection to all or part of a purchase offer that negotiates different terms to reach an acceptable sales contract.
Covenants: legally enforceable terms that govern the use of property. These terms are transferred with the property deed. Discriminatory covenants are illegal and unenforceable. Also known as a condition, restriction, deed restriction or restrictive covenant.
Credit: an agreement that a person will borrow money and repay it to the lender over time.
Credit Bureau: an agency that provides financial information and payment history to lenders about potential borrowers. Also known as a National Credit Repository. Equifax, Experian and Trans Union are the three major credit bureaus.
Credit Counseling: education on how to improve bad credit and how to avoid having more debt than can be repaid.
Creditor: the lender that provides a loan or credit.
Credit History: a record of an individual that lists all debts and the payment history for each. The report that is generated from the history is called a credit report. Lenders use this information to gauge a potential borrower’s ability to repay a loan.
Credit Repair Companies: Private, for-profit businesses that claim to offer consumers credit and debt repayment difficulties assistance with their credit problems and a bad credit report.
Credit Report: a report generated by the credit bureau that contains the borrower’s credit history for the past seven years. Lenders use this information to determine if a loan will be granted.
Credit Risk: a term used to describe the possibility of default on a loan by a borrower.
Credit Score: a score calculated by using a person’s credit report to determine the likelihood of a loan being repaid on time. Scores range from about 360 – 840: a lower score meaning a person is a higher risk, while a higher score means that there is less risk.
Credit Union: a non-profit financial institution federally regulated and owned by the members or people who use their services. Credit unions serve groups that hold a common interest and you have to become a member to use the available services.
Creditor: the lending institution providing a loan or credit.
Creditworthiness: the way a lender measures the ability of a person to qualify and repay a loan.
D
Debtor: The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.
Debt-to-Income Ratio: a comparison or ratio 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.
Debt Security: a security that represents a loan from an investor to an issuer. The issuer in turn agrees to pay interest in addition to the principal amount borrowed.
Deductible: the amount of cash payment that is made by the insured (the homeowner) to cover a portion of a damage or loss. Sometimes also called “out-of-pocket expenses.” For example, out of a total damage claim of $1,000, the homeowner might pay a $250 deductible toward the loss, while the insurance company pays $750 toward the loss. Typically, the higher the deductible, the lower the cost of the policy.
Deed: a document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description and the owner’s signature. Also known as the title.
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 does not allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.
Default: the inability to make timely monthly mortgage payments or otherwise comply with mortgage terms. A loan is considered in default when payment has not been paid after 60 to 90 days. Once in default the lender can exercise legal rights defined in the contract to begin foreclosure proceedings
Delinquency: failure of a borrower to make timely mortgage payments under a loan agreement. Generally after fifteen days a late fee may be assessed.
Deposit (Earnest Money): money put down by a potential buyer to show that they are 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. During the contingency period the money may be returned to the buyer if the contingencies are not met to the buyer’s satisfaction.
Depreciation: a decrease in the value or price of a property due to changes in market conditions, wear and tear on the property, or other factors.
Derivative: a contract between two or more parties where the security is dependent on the price of another investment.
Disclosures: the release of relevant information about a property that may influence the final sale, especially if it represents defects or problems. “Full disclosure” usually refers to the responsibility of the seller to voluntarily provide all known information about the property. Some disclosures may be required by law, such as the federal requirement to warn of potential lead-based paint hazards in pre-1978 housing. A seller found to have knowingly lied about a defect may face legal penalties.
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. In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give you a lower rate and lower payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index rate.
Down Payment: the portion of a home’s purchase price that is paid in cash and is not part of the mortgage loan. This amount varies based on the loan type, but is determined by taking the difference of the sale price and the actual mortgage loan amount. Mortgage insurance is required when a down payment less than 20 percent is made.
Document Recording: after closing on a loan, certain documents are filed and made public record. Discharges for the prior mortgage holder are filed first. Then the deed is filed with the new owner’s and mortgage company’s names.
Due on Sale Clause: a provision of a loan allowing the lender to demand full repayment of the loan if the property is sold.
E
Earnest Money (Deposit): money put down by a potential buyer to show that they are 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. During the contingency period the money may be returned to the buyer if the contingencies are not met to the buyer’s satisfaction.
Eminent Domain: when a government takes private property for public use. The owner receives payment for its fair market value. The property can then proceed to condemnation proceedings.
Encumbrance: anything that affects title to a property, such as loans, leases, easements, or restrictions.
Equal Credit Opportunity Act (ECOA): a federal law requiring lenders to make credit available equally without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
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: funds held in an account to be used by the lender to pay for home insurance and property taxes. The funds may also be held by a third party until contractual conditions are met and then paid out.
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.
Estate: the ownership interest of a person in real property. The sum total of all property, real and personal, owned by a person.
F
FICO Score: FICO is an abbreviation for Fair Isaac Corporation and refers to a person’s credit score based on credit history. Lenders and credit card companies use the number to decide if the person is likely to pay his or her bills. A credit score is evaluated using information from the three major credit bureaus and is usually between 300 and 850.
FSBO (For Sale by Owner): a home that is offered for sale by the owner without the benefit of a real estate professional.
Fair Credit Reporting Act: federal act to ensure that credit bureaus are fair and accurate protecting the individual’s privacy rights enacted in 1971 and revised in October 1997.
Fair Housing Act: a law that prohibits discrimination in all facets of the home buying 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. Also known as a Government Sponsored Enterprise (GSE).
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.
First Mortgage: the mortgage with first priority if the loan is not paid.
Fixed Expenses: payments that do not vary from month to month.
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.
Float: the act of allowing an interest rate and discount points to fluctuate with changes in the market.
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.
Forbearance: a lender may decide not to take legal action when a borrower is late in making a payment. Usually this occurs when a borrower sets up a plan that both sides agree will bring overdue mortgage payments up to date.
Foreclosure: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.
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. Also known as a Government Sponsored Enterprise (GSE).
Front End Ratio: a percentage comparing a borrower’s total monthly cost to buy a house (mortgage principal and interest, insurance, and real estate taxes) to monthly income before deductions.
G
GSE: abbreviation for government sponsored enterprises: a collection of financial services corporations formed by the United States Congress to reduce interest rates for farmers and homeowners. Examples include Fannie Mae and Freddie Mac.
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.
Gross Income: money earned before taxes and other deductions. Sometimes it may include net income from self-employment, rental property, alimony, child support, public assistance payments, and retirement benefits.
Guaranty Fee: payment to FannieMae from a lender for the assurance of timely principal and interest payments to MBS (Mortgage Backed Security) security holders.
H
HECM (Reverse Mortgage): the reverse mortgage is used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. A lending institution such as a mortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, commonly known as HECM.
Hazard Insurance: protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.
Home Equity Line of Credit: a mortgage loan, usually in second mortgage, allowing a borrower to obtain cash against the equity of a home, up to a predetermined amount.
Home Equity Loan: a loan backed by the value of a home (real estate). If the borrower defaults or does not pay the loan, the lender has some rights to the property. The borrower can usually claim a home equity loan as a tax deduction.
Home Inspection: an examination of the structure and mechanical systems to determine a home’s quality, soundness and safety; makes the potential homebuyer aware of any repairs that may be needed. The homebuyer generally pays inspection fees.
Home Warranty: offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner’s insurance; coverage extends over a specific time period and does not cover the home’s structure.
Homeowner’s Insurance: an insurance policy, also called hazard insurance, that combines protection against damage to a dwelling and its contents including fire, storms or other damages with protection against claims of negligence or inappropriate action that result in someone’s injury or property damage. Most lenders require homeowners insurance and may escrow the cost. Flood insurance is generally not included in standard policies and must be purchased separately.
Homeownership Education Classes: classes that stress the need to develop a strong credit history and offer information about how to get a mortgage approved, qualify for a loan, choose an affordable home, go through financing and closing processes, and avoid mortgage problems that cause people to lose their homes.
Homestead Credit: property tax credit program, offered by some state governments, that provides reductions in property taxes to eligible households.
Housing Counseling Agency: provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.
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.
HUD-1 Settlement Statement: also known as the “settlement sheet,” or “closing statement” it itemizes all closing costs; must be given to the borrower at or before closing. Items that appear on the statement include real estate commissions, loan fees, points, and escrow amounts.
I
Indemnification: to secure against any loss or damage, compensate or give security for reimbursement for loss or damage incurred. A homeowner should negotiate for inclusion of an indemnification provision in a contract with a general contractor or for a separate indemnity agreement protecting the homeowner from harm, loss or damage caused by actions or omissions of the general (and all sub) contractor.
Index: the measure of interest rate changes that the lender uses to decide how much the interest rate of an ARM will change over time. No one can be sure when an index rate will go up or down. If a lender bases interest rate adjustments on the average value of an index over time, your interest rate would not be as volatile. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.
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.
Inflation Coverage: endorsement to a homeowner’s policy that automatically adjusts the amount of insurance to compensate for inflationary rises in the home’s value. This type of coverage does not adjust for increases in the home’s value due to improvements.
Inquiry: a credit report request. Each time a credit application is completed or more credit is requested counts as an inquiry. A large number of inquiries on a credit report can sometimes make a credit score lower.
Interest: a fee charged for the use of borrowing money.
Interest Rate: the amount of interest charged on a monthly loan payment, expressed as a percentage.
Insurance: protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.
J
Joint Tenancy (with Rights of Survivorship): two or more owners share equal ownership and rights to the property. If a joint owner dies, his or her share of the property passes to the other owners, without probate. In joint tenancy, ownership of the property cannot be willed to someone who is not a joint owner.
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.
Jumbo Loan: or non-conforming loan, is a loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
K
L
Late Payment Charges: the penalty the homeowner must pay when a mortgage payment is made after the due date grace period.
Lease: a written agreement between a property owner and a tenant (resident) that stipulates the payment and conditions under which the tenant may occupy a home or apartment and states a specified period of time.
Lease Purchase (Lease Option): 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.
Lender: A term referring to an person or company that makes loans for real estate purchases. Sometimes referred to as a loan officer or lender.
Liabilities: a person’s financial obligations such as long-term / short-term debt, and other financial obligations to be paid.
Lien: a legal claim against property that must be satisfied when the property is sold. A claim of money against a property, wherein the value of the property is used as security in repayment of a debt. Examples include a mechanic’s lien, which might be for the unpaid cost of building supplies, or a tax lien for unpaid property taxes. A lien is a defect on the title and needs to be settled before transfer of ownership. A lien release is a written report of the settlement of a lien and is recorded in the public record as evidence of payment.
Lifetime Cap: a limit on the range interest rates can increase or decrease over the life of an adjustable-rate mortgage (ARM).
Line of Credit: an agreement by a financial institution such as a bank to extend credit up to a certain amount for a certain time to a specified borrower.
Liquid Asset: a cash asset or an asset that is easily converted into cash.
Listing Agreement: a contract between a seller and a real estate professional to market and sell a home. A listing agreement obligates the real estate professional (or his or her agent) to seek qualified buyers, report all purchase offers and help negotiate the highest possible price and most favorable terms for the property seller.
Loan: money borrowed that is usually repaid with interest.
Loan Acceleration: an acceleration clause in a loan document is a statement in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
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 Officer: a representative of a lending or mortgage company who is responsible for soliciting homebuyers, qualifying and processing of loans. They may also be called lender, loan representative, account executive or loan rep.
Loan Origination Fee: a charge by the lender to cover the administrative costs of making the mortgage. This charge is paid at the closing and varies with the lender and type of loan.
Loan Servicer: the company that collects monthly mortgage payments and disperses property taxes and insurance payments. Loan servicers also monitor nonperforming loans, contact delinquent borrowers, and notify insurers and investors of potential problems. Loan servicers may be the lender or a specialized company that just handles loan servicing under contract with the lender or the investor who owns the loan.
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.
Lock-in Period: the length of time that the lender has guaranteed a specific interest rate to a borrower.
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
definitions provided by hud.gov