On an ARM, determining how the interest rate and payment will change in response to specified future changes in market interest rates known as “scenarios”.
Scheduled mortgage payment
Under the terms of the mortgage contract, the amount the borrower is required to pay each period, including interest, principal, and mortgage insurance. Underpayment of the scheduled amount results in delinquency.
A subsequent mortgage on a property, which is subordinate to the first. If the borrower defaults the second mortgage lender has a second-priority claim against a property and gets paid only after the lender holding the first mortgage. Second mortgages are also often referred to as home equity loans.
Secure option ARM
An option ARM where the initial rate stays fixed for 5 years instead of one month.
Financial markets wherein mortgages and/or mortgage-backed securities are purchased and sold.
The property that will be pledged as collateral for a loan.
Instead of using information provided by an employer, these borrowers must document using income tax returns which, serves to complicate the loan process.
A contribution made to a borrower’s down payment or settlement costs by a home seller in lieu of a price reduction..
The provision of a mortgage by the seller of a house, often a second mortgage, as a condition of the sale.
The administration of loans from the time of disbursement until the loan is fully paid off. This entails collecting monthly payments from the borrower, documentation and maintenance of loan progress records, assuring taxes and insurance payments as well as pursuing delinquent accounts.
The party responsible for servicing a loan. This may or may not be the lender having originated it.
Servicing release premium
A payment made to the seller of a mortgage by the purchaser for the release of the servicing on the mortgage with no direct relevance to borrowers.
When a servicing agent relinquishes a contract to or is replaced by another.
See closing/closing costs
Shared appreciation mortgage
A mortgage where the borrower relinquishes a share in the future price appreciation in exchange for a lower interest rate and/or interest deferral.
A multi-lender web site type offering prospective borrowers the ability to shop multiple competing lenders.
An agreement whereby a mortgage borrower in distress is granted permission by the lender to sell the house and remit the proceeds to the lender as an alternative to foreclosure, or a deed in lieu of foreclosure.
A deceptive practice whereby a secondary mortgage is placed on an asset that is not disclosed to the lender of the original loan, which may be used to provide preferential (subsidized) terms to qualified home buyers.
Simple interest mortgage
A mortgage wherein the interest is calculated daily based on the balance at the time of the last payment. The daily interest charge within the month remains constant with interest not charged on the interest charges of prior days.
Simple interest biweekly mortgage
A biweekly mortgage wherein the biweekly payment is applied to the balance every two weeks rather than held in an account as with an ordinary biweekly.
Single file mortgage insurance
A type of mortgage insurance whereby the lender pays the premium and prices it as part of the interest rate.
A documentation requirement wherein the borrower discloses assets but the assets are not verified by the lender.
A documentation requirement wherein the lender verifies the income source but not the amount.
Standard Payment Calculation
The methodology used to determine the monthly-required payment for repaying the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
A situation whereby a mortgage borrower with the capacity to make payments on the mortgage elects not to, due to negative equity; the loan balance is substantially greater than the value of the house.
Refinancing that permits the omission of some standard risk control measures making it more rapid and less costly.
A second mortgage on the property, which is not paid off when a new loan is taken out. The second mortgage lender must allow the subordination of the second to the new first mortgage.
The directive of a second mortgage lender allowing for a borrower to refinance the first mortgage while leaving the second in place.
A borrower who is considered a higher-than-normal credit risk relegated to borrowing only from subprime lenders specializing in dealing with borrowers who have poor credit. These borrowers are penalized with higher interest rates than prime borrowers. Not all borrowers who deal with subprime lenders are in fact subprime borrowers; were they to properly shop the market, some could obtain loans from mainstream lenders.
A lender specializing in lending to subprime borrowers who are often identified by having a FICO credit score below 640.
The market for lenders and borrowers of subprime credit. The network includes subprime lenders, mortgage brokers, warehouse lenders and investment bankers who make the delivery of loans to subprime borrowers possible.
A measurement of land prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, with the location and dimensions of any buildings.
See Bridge loan