- 1003: Standard mortgage application form submitted by most brokers
- Accommodation mortgage: Taking a junior lien position on collateral with little or no equity remaining
- Amortize: Term of loan upon which payments are calculated
- Appraisal: Inspection performed on subject property to ascertain its value
- Approach to value: Appraisers may use three approaches to value – income approach, sales approach, cost approach
- Approach to value – cost: Appraiser will focus on land value + the cost to replace the improvement (structure)
- Approach to value – income: Appraiser’s focus is on the cash flow (rents vs. expenses) of the property
- Approach to value – sales: Appraiser’s focus is on recent sales within the same area of subject with similar use; this is the most common approach
- ARM: Adjustable Rate Mortgage
- Balloon: A mortgage with payments that do not fully amortize the loan; the balance is due in a lump sum payment
- Blanket: A mortgage which covers more than one property
- Borrower: Receiver of funds with intentions to repay the loan in full under agreed terms
- Broker: Brings parties together (borrowers/lenders) to negotiate loan terms for a commission
- Collateral: Any property pledged as security for a debt
- Credit score: Numbered rating system used to determine a prospective borrower’s credit worthiness; ranges 300-800
- Due diligence: Evaluation process used in determining levels of risk in a potential loan purchase of a loan portfolio
- Drive-by: 1-3 page appraisal report referring to outside (only) of collateral
- Environmental: A summary of government data used to determine collateral environmental risk factors
- Estimate of closing cost: Preliminary list of costs associated with obtaining a loan
- FMV: Fair Market Value
- Guarantor: A person or entity guaranteeing payment of a loan in the event of default of the borrower
- HOEPA: Home Owner’s Equality Protection Act- deals with predatory lending (high interest rates)
- Hud-1: A standard settlement sheet form used at loan closings
- Judgments: Liens against borrower or collateral that have been allowed or decreed by a court
- LLC: Limited Liability Company
- Loan type: Usually based on the use of funds – personal, business purpose, corporate
- LOX: Letter Of Explanation, usually pertains to credit issues
- LTV: Loan To Value – percentage of appraised value on which a lender will extend credit (value/loan amount = LTV)
- Mortgage: Legal document which secures the repayment of the note; recorded on the collateral pledged for the loan
- N/O/O: Abbreviation for non-owner occupied
- Note: Also known as the promissory note; legal document which outlines the loan terms including loan amount, interest rate, etc.
- O/O: Abbreviation for owner occupied
- Pipelines: Reports of deals in various stages of origination
- Points: A percentage of the loan amount paid to the broker; e.g. 1 point on a $100,000 loan is $10,00; front end points
- PPP: Prepayment Penalty- A penalty charge to a borrower for early substantial pay off (usually within the first 5 years)
- Program: An outline of underwriting guidelines used to determine the terms of a loan; e.g. APEX’s programs are A1- A2- A3- A4- A5- A7
- Property type: Description of property; e.g. mixed-use, commercial, 4-unit residential, single family residence, etc.
- Real estate tax escrow: Funds collected over and above the principal and interest amount to be paid out to local taxing authorities as the real estate taxes come due
- REO: Real estate owned- collateral owned by lender post- foreclosure and sheriff’s sale
- Repair escrow: A sum of money withheld from the proceeds of the loan until improvements or repairs are completed on collateral
- Rescission: On personal references, funds are not distributed for a 3-day period post-closing to allow the borrower to review the loan documents with the option to cancel the loan if desired; collateral must be borrower’s primary residence
- Settlement sheet: Also known as Hud; a form listing all of the fees, costs, pay-offs, etc. related to a loan
- Subject property: Property that is or is being considered for collateral for the loan
- Term: Length of the loan in months or years
- Title report: A report on collateral showing ownership, legal description, existing liens, etc.
- UCC: Uniform Commercial Code- documents that enable lenders to lien items contained in or attached to the property along with other items such as liquor license or mobile home, etc.
- Underwriting: The structuring of loan terms that will reduce the risk and protect against lender’s loss
- Use of funds: The borrower’s reason for applying for the loan; e.g. purchase, refinance, debt consolidation, improvements, etc.
- YSP: Yield Spread Premium- A form of compensation that a mortgage broker, acting as the intermediary, receives from the original lender for selling an interest rate to a borrower that is above the lender’s par rate for which the borrower qualifies.
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