NavPros - Glossary

4506-C

An IRS Form 4506-C is an authorization to request tax return information. Lenders use this authorization to request a return transcript that will validate an applicant(s) income for specific tax filing years.

401(K)/403(B)

An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.

Ability to Repay (ATR)

Ability to Repay. Before extending a loan, lenders must make a reasonable determination as to whether the borrower will have a reasonable ability to repay the debt within the terms of the loan. This determination is based off of eight factors; the borrowers current income and assets, employment status, Monthly payment of mortgage obligations, monthly payment on subsequent loans, current debt obligations, Debt-to-income ratio, and the expected payment of the covered transaction

Acceleration Clause

A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Acceptance

Acceptance of a contract occurs when all parties have fully executed the agreement(s) that are negotiated between two or more parties. Some common agreements that NavPros supports includes: 1. MSA - The agreement that is between NavPros and our Lender customers that defines the services we will provide. 2. Loan Closings - NavPros prepares loan closing document packages that are binding between our Lender customers and their clients (Borrowers). 3. Sales Agreements - Borrowers that purchase a home typically have an Accepted sales agreement between them and the seller for a property purchase.

Accommodation Mortgagor

A borrower who is on the property title but does not guaranty repayment of a loan. They sign the mortgage or deed of trust but not the mortgage note.

Additional Principal Payment

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjustable Rate Mortgage (ARM)

A mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change.

Adjustment Date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Period

The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Administrator

An LOS user that is provided rights to configure the system and add, delete or modify user rights

Amenity

A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

American Land Title Association (ALTA)

The American Land Title Association or any successor thereto defines the guidelines for title companies to complete title searches and recording documents

Amortization

The gradual repayment of a mortgage loan by installments.

Amortization Schedule

A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.

Amortization Term

The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Amortize

To repay a mortgage with regular payments that cover both principal and interest.

Annual Mortgagor Statement

A report sent to the mortgagor (the borrower) each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate (APR)

The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

Annuity

An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Application (1003)

A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security. Lenders use the information on the loan application to evaluate whether or not they can give the loan, and if so, the amount of money they can lend. Also known as a "FNMA 1003" or "1003".

Application Date

The date in which a loan application has been completed and is defined by collecting a specific amount of information typically known as the "Fed Six". These data points include an applicants name, income, Social Security number (so the lender can pull a credit report), the property address, an estimate of the value of the property, and the desired loan amount. Once a residential application has been received a Lender is obligated to complete loan disclosures and issue a decision (disposition) on a loan transition in a timely manner.

Appraisal

written analysis of the estimated value of a property, as prepared by a qualified appraiser.

Appraised Value

The value set forth in an appraisal made by a Qualified Appraiser in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property. The LTV is placed on this value and not the sales price, assessed value or the owners estimated value.

Appraiser

A person qualified by education, training, and experience to estimate the value of real property and personal property.

Appreciation

An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Assessed Value

The valuation placed on property by a public tax assessor for purposes of taxation.

Assessment

The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignment

The transfer of a mortgage from one person to another.

Assignment of Mortgage

An assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to the Purchaser.

Assignment of Trade (AOT)

Assignment of trades. Creating a security block of loans “MBS” Mortgage Backed Security. Pricing is usually set in the AOT

Assumable Mortgage

A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

Assumption

The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.

Assumption Clause

A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption Fee

The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Attorney-in-fact

One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

Automatic Underwriting System (AUS)

Technology-driven underwriting process that provides a computer generated loan decision and Loan conditions, to improve the processing time for specific types of loans. Fannie Mae supports Desktop Underwriter (DU), Freddie Mac supports Loan Prospector and USDA supports GUS. The Fannie Mae AUS supports electronic asset and income documentation process called Day 1 Certainty (D1C). Freddie Mac AUS supports an electronic asset and income documentation process called AIM.

Balance Sheet

A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balancing (Balancer)

Balancing a loan is the process of reviewing and documenting all fees associated with closing and selling a loan to the secondary market and ensuring its accuracy. This activity requires a copy of the lock agreement, Final Closing Disclosure and the loan sale Purchase Advise. The process is completed by a role call a Balancer.

Balloon Mortgage

A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term. The principal and interest on the loan are amortized over a longer period than the actual term of the mortgage.

Balloon Payment

The final lump sum payment that is made at the maturity date of a balloon mortgage.

Bank

A regulated Financial Institution including Commercial Banks, Community Banks, Thrifts and Savings and Loan companies.

Bankrupt

A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy

A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Basis Point (BP)

1/100th of 1%. This unit of measurement is used with the loan amount to calculate fees to the borrower or to sell a loan to a secondary market investor. 100 basis points = 1% of the loan amount. Example: 100 basis points for a $100,000 mortgage loan would be $1,000.

Before-tax Income

Income before taxes are deducted. This is also known as "Gross Income".

Beneficiary

The person designated to receive the income from a trust, estate, or a deed of trust.

Bequeath

To transfer personal property through a will.

Best effort lock (BE)

A lock that commits an investor to a specific rate and price for loan delivery by a specific date. There is no penalty for not delivering the loan

Betterment

An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.

Bill of Sale

A written document that transfers title to personal property.

Binder

An agreement that typically represents a company's proposal to insure a property (either Mortgage Insurance, Title Insurance, Hazard Insurance or other type of property insurance)

Biweekly Payment Mortgage

A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

Blanket Mortgage

The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

Bona Fide

In good faith, without fraud.

Bona Fide Discount Point

The amount received by the lender in one time fees specifically used to reduce the Par rate of a loan.

Borrower

The primary applicant on a loan. This applicant type signs the Promissory Note and the Mortgage or Deed of Trust.

Borrower Portal

An online portal provided by NavPros to our customers applicants to securely and conveniently check loan status, submit loan conditions, send messages and received documents for their loan.

Breach

A violation of any legal obligation.

Bridge Loan

A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."

Broker

A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Building Code

Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards. Properties typically have to meet building codes to qualify for financing.

Bulk

Typically describes a loan sale or pricing method for a group of loans rather than a single loan (Flow).

Business Continuity Plan (BCP)

Outlines how business will continue to be conducted in the event of an emergency or disaster.

Business Day

Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking and savings and loan institutions in the State a Lender does business in are authorized or obligated by law or executive order to be closed.

Business to Business (B2B)

Business to Business website used by NavPros to board customer loans. Typically an online portal that allows businesses to exchange data and information.

Buydown Account

An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.

Buydown Mortgage

A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

Cap

A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap.

Capital

(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure

The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital Improvement

Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Cash-out Refinance

A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Certificate of Deposit (CD)

A document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period. See adjustable rate mortgage (ARM).

Certificate of Deposit Index

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. See adjustable-rate mortgage.

Certificate of Eligibility

A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.

Certificate of Reasonable Value (CRV)

A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.

Certificate of Title

A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

Chain of Title

The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency

The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM)

Chattel

Another name for personal property.

Clear Title

A title that is free of liens or legal questions as to ownership of the property.

Closer

Closers assemble, prepare and review closing documents for mortgage loans to complete the loan closing (settlement) process. They work with the other loan processing team members, settlement agent and borrower to ensure the closing process is properly coordinated.

Closing

A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement." At this meeting, ownership of the property is transferred from the seller to the buyer.

Closing Cost Item

A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the Closing Disclosure or HUD-1 statement.

Closing Costs

Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or Realtors often provide estimates of closing costs to prospective homebuyers.

Closing Date

The relevant date on which the Purchaser from time to time shall purchase and the Seller from time to time shall sell the Mortgage Loans listed on the related Mortgage Loan Schedule.

Closing Disclosure (CD)

A Closing Disclosure is a five-page form that provides final details about the mortgage loan. It includes the loan terms, projected monthly payments, and closing costs. The fees charged by all parties must be finalized and agreed to prior to loan closing.

Cloud on Title

Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Coborrower

Is an individual that helps qualify for a loan and is on title. They sign the Mortgage Note and the Deed of Trust / Mortgage.

Code of Federal Regulations (CFR)

The specific language of active federal laws.

Collateral

An asset (such as a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Collection

The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.

Combined Loan to Value (CLTV)

A derivative of Loan to Value where the calculation is completed using the total of all liens (1st and 2nd mortgage or HELOC) divided by the value of the property. Example: (1st Mortgage Loan Amount + Second Mortgage or HELOC) / Value = CLTV .

Commission

The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment Letter

A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."

Commitment period

The period of time the seller is required to deliver loans into the pool

Common Area Assessments

Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.