Hype Program - Freedom Mortgage

ABILITY TO REPAY

Consideration of a borrower’s ability to afford a loan, including review of income, assets, and other factors.

ABSOLUTE TITLE 

A title that is clear of any liens, judgments, or other encumbrances.  

ABSTRACTOR

A professional in the title industry (sometimes an attorney) who conducts a title search and produces an abstract. 

ACCELERATION CLAUSE  

A clause in a mortgage or deed of trust that allows the lender to demand immediate repayment of the balance of a loan under certain conditions, such as default by the borrower.  

ACKNOWLEDGMENT  

Declaration by a person signing a document that the signature is a voluntary act, made before a duly-authorized person. 

ACT OF GOD  

An unpreventable destructive occurrence of the natural world.  

ADJUSTABLE-RATE MORTGAGE (ARM)  

Mortgage in which the rate is adjusted periodically based on a pre-determined margin, index, and adjustment interval. 

ADJUSTED BASIS  

Cost of property, plus the value of any capital expenditures for property improvements and minus any depreciation. 

ADJUSTMENT DATE  

The date on which the interest rate for an ARM may change.  

ADJUSTMENT INTERVAL  

The period elapsing between adjustment dates for an ARM. a.k.a.: Adjustment period, change frequency

ADJUSTMENTS (IN APPRAISAL)  

The dollar value that is added to or subtracted from the sale price of a comparable property used to provide an indication of value of the subject property.  

ADVANCE

A partial disbursement of funds under a note, usually made as part of a construction loan or a reverse mortgage. 

ADVERSE ACTION  

A refusal to grant credit as requested; a termination of an account or an unfavorable change in the terms of an account; or a refusal to increase the amount of credit available to a person who has applied for an increase.  

AGENCY

Legal relationship created by law/contract in which the agent performs certain acts on behalf of the principal.

AIR LOAN

An instance where a fictitious borrower obtains a mortgage loan “secured” by fictitious property.

AMORTIZATION

Scheduling the periodic payments on a loan so that each installment requires enough principal and interest to ensure complete repayment of the loan by the end of its term.

AMORTIZATION TERM  

The length of time required to amortize a mortgage loan, expressed as a number of months.  

ANNUAL MORTGAGE INSURANCE PREMIUM (ANNUAL MIP)  

A fee paid for mortgage insurance on an FHA-insured loan. Annual MIP is paid on a monthly basis.  

ANNUAL PERCENTAGE RATE (APR)  

Measurement of the loan cost, including interest and financed costs of closing, expressed as a yearly percentage rate. 

ANNUITY

Payments made at specified intervals, such as with insurance contracts or certain types of investments.  

ANTI-MONEY LAUNDERING PROGRAM (AML PROGRAM)  

A program established to detect and guard against money laundering.  

APPLICATION

The method by which a consumer formally applies to obtain a mortgage loan.  

APPLICATION FEE  

Fee charged for processing a loan application. An application fee may be a flat fee or a percentage of the loan amount. 

APPRAISAL 

An opinion of the fair market value of a property, based on an analysis of the property. a.k.a.: Valuation

APPRAISED VALUE  

An estimate of the fair market value of real or personal property.  

APPRAISER 

A person qualified through state licensing procedures to estimate the value of real property.  

APPRECIATION 

An increase in the value of property that occurs over time.  

APR THRESHOLD  

One of several standards used to identify high-cost mortgage loans. If the APR of a loan meets or exceeds the threshold established under the law, the loan qualifies as a high-cost mortgage and must comply with corresponding regulations. 

ASSESSMENT

A local tax levied against a property for a specific purpose, such as for sewage or street lights.  

ASSET

Things that a person owns and that can be converted to cash, such as property, investments, savings, etc.  

ASSIGNMENT 

The transfer of the rights and obligations under a mortgage loan from one person to another.  

ASSUMABILITY CLAUSE  

A provision in a mortgage loan that allows for the transfer of the mortgage from one party to another.  

ASSUMABLE MORTGAGE  

A mortgage that a seller can transfer to a new buyer, with the buyer taking over the payments on the existing mortgage. 

ASSUMPTION FEE  

The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.  

AVERAGE PRIME OFFER RATE (APOR)  

An annual percentage rate based on average interest rates, fees, and other terms that are offered to qualified borrowers. The APOR is used as a benchmark rate in identifying high-cost loans and higher-priced loans under federal law. 

BACK-END RATIO  

C a.k.a.: Total debt ratio

BALANCE 

The amount due, including principal, interest, and any fees or penalties owed.  

BALLOON MORTGAGE  

A mortgage with periodic payments including a final payment that is considerably larger than preceding payments. 

BALLOON PAYMENT  

The final lump sum paid on the maturity date of a balloon mortgage.  

BANKRUPTCY

Financial inability to pay debts when due, resulting in court action for relief through restructuring or erasing of debt. 

BASIS POINT  

One 100^th of 1% of the loan amount (0.0001 x loan amount = 1 basis point).  

BENEFICIARY

The person who receives or is to receive the benefits from a specific act or action.  

BI-WEEKLY PAYMENT MORTGAGE  

A plan to reduce debt by making payments every two weeks instead of every month.  

BONA FIDE  

In good faith and without fraud.  

BORROWER  

One who applies for and receives a loan in the form of a mortgage. See also Mortgagor. 

BORROWER CREDIT  

Credits at closing that are subtracted from the final closing costs.  

BRIDGE LOAN  

Short-term loan collateralized by the present home and used to close on a new house before the present home is sold.

CAPS (FOR ARMS)  

Limitations on the amount by which the rate or payment on an ARM may change. There are four caps in common use: Initial Rate Cap: limit on amount by which the rate can increase during the first adjustment period for an ARM. Periodic Rate Cap: limit on amount by which the rate can change during any adjustment periods.  Lifetime Rate Cap: limit on amount by which the rate can change over the life of an ARM. a.k.a.: Rate CeilingPayment Cap: limit on amount by which the payment can change during an adjustment period on an ARM. 

CERTIFICATE OF ELIGIBILITY  

The document that qualified veterans must obtain from the VA in order to apply for a VA guaranteed home loan.  

CERTIFICATE OF REASONABLE VALUE (CRV)  

A statement issued by the VA showin -approved appraisal. 

CERTIFICATE OF TITLE  

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

CHANGED CIRCUMSTANCE  

Acts of God, war, disaster, or other emergency; information particular to the borrower or transaction relied on in providing a GFE/LE and subsequently found to be inaccurate; new information particular to the borrower/transaction that was not relied on in providing the GFE/LE; or other circumstances particular to the borrower/transaction. 

CHARM BOOKLET  

A disclosure booklet used to educate consumers on the risks associated with adjustable-rate mortgages.  

CHATTEL  

Anything owned that is not real property i.e., personal property.  

CLEAR TITLE  

Generally, a title that is clear of liens, judgments, and other encumbrances.  

CLERICAL OR SUPPORT DUTIES  

Receipt, collection, distribution, and analysis of information for the processing or underwriting of a mortgage loan. 

CLOSED-END LOAN  

Transaction in which the creditor disburses all funds at closing and demands repayment within a specified time. 

CLOSING

Meeting between the buyer, seller, and lender, where funds for the purchase of real estate legally change hands. 

CLOSING COSTS  

Expenses over and above the price of the property incurred by buyers and sellers when transferring property ownership. 

CLOSING DISCLOSURE  

A federal disclosure that provides a statement of the final costs of a mortgage lending transaction.  

CLOUD ON TITLE  

An outstanding claim or encumbrance on the title.  

CODE OF ETHICS  

A statement of principles concerning the behavior of those who subscribe to the code.  

COLLATERAL 

Property pledged as security for a debt.  

COMBINED LOAN-TO-VALUE RATIO  

A comparison, expressed as a percentage, of the combined cost of all mortgages on a home and the value of the home used to secure the loans.  

COMMITMENT

A pledge or promise; a firm agreement. 

CONFORMING LOAN 

A loan that meets the lending limits and other criteria established by Fannie Mae or Freddie Mac.  

CONSTRUCTION LOAN  

An interim loan used to pay for the construction of buildings or homes.  

CONSUMER REPORTING AGENCY (CRA)  

An organization that prepares reports used by lenders to determine an applicant’s credit history

CONSUMMATION

The time at which the consumer becomes contractually obligated by a transaction. See also: Closing. 

CONVENTIONAL LOAN  

A mortgage that is not insured by the FHA or guaranteed by the VA.  

CONVERSION CLAUSE  

A provision in an ARM allowing the loan to be converted to a fixed rate at some point during its term.  

CONVEYANCE 

The transfer of the title of real estate from one person to another.  

CREDIT LIFE INSURANCE  

A declining term life insurance policy used to ensure repayment of a loan should the borrower die. 

CREDIT REPORT  

A report documenting the credit history and current status of a borrower’s credit standing

CREDIT REPOSITORY  

An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.  

CREDIT RISK SCORE  

A statistical summary of the information contained in a consumer’s credit standing.

CREDITOR

A person or entity to whom an obligation is owed, such as a loan. See also Lender. 

CURRENCY TRANSACTION REPORT (CTR)  

A report that must be filed for each transaction in currency of more than $10,000 by or through a bank.  

CURSORY INSPECTION  

An inadequate inspection of property in an attempt to conceal misrepresentations or omissions.

DEBT-TO-INCOME RATIO  

Relationship, and his/her gross monthly income. 

DEBTOR

A person who owes a debt to a creditor or lender. See also Borrower. 

DEED

A written instrument, properly signed and delivered, that conveys title to real property. 

DEED-IN-LIEU OF FORECLOSURE 

An arrangement in which the mortgagor (borrower) conveys all interest in the property to the mortgagee (lender) in an effort to satisfy a loan that is in default and avoid foreclosure proceedings. See also Conveyance, Foreclosure.

DEED OF TRUST  

In many states, a document that is used in place of a mortgage to secure the payment of a note.  

DEFAULT 

Failure to meet legal obligations in a contract; specifically, failure to make the monthly payments on a mortgage.  

DEFERRED INTEREST  

When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See also Negative Amortization. 

DELINQUENT  

Past due.  

DEPOSIT  

Funds that are given in advance to show committed interest in the purchase of a property. See also Earnest Money. 

DEPRECIATION 

A decrease in the value of a property over time.  

DISCOUNT POINT  

A fee paid to a lender at closing and used to prepay a portion of the interest on a loan.  

DISCOURAGEMENT  

A statement communicated by any means that discourages an individual from applying for credit on a prohibited basis. 

DISCRIMINATION  

In mortgage lending, treating an applicant less favorably than other applicants on a prohibited basis.  

DO-NOT-CALL REGISTRY  

List of consumers who have put their names on the Registry to avoid receiving unwanted commercial communications. 

DONOR 

In mortgage lending, the term refers to those who make gifts of money for use in the purchase of a home.  

DOWN PAYMENT  

Money that is paid towards the purchase price of a home and that is not financed.  

DRY SETTLEMENT  

A loan settlement in which loan funds are not made available on the same day as closing.  

DUAL COMPENSATION  

Practice of receiving prohibited compensation from a consumer and a creditor that funds mortgage loans.  

DUE-ON-DEMAND CLAUSE  

A provision of a mortgage or deed of trust that allows a lender to demand immediate payment of the balance of the loan if specific criteria relating to fraud and misrepresentation are met.  

DUE-ON-SALE CLAUSE  

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home. 

EARNEST MONEY  

Money paid by a buyer to a seller when entering a contract to indicate ability to carry out the contract.