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113 Cards in this Set

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  • Back

Allodial Ownership

In Roman times, the allodial system allowed for ownership of land by individuals and was absolute. The landowner had few limitations or restrictions on the right to use or dispose of it.
Feudal Ownership
Primarily granted the right to occupy and use the land owned by a superior
Something of value is conveyed by a limited pledge as protection for a lender to assure repayment of a loan.
The pledge of protection for a lender. The borrower remains in possession of the property while it also offers security for the loan
The nonperformance of an obligation that is part of a contract. Failure to repay the loan is the most common act of default.
Promissory Note
An unconditional written promise of a person to pay a certain sum to another person.
The "loan agreement." A mortgage pledges property (collateral) as security for the note.
Following default, the property offered as collateral for the loan is sold to satisfy the debt.
A portion of the loan amount taken by a lender as a cost for borrowed money.
The discount is measured by points. One point is 1% of the loan amount.
Primary Market
Where each loan is originated.
Secondary Market
Consists of investors who purchase loans made by others.
Loan Originator
A person or company seeking a mortgage loan contacts the loan originator (bank, insurance company, mortgage company, etc).
Negotiable Instrument
The holder of the note has the right to sell it. Almost all mortgage notes are written as negotiable instruments.
Combination of the interest plus the discount.
Debt instrument representing borrowed money that must be repaid with interest.
A corporation, such as investment banker Saloman Smith Barney, Inc., that buys loans to create pools.
Mortgage-Backed Securities
Bond category that is secured by the pledge of a large pool of mortgage loans.
Commercial Paper
A type of corporate borrowing that is used to finance construction by large builders. Commercial paper is a simple promise to pay that is unsecured (a corporate IOU).
Federal Reserve Bank
A central banking system created in 1913 designed to manage the nation's monetary system and serve as a national bank for its member institutions.
Open Market Operations
A tool that the Fed can use to influence the economy through moving both government bonds and cash in and out of the banking system at any time.
Discount Rate of Interest
The rate charged by the Fed to those depository institutions eligible to borrow from it.
Prime Rate
A base interest rate, determined independently by banks, that generally is charged to the bank's most creditworthy customers.
Federal Funds Rate
An interest rate charged between banks for short-term loans that facilitate compliance with federal liquidity requirements. It is a rate used periodically by the Federal Reserve Bank as a guide in setting monetary policy.
Interest Rate Indicators
Treasury Bill Rate, Prime Rate, Fannie Mae/Freddie Mac-Administered Yield Requirements, U.S. Treasury Security Rates.
Treasury Bill Rate
The cost of short-term borrowing by the federal government.
Usury Laws
State laws that limit the amount of interest that may be charged on different kinds of loans and to various categories of borrowers.
Mortgage Pools
The major source for residential loans which serve as collateral for the issuance of mortgage-backed securities.
Regulated Lenders
Depository institutions and life insurance companies that are subject to various government regulatory agencies.
Time Deposit
One that does not permit withdrawal on demand, usually requiring a waiting period of 14 to 30 days depending on which regulatory controls.
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
To cope with massive losses on insured deposits, this was signed by President Busy on August 9, 1989 and created an overhaul of banking practices with a primary target of restructuring the savings and loan association system.
Office of Thrift Supervision (OTS)
An arm of the Treasury Department and its authority extends to both federal and state-chartered institutions that carry federal deposit insurance.
Federal Deposit Insurance Corp. (FDIC)
Under the Treasury Department and manages both the bank deposit insurance fund and the savings association insurance fund.
Resolution Trust Corporation (RTC)
Created in 1989 to take the necessary steps to sell or liquidate failing thrifts.
Savings Banks
Originated in the early years of the U.S. when most individuals traded in cash and needed a place to deposit their surplus for safekeeping.
Comptroller of the Currency
The regulatory authority of which federally chartered banks were organized under.
Warehouse Line of Credit
Line of credit for the mortgage company and is listed as a mortgage loan for the bank.
Credit Unions
May be chartered by any group of people who can show a common bond.
Community Reinvestment Act
The purpose of this act is to require regulated institutions to publicize their lending services in their own community and to encourage participation in local lending assistant programs.
Mortgage Broker
Specializes in serving as an intermediary between the customer-borrower and the client-lender.
Mortgage Bankers
Offers full service by originating a mortgage loan, funding the loan at closing, and servicing the loan as it is paid off.
Loan Servicing
The record-keeping section that maintains customers' or borrowers' accounts.
Forward Commitment
A promise by a lender to have certain funds available for qualifying loans submitted to them over a limited period of time, such as 30 days to 6 months.
Immediate Commitment
"Immediate" means that the loans alread exist and can be delivered now.
Application Fee
A nonrefundable fee that is normally charged by loan originators at the time an application is taken.
Origination Fee
The amount charged for services performed by the company handling the initial application and processing of the loan. Normally paid at the time of closing.
Servicing Fee
A charge made for handling the loan after it has been funded. The services involve collecting and accounting for periodic loan payments, handling the escrow portion of the payments, and following up on delinquent accounts.
Farm Credit Administration (FCA)
An independent federal agency that supervises the Farm Credit System (FCS) which is an elaborate cooperative, borrower-owned network of farm lending banks.
Federal Land Bank
Makes long-term mortgage loans and machinery and livestock loans through more than 400 Federal Land Bank Associations. There are 12 Federal Land banks that account for about 68% of the total loans within the system.
Rural Development Services Agency
Provides loan guarantees to help local lenders provide credit that is needed for expansion and preservation of jobs.
Real Estate Investment Trust (REIT)
The intent of this act was to make it more profitable for the small investor to enter the real estate market, thus increasing available capital.
Right of Redemption
The period at which the borrower might be given a chance to redeem the land with a late payment of the obligation.
Lien Theory
The borrower retains legal title to the property and grants a lien to the lender as security for repayment of the loan.
Prepayment Penalty
An additional charge that could arise if all or part of the principal balance of a loan is paid before it becomes due.
Acceleration Clause
Gives a lender the right to call the entire balance due, in full, in advance of due date upon occurrence of a default.
Alienation Clause
A right-to-sell clause that is in a mortgage.
Due-On-Sale Clause
A clause found on many mortgages that reads, "Should the mortgagor sell, transfer, change, modify, or otherwise alter the ownership of the land pledged in this mortgage, or an interest therein, without first obtaining the written consent of the mortgagee to such change, then the full outstanding balance owed the mortgagee on account of this transaction shall become immediately due and payable."
Hazard Insurance
Insurance that includes fire and extended coverage and is required by the lender in an amount at least equal to that of the loan.
Ad Valorem Taxes
Property tax that becomes a specific lien on real property on the date the tax is assessed by an authorized taxing authority.
Deed of Trust
A mortgage in which title to property is conditionally conveyed to a third-party trustee as security for an obligation owerd to the lender, who is called the beneficiary.
Open-End Mortgage
Sets a limit to the amount that may be borrowed and allows incremental advances up to that amount secured by the same mortgage.
Construction Loan
A short-term loan to cover the costs of building.
Junior Mortgage
Applies to those mortgages that carry a lower priority than the prime or first mortgage.
Purchase Money Mortgage
The sellers receive some cash and the written, secured promise of the purchasers to pay the balance over a period of time. The sellers become the mortgagees instead of commercial lender's taking that role.
Package Mortgage
Pledges both real and personal property to secure a loan.
Blanket Mortgage
A mortgage that is secured by more than one parcel of real estate as collateral.
Contract for Deed
A sale and financing agreement that allows the purchase price of property to be paid in installments.
Equitable Title
The right held by a purchaser under a contract for deed to eventually obtain absolute ownership to property when legal title is held in the seller's or another's name.
The act of entering into the public record a written instrument that affects title to property.
The method of altering the priority of claims to property by a written agreement.
The periodic reduction of debt.
Adjustable Rate Mortgage (ARM)
A mortgage design that permits the lender to adjust the interest rate at periodic intervals, with the amount of change generally tied to changes in an independent published index of interest rates or yields.
Rate Index
A rate that is regulator-approved.
Graduated Payment Mortgage
A repayment plan popularized by the FHS, but also approved as a conventional loan, that offers early-year monthly payments substantially lower than a constant-level plan, permitting easier qualification for a borrower. Payment amounts increase annually at a predetermined rate until reaching a level that fully amortizes the loan within its term.
Pledged-Account Mortgage
A mortgage repayment plan that features lower initial monthly payments similar to a graduated payment design. With a PAM, the borrower deposits a portion of the down payment in an escrow account with the lender and allows the lender to withdraw enough money from the account to supplement the borrower's monthly payments. The result is a constant-level, fully amortized payment applied to the loan each month.
Buy-Down Mortgage
A mortgage repayment design offering lower initial monthly payments achieved through the prepayment of a portion of the interest cost. The prepayment of interest is usually limited to the first few years and is normally paid by a seller to help attract buyers by allowing easier borrower qualification.
Balloon Payment
A debt repayment plan wherein the installments are less than those required for full amortization of the loan, with the balance due in a lump sum at maturity.
Straight Note
A note that calls for payment of the interest only at periodic intervals and the principal balance due in full at maturity.
Growing Equity Mortgage
Method used to shorten a loan term and reduce interest costs by making certain increases in the payment amount each year.
Shared Equity Mortgage
Two or more parties hold an ownership interest in the property.
Reverse Annuity Mortgage
A mortgage designed to use the equity value of a home as collateral for a loan funded in installments intended primarily to supplement living costs.
Equal Credit Opportunity Act (ECOA)
Regulation B. Equalizes the availability of credit by limiting the information that may be required in an application
Loan Application
Offers information for qualification of both the borrower and the property.
Credit Scoring
A method of giving a default probability number based on an individual's credit record.
Production-Related Income
Commissions, bonuses, and, in some cases, piecework pay.
Effective Income
Includes gross income from all sources, including borrower and co-borrower, that can be expected to continue for the first three years of the mortgage.
Housing Expense
Includes the mortgage payment of principal, interest, real estate taxes, and hazard insurance plus flood insurance if applicable.
Residual Income
Gross effective income minus fixed payment.
Residual Method (VA)
Starts with the gross monthly income, then deducts applicant's monthly tax liabilities, shelter expenses, and other fixed obligations.
Cost-of-Living-Expenses (VA)
Costs that include food, clothing, transportation, personal and medical care, and other consumption items.
Conforming Loan
A loan written on uniform documents as required by Fannie Mae and Freddie Mac if purchased by them. The loans are subject to limitations set by the agencies and Congress on the size and kind of loan.
Private Mortgage Insurance (PMI)
Insurance against default on repayment of a mortgage loan, as offered by private insurance carriers.
Three C's of Underwriting a Loan
Capability, Credit, Collateral.
Fannie Mae
Popular nickname for the Federal National Mortgage Association, a quasi-government agency that plays a major role in the secondary mortgage market.
Freddie Mac
The Federal Home Loan Mortgage Corporation, a corporation that buys mortgages from lenders such as commercial banks, mortgage bankers, savings institutions, and credit unions.
Computerized Loan Origination (CLO)
Initiation of a mortgage loan through a terminal linked to a lender's computer. Subject to HUD limitations, the method allows real estate agents to assist in loan origination.
The person or company taking responsibility for rating risks and approving mortgage loans. Also used to identify those who provide credit enhancement for mortgage loans, such as Fannie Mae and Freddie Mac.
Manual Underwriting
Utilize a Computerized Loan Origination (CLO) system and generally resort to intermediary companies that perform the loan services, via computer, of a loan broker or a mortgage company.
Automated Underwriting
Introduced by Fannie Mae and Freddie Mac, these systems involve artificial intelligence capable of analyzing a loan application and approving it for funding if qualifications are met.
Loan Prospector
Freddie Mac's automated underwriting system and is limited for use by Freddie Mac's seller/services who are required to submit verification of the data submitted.
Collateral Assessment
Loan prospector's ability to assess whether or not the collateral is sufficient to secure the loan.
Desktop Underwriter
One of Fannie Mae's basic programs that uses artificial intelligence and information from Fannie Mae's seller/services guide to properly analyze a loan application.
Desktop Originator
One of Fannie Mae's programs that is designed to allow an agent or mortgage broker to take an application in a potential borrower's home with a laptop computer, relaying the information to the lender who is the seller/servicer.
A principal credit scoring procedure that was begun in 1956 by Fair, Isaacs Company of San Rafael, California.
Subprime Loans
Loans made to persons who do not have a top-grade credit record as is required to qualify for a regular mortgage loan. Subprime loans command higher interest rates and discounts which add profitable business to a lender providing it is careful in analyzing the higher risks involved.
Online Real Estate Services
Allows consumer access to information on a full range of real estate services through the internet.
Risk-Based Mortgage Loan Pricing
Lenders assess borrowing costs loan by loan.
Universal Account
The idea that would be a combination of loans, such as a car loan, a personal loan, or a mortgage loan, in one account.
The Department of Housing and Urban Development
Federal Housing Administration (FHA)
A federal agency created in 1934, now a part of HUD, that insures high loan to value ratio residential loans.
Loan to Value Ratio (LTVR)
The ratio between the amount of a loan and the value of property pledged.
Truth in Lending Law
Known as Regulation Z, it's purpose is to promote the informed use of consumer credit by requiring meaningful disclosures about the loan's term and cost.
Home Mortgage Disclosure Act (HMDA)
Known as Regulation C, this act requires most financial institutions to disclose the number of mortgage loans and the dollar amount of these loans by geographical area. The intent was to generate a statistical basis for judging if and where discrimination was prevalent in lending practices.