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To call the entire remaining balance of the mortgage due and payable immediately because of a default in one or more of the mortgage provisions.

The lesser of the appraised value or the sales price plus or minus the required adjustments.

A mortgage that permits the lender to periodically adjust its interest rate on the basis of movement in a specified index.  Also used collectively to refer to ARMs and graduated-payment adjustable-rate mortgages (GPARMs).

Expenses related to the purchase, sale or financing of property that HUD allows the buyer to pay.  They are usually the appraisal fee, credit report, 1% origination fee, closing fee, recording of documents, title policy, etc.  A list of allowable closing costs is available from the Lenders Homeownership Center (HOC).

A timetable for payment of a mortgage that shows the amount of each payment that should be applied to interest and principal and the remaining unpaid principal balance that will result from the application.

A method of selling real estate wherein the property purchaser agrees to take over the primary liability for payment of an existing mortgage.

A proceeding in 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.  This affects the borrower’s personal liability for a mortgage debt, but not the lien of the mortgage.

1/100th of 1%.  For example, 7½ basis points equal 0.075% or 0.00075.

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.

The person whose name appears on the application along with the mortgagor.  The co-mortgagor’s income, assets and debts are added together with the mortgagor’s for underwriting and ratio analysis purposes.  Lenders should check with their legal counsel when obtaining credit information on the co-mortgagor.  It may be affected by homestead rights or community property rights depending on the state and its regulations and laws.  The co-mortgagor’s name(s) must appear on the FHA Certificate of Commitment, the note and the mortgage/deed of trust; for FHA loans, the co-mortgagor may not have to occupy the property with the mortgagor.For fully guaranty under the VA’s program, the co-mortgagor(s) must be either a spouse or another veteran and must occupy the property.  If the co-mortgagor is another veteran and his/her entitlement will be used, also known as a “joint loan,” the loan must be submitted to VA for underwriting and approval.

A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

A type of adjustable-rate mortgage that includes an option for the mortgagor to change the mortgage to a fixed-rate mortgage during one of its early interest rate adjustment dates or in any month during the early years of the mortgage term.

The cabinet department of the federal government responsible for federal housing programs and urban affairs; it governs FHA, Ginnie Mae, Fannie Mae and Freddie Mac operations.  HUD was established to provide cohesive control over those governmental programs designed primarily to provide housing and the services and facilities essential to the improvement of housing standards and conditions.

An amount used to increase the yield of the mortgage note to the permanent Investor.  Points let the lender make mortgages at below-market interest rates for higher loan-to-value ratios.  They also allow the mortgage to be sold in the marketplace at an acceptable yield to an investor. Sellers or buyers in FHA transactions may pay discount points.  FHA also allows a family member loan to include discount points.  (See secondary financing.)  Discount points may be financed on VA refinance loans.  VA limits the number of discount points a veteran may include in an IRRRL per Circular 26-96-4 to two.  Veterans may pay more than two points on IRRL’s, but the additional points must be paid in cash.  The funding fee, a maximum of two discount points, and all other allowable closing costs may be financed in the loan.

A private government corporation organized to provide secondary mortgage assistance for residential housing through the purchase of eligible FHA-insured/VA-guaranteed mortgages.  Fannie Mae’s function is to buy FHA/VA mortgages and leave the servicing in the hands of the originating lender; Fannie Mae then sells these mortgages to permanent private investors whenever the market permits.  Fannie Mae is directed by Congress and has three separate functions: 1) to provide a secondary market for federally underwritten loans; 2) to assist in financing selected types of mortgages originated under special housing programs; and 3) to assist in the management and liquidation of mortgages held or acquired by contract under its previous charter.

An agency that administers the federal deposit insurance system and may be appointed conservator or receiver of a lender that is a depository institution.

A mortgage that provides for only one interest rate for the entire term of the mortgage.  If the interest rate changes because of enforcement of the due-on-sale provision, the mortgage is still considered a fixed-rate mortgage.

The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property.  This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Congress charters Freddie Mac.  Freddie Mac is somewhat like Fannie Mae, except their charter dictates the framework for the mortgage products offered to the market and the services provided to the national housing and mortgage industry.  These products and services may differ from Fannie Mae.

A mortgage that combines the features of a graduated-payment mortgage and an adjustable-rate mortgage.  Payments are increased yearly during the graduated-payment period and do not necessarily reflect changes in the interest rate during that period.  At the end of any graduated-payment period, if there is no option for an additional graduated-payment period, the mortgage characteristics are those of a regular adjustable-rate mortgage.

Insurance coverage that compensates for physical damage – by fire, wind, or other natural disasters – to property.

Insurance coverage available for owner-occupied properties to protect against personal liability and physical property damage for a dwelling and its contents.

A government form – essentially a closing statement – required on closing of all federally related mortgages.  Lenders and settlement agents are required to provide a HUD-1 or HUD-1A on loans that previously had not been required to comply with the Real Estate Settlement Procedures Act (RESPA); i.e.; refinances, seconds, and home equity mortgages.

The original interest rate of the mortgage when it is closed.  This rate (which is often referred to as the “start rate”) changes for adjustable-rate mortgages.

An arrangement wherein the property seller (or any other party) deposits money into an account so that it can be released each month to reduce the mortgagor’s monthly payment during the early years of the mortgage.  During the specified period, the mortgagor’s effective interest rate is “bought down” below the actual mortgage interest rate.

A written agreement between property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

A way of holding title to a property wherein the mortgagor does not actually own the property, but rather has a recorded long-term lease on it.

Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.

The relationship between the unpaid principal balance of the mortgagor and the value (or sales price, if it is lower) of a property.

The amount that is added to an index value to create the mortgage interest rate for an ARM/GPARM.

The contractually responsible servicer of a mortgage or pool or mortgages that is included in a subservicing arrangement.

Any one of the private or state mortgage insurance companies that insure us against loss in the event of a mortgagor’s default under a conventional mortgage.

The portion of the total monthly payment that is applied toward principal and interest.  When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.

Generally, the total payment made by the mortgagor each month.

An investment security that represents an undivided interest in a pool of mortgages.

As defined by HUD, a mortgage broker is “a person (not an employee or exclusive agent of a lender) who brings a borrower and lender together to obtain a federally related mortgage loan, and who renders settlement services.”

A fee charged by the FHA to insure the loan.  This can be an upfront charge (UFMIP) plus an amount collected monthly or a monthly collection only.

The rate of interest in effect for the monthly installment due.  For fixed-rate mortgages or for adjustable-rate mortgages that have an initial fixed-rate period, it is the rate in effect during that period.  For adjustable-rate mortgages after any initial fixed-rate period, it is the sum of the applicable index and the mortgage margin (rounded as appropriate and subject to any per adjustment caps or lifetime interest ceilings.

The value of all a company’s (or individual’s) assets – including cash – less its total liabilities.  It is used to indicate financial strength.

A fee charged by the lender to originate the loan.  Both the FHA and VA restrict this fee to 1%.  The FHA further requires that lenders call it an “origination fee” and not a “service fee.”  An FHA contract may not use to term “service fee”; if a conventional contract is used, this term must be changed or an addendum must be used that clarifies the term and the amount that will be charged.

The price paid for a mortgage when its faces value (unpaid principal balance) equals its selling price (100%) – there are no discounts or premiums.

The percentage rate used to calculate the monthly payment for ARM Plan 2 and GPARM Plan 2 after the graduated-payment period.  It differs from the interest accrual rate.

A real estate project in which each unit owner has title to a residential lot and building and a nonexclusive easement on the common areas of the project.  The owner may have an exclusive easement over some parts of the common areas (for example, a parking space).

A formal agreement absolving a mortgagor from responsibility under a mortgage because another party has agreed to assume the mortgage obligations.

The percentage of par that the lender must apply to the unpaid balance or outstanding debt of a mortgage or acquired property that it has to repurchase from Fannie Mae.

The legal document that outlines what the buyer and seller have agreed to for a basis of the sale; e.g., sales price; requested loan amount; who will pay closing costs, discount points, repair costs, upfront mortgage insurance premium (UFMIP if applicable) or VA Funding Fee financed; or required inspections.

A reverse mortgage payment that is made to a borrower under the terms of a payment plan that calls for payments to be made at stated intervals over a defined term or until the borrower no longer occupies the property as a principal residence or otherwise defaults under the terms of the mortgage; the payment that is due for any given month (or any given biweekly payment period) for a regularly amortizing mortgage.

A mortgage that has a lien position that is subordinate to the first mortgage.

An ownership interest in a pool of mortgages, which is evidenced by either a definitive certificate that is authenticated by the certicate registrar or a book-entry account within the Federal Reserve’s book-entry system.

The collection of monthly loan payments, payment of the taxes and insurance plus any other required escrows from established reserves, monitoring of loan delinquencies, and filing of foreclosure proceedings when necessary.

“Out of pocket” costs and expenses a servicer incurs in the performance of its servicing obligations.  The servicer may reimburse itself for these advances by billing the mortgagor, by reducing subsequent mortgagor payments if the mortgagor fails to repay the servicer for its advances, or by recovering it from liquidation or insurance proceeds.

The income that a servicer receives for the collection of payments and management of operational procedures related to a mortgage.  It includes a base servicing fee, plus late charges, fees charged for special services, yield differential adjustments or excess yield, and, sometimes, a share in prepayment charges.

The portion of the borrower’s principal limit for a reverse mortgage that is allocated to the payment of monthly servicing fees.  It must be established in an amount that is expected to be sufficient to cover the payment of a flat monthly fee to the servicer for the expected life of the mortgage.

A lender that has contracted with the contractually responsible servicer of a mortgage or pool of mortgages to perform the on-going servicing activities for the mortgage pool.

An FHA Home Equity Conversion Mortgage payment plan that provides for the borrower to receive scheduled equal monthly installments for a stated term (unless he or she ceases to occupy the property as a principal residence or otherwise defaults under the terms of the mortgage before the expiration date of the stated term.