The document issued by the mortgagee when the mortgage loan is paid in full.
Also called a "release of mortgage." TOP
Second Mortgage
A mortgage made subsequent to another mortgage and subordinate to the first
one. TOP
Secondary Mortgage Market
The place where primary mortgage lenders sell the mortgages they make to obtain
more funds to originate more new loans. It provides liquidity for the lenders. TOP
Security
The property that will be pledged as collateral for a loan. TOP
Seller Carry-back
An agreement in which the owner of a property provides financing, often in
combination with an assumable mortgage. See owner financing. TOP
Servicer
An organization that collects principal and interest payments from borrowers
and manages borrowers’ escrow accounts. The servicer often services
mortgages that have been purchased by an investor in the secondary mortgage
market. TOP
Servicing
All the steps and operations a lender performs to keep a loan in good standing,
such as collection of payments, payment of taxes, insurance, property
inspections and the like. TOP
A mortgage in which a borrower receives a below-market interest rate in return
for which the lender (or another investor such as a family member or other
partner) receives a portion of the future appreciation in the value of the
property. May also apply to mortgage where the borrowers shares the monthly
principal and interest payments with another party in exchange for part of the
appreciation. TOP
Simple Interest
Interest which is computed only on the principle balance. TOP
Standard Payment Calculation
The method used to determine the monthly payment required to repay the
remaining balance of a mortgage in substantially equal installments over the
remaining term of the mortgage at the current interest rate. TOP
Step-Rate Mortgage
A mortgage that allows for the interest rate to increase according to a
specified schedule (i.e., seven years), resulting in increased payments as
well. At the end of the specified period, the rate and payments will remain
constant for the remainder of the loan. TOP
Survey
A measurement of land, prepared by a registered land surveyor, showing the
location of the land with reference to known points, its dimensions, and the
location and dimensions of any buildings. TOP
Sweat Equity
Equity created by a purchaser performing work on a property being purchased. TOP
Third-party Origination
When a lender uses another party to completely or partially originate, process,
underwrite, close, fund, or package the mortgages it plans to deliver to the
secondary mortgage market. TOP
Title
A document that gives evidence of an individual's ownership of property. TOP
Title Insurance
A policy, usually issued by a title insurance company, which insures a home
buyer against errors in the title search. The cost of the policy is usually a
function of the value of the property, and is often borne by the purchaser
and/or seller. Policies are also available to protect the lender's interests. TOP
Title Search
An examination of municipal records to determine the legal ownership of
property. Usually is performed by a title company.
TOP
Total Expense Ratio
Total obligations as a percentage of gross monthly income including monthly
housing expenses plus other monthly debts. TOP
Truth-In-Lending
A federal law requiring disclosure of the Annual Percentage Rate to home buyers
shortly after they apply for the loan. Also known as Regulation Z. TOP
Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a
specified number of years (most often seven or 10), and then receives a new
interest rate adjusted (within certain limits) to market conditions at that
time. the lender sometimes has the option to call the loan due with 30 days
notice at the end of seven or 10 years. also called "Super Seven" or
"Premier" mortgage. TOP
Underwriting
The decision whether to make a loan to a potential home buyer based on credit,
employment, assets, and other factors and the matching of this risk to an
appropriate rate and term or loan amount. TOP
Usury
Interest charged in excess of the legal rate established by law. TOP
VA Loan
A long-term, low- or no-down payment loan guaranteed by the Department of
Veterans Affairs. Restricted to individuals qualified by military service or
other entitlements. TOP
VA Mortgage Funding Fee
A premium of up to 1-7/8 percent (depending on the size of the down payment)
paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down
payment, this would amount to $1,406 either paid at closing or added to the
amount financed. TOP
A document signed by the borrower's financial institution verifying the status
and balance of his/her financial accounts. TOP
Verification of Employment (VOE)
A document signed by the borrower's employer verifying his/her position and
salary. TOP
Warehouse Fee
Many mortgage firms must borrow funds on a short term basis in order to
originate loans which are to be sold later in the secondary mortgage market (or
to investors). When the prime rate of interest is higher on short term loans
than on mortgage loans, the mortgage firm has an economic loss which is offset
by charging a warehouse fee. TOP
Wraparound mortgage
Results when an existing assumable loan is combined with a new loan, resulting
in an interest rate somewhere between the old rate and the current market rate.
The payments are made to a second lender or the previous homeowner, who then
forwards the payments to the first lender after taking the additional amount
off the top. TOP
MORTGAGE TERMINOLOGY