Acceleration Clause: A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance

Amortization: Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

Annual Percentage Rate (APR): Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loans.

ARM: Adjustable Rate Mortgage: a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

Assignment Of Deed of Trust: A document that transfers the lender’s (beneficiary’s) interest into a deed of trust.

Bad Credit: Term used when a borrower fails to repay debt in the past , overuses credit, declares bankruptcy, etc; thereby showing a poor credit history.

Bankruptcy: A federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Borrower: A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Credit history: History of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan. Credit report: A record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.

Debt-to-income ratio (DTI): A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

Deed-in-lieu: To avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Deed of Trust: A written document describing the real property being given as security for an obligation

Delinquency: Failure of a borrower to make timely mortgage payments under a loan agreement.

Equity: An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s) from the fair market value of the property.

Escrow:  A way of transferring or exchanging property and/or money using a neutral third party.

FHA:  Federal Housing Administration

Fair market value: The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fixed-rate mortgage: A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.

Forbearance: A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

Foreclosure: A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

Good faith estimate (GFE):  An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

Gross Monthly Income: Income before taxes

Hard expenses: Hard expenses are monthly expenses that are definite and documented. Examples include installment debt like mortgage payments, car loans, and personal loans. Most hard expenses will be included on one’s credit report.

HELOC:  Home Equity Line of Credit; it is a loan in which the borrower can draw up to a maximum amount, maximum credit limit

HOA:  Home Owner’s Association; it is a legal entity created for the purpose of developing, managing homes.It enforces rules and regulations for the maintenance of common areas and facilitates services for the common enjoyment of its residents.

H.U.D:  Department of Housing and Urban Development

Index:  Lenders base ARM rates on a variety of indices.  COFI and LIBOR are used in over 80% of all ARMS.  The index can vary and the repayment rate will change accordingly.  Indices include TBILL, MTA, CODI, COSI, COFI, LIBOR, CD & PRIME RATE

Interest: A fee charged for the use of money (See also: Loan)

Interest rate: The amount of interest charged on a monthly loan payment expressed as a percentage.

Interest Adjustment Rate: The date from when the loan begins and interests starts to collect.

Interest Only: A feature of some MLCC loan programs that allows the borrower to pay only the interest on a loan, without paying down any principal with each monthly payment.
Lender: To give/lend money on condition that it is returned and that interest is paid for its temporary use. Banks are commonly known as lenders. Your mortgage broker is not a lender, but rather sold your loan to a lender.

Lien: A legal claim against property that must be satisfied when the property is sold.

Loan: Money borrowed at interest where one who borrows the money is called 'borrower' and one who lends it is called 'lender' .The borrower OWES money to the lender.

Loan-to-value (LTV) ratio: A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required
to pay as down payment.

Loan Servicing Company:  A company contracted to perform administrative duties for servicing a loan, billing and collections only.  They do not lend money.  Many large banks also have their own servicing companies.

Loan Modification:  A loan modification is a process whereby the original terms of a mortgage are changed in order for the borrower to better meet the mortgage obligation and therefore avoid default.
 
Loss mitigation: A process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.

Margin:  A fixed amount represented in a percentage that is added to an index to determine the fully indexed interest rate on an adjustable mortgage.

Mortgage (Mortgage Backed Security, Home Mortgage): A lien (lien: read above) on the property that secures the Promise to repay a loan. It is a legal instrument creating a lien upon real estate in order to secure a debt.

Mortgage banker: A company that originates loans and resells them to secondary mortgage lenders like: Fannie Mae or Freddie Mac.

Mortgage broker: A firm that originates and processes loans for a number of lenders.

Mortgage insurance: A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.

Mortgage Loan: A loan secured by real property (eg:for purchase of a home - which serves as a security)

Mortgage Rate: It is the rate of interest that a homeowner pays to obtain a mortgage or borrow funds from a lender in order to purchase his or her home.This is expressed as a percentage.

Notice of Default:  A written document that is recorded, Published, and posted giving notice of public record that a borrower has failed to perform his or her obligation under the terms of the promissory note.  This document is recorded.

Notice of Trustee sale:  A document that is recorded, published, posted and miled and sets for the date, time and location of the trustee’s sale.

Principal Balance Reduction: Instance where the bank forgives a portion of your principal balance as part of a loan modification. The mortgage payment due for this note is based off the new loan amount. Only applicable in heavily depreciated areas.

PITI:  Acronym for principal, interest, taxes, and insurance, the four components of a mortgage payment.

Postponement:  A verbal announcement made at the time and location of a trustee’s sale, extending the sale to a future date.

Principal Amount: The total amount of the loan owed by the borrower

Rate of Interest: The amount of interest charged on a monthly loan payment expressed as a percentage.

Refinancing: Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).

Reinstatement Period:  The time period between the time that the Notice of default records and ends 5 business days before the trustee’s sale date.  The lender must allow reinstatement after the 5 day period ends, but before the trustee’s sale.

Repayment Plan: Adding a portion of the delinquent mortgage balance on top of the normal monthly payments until caught up.

RESPA: Real Estate Settlement Procedures Act (Visit http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm for details)

Second trust:  An additional loan imposed on a property with an existing mortgage.

Short Sale: A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes.

Soft expenses: Monthly expenses that fluctuate and are difficult to document. These include food, gas, incidentals, entertainment and are not reported on one’s credit report.

Substitution Trustee:  A document signed by the lender and recorded by the trustee whereby the beneficiary appoints a successor trustee to the trustee of record.

Teaser Rate: A temporary rate reduction at the inset of a loan.

TILA: Truth in Lending Act. (Visit http://www.fdic.gov/regulations/laws/rules/6500-200.html for details)

Trustee: The part who holds title to real property in trust for the benefit of another.  The trustee’s most common functions are to process a full (when a loan is paid off) or partial (when a portion of the property is being released) reconveyance and to process a non-judicial foreclosure and process a trustee’s sale.

Trustor: The borrower/owner at the time the deed of trust is created.