Agility Mortgage Corporation

Adjustable Rate Mortgage (ARM)

A mortgage loan or deed of trust which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan.

Adjustment Interval

This is the time between changes in your interest rate and monthly payments on an Adjustable Rate Mortgage.

Amortization

Repayment of a mortgage debt with equal periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.

Amortization Schedule

A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made.

Annual Percentage Rate

The cost of your loan expressed as a yearly rate. For mortgages, it includes interest, points, origination fees and any mortgage insurance required by the lender.

Appraisal

A written estimate of the current value of the home to be purchased prepared by a licensed, certified appraiser. Also refers to the process by which a value estimate is obtained.

Arrearages

The amounts which are past due on a loan (usually past due payments), excluding any amounts which become due through acceleration.

Assessment

The value placed on property for the purpose of taxation. May also refer to a levy against property for a special purpose, such a sewer assessment.

Assign

To transfer or make over to another, to sell (see Assignment of Mortgage).

Assignment of Mortgage

A document which transfers ownership of a mortgage from one mortgagee to another (as from the originator of the loan to the permanent investor).

Assumable Mortgage

A mortgage that lets you transfer your mortgage and its terms to the purchaser of your home. This can be an advantage if and when you sell.

Assumption

The taking over by one party of an obligation which was originally occurred by another, as in the assumption of an existing mortgage by the new owner when the property is sold.

Balloon Mortgage

A mortgage with periodic installments of principal and interest which do not fully amortize the loan. The balance of the mortgage is due in a lump sum at the end of the term.

Bankruptcy

A proceeding in a Federal court in which a debtor who owes more than his/her assets are worth can be relieved of his/her debts by transferring the assets to a trustee. Affects only the borrower’s personal liability for the debt; does not affect the lien of the mortgage (see ‘Personal Liability’).

Bi-weekly Mortgage

A payment plan that allows you to pay on half of your monthly payment every two weeks. In addition to substantial interest savings over the life of the loan, most people like the way the payment plan smoothes out their cash flow.

Blanket Mortgage

A lien on more than one parcel or unit of land, frequently incurred by subdividers or developers who have purchased a single tract of land for he purpose of dividing it into smaller parcels for sale or development. Also called a blanket trust deed.

Call Option

This allows the lender to require the repayment of the loan in full before the term is up.

Caps

Safeguards that limit how much your ARM interest rates and payments can go up or down at any one time and over the life of the loan.  

Chronic Delinquents

Borrowers who are seriously or repeatedly late in making payments and the lateness is not caused by circumstances beyond their control.

Closing Costs

Money paid by the borrower and/or seller when the loan is closed.

Collateral

Any property pledged as security for a debt (i.e., the real estate pledged as security for a mortgage).

Collection

The servicing procedure followed to bring a delinquent mortgage current to file the required notices to begin foreclosure when necessary.

Conventional Financing

In real estate, mortgage financing which is not insured or guaranteed by a government agency such as HUD/FHA, VA or the Farmer’s Home Administration.  

Conveyance

The document, such as a deed, lease, or mortgage, used to effect a transfer.

Correspondent

A specialized type of mortgage banker whose function is limited to the origination of mortgage loans that are sold to other mortgage bankers or investment bankers.

Coupon Book

A book of printed tickets furnished to the borrower. One coupon is returned each month with a check or money order, enabling the mortgage servicer to identify the payment by name and loan number.

Covenant

A legally enforceable promise, as the covenant in a mortgage by which the borrower agrees to keep the property on good repair, adequately insures against fire and other casualties, etc. The breach of a covenant in the mortgage usually creates a default as defined by the mortgage and can be a basis for foreclosure.

Credit Instrument

The note or other document evidencing the debt (as distinguished from the mortgage or other security instrument).

Credit Rating

A rating given to a person or company to establish creditworthiness based upon present financial condition, experience, and past credit history.

Deed

A written document, signed, delivered, and usually recorded, which conveys title to property from one owner to another (see ‘Conveyance’).

Deed of Trust

A type of security instrument in which the borrower conveys a trust to hold property to a third party (trustee) as security for the lender, with the condition that the trustee shall reconvey the title upon the payment of the debt, and conversely, will sell the land and pay the debt in the event of a default by the borrower.

Deed-in-Lieu of Foreclosure

A deed given by an owner/borrower to a lender to prevent the lender from bringing foreclosure proceedings. The validity of the deed depends to some degree on ‘fairness’ under the circumstances, and adequacy of consideration will be considered.

Default

A breach or non-performance of the terms of a note or the covenants under a mortgage.

Deficiency

The difference between the balance outstanding on a loan and proceeds from the sale of the loan collateral.

Deficiency Judgment

A court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan.

Delinquency

A loan in which a payment is overdue but not yet declared to be in default by the lender. A payment is overdue, and therefore the loan is delinquent if it has not been received by the due date.

Delinquency Ratio

Ratio of the number of dollar balance of past due loans to total number or dollar balance of loans serviced.

Equity

Net ownership, the difference between fair market value and current indebtedness sometimes called owner’s interest.

Escrow Account

An account set aside by your mortgage lender to pay for annual expenses such as homeowners insurance and property taxes. Part of your monthly mortgage payment goes into this account, so you don’t have to make one lump payment when these expenses are due.

Escrow Analysis

The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow Overage or Shortage

The difference, determined by an escrow analysis, between escrow funds on deposit and escrow funds required to make a payment when it becomes due.

Escrow Payment

That portion of a mortgagor’s monthly payments held by a lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also called impounds or reserves in some states.

Executed

Officially signed, as in the execution of a deed or other document, with the intention that the person signing shall be bound by the contents.

Extending the Term

Lengthening the term of a loan beyond its original maturity.

FHA Insurance

An undertaking by FHA to insure the lender against loss arising from a default by the borrower.

Fannie Mae

Another name for the Federal National Mortgage Association (FNMA), the nation’s largest mortgage investor. A quasi-governmental secondary market organization, which offers various mortgage purchase and securitization programs.

Federal Home Loan Mortgage Corporation (FHLMC)

See ‘Freddie Mac’.

Federal Housing Administration (FHA)

A federal agency within the Department of Housing and Urban Development (HUD) that provides mortgage insurance for residential mortgages and sets standards for construction and underwriting. The FHA does not lend money, nor does it plan or construct housing.

Federal National Mortgage Association (FNMA)

See ‘Fannie Mae’.

Fixed Rate Loan

A mortgage with an interest rate that does not change.

Flood Insurance

Protection against flood loss through the 1973 Flood Disaster Protection Act.

Forbearance

The act of refraining from taking legal action despite the fact that the mortgage is in arrears. It is usually granted only when a mortgagor makes satisfactory arrangements to pay the amount owed at a future date.

Foreclosure Complaint

In a judicial foreclosure, the initial petition or pleading filed with the court outlining the terms of the mortgage and the nature and extent of the default, and asking that the property be sold to satisfy the debt.

Foreclosure Expenses

Attorney’s fees, title charges, court costs, and other necessary expenses incurred by the mortgagee in connection with foreclosure.

Foreclosure Sale

A forced sale of mortgaged property at public auction conducted either by the court or in some other prescribed fashion, with the proceeds of the sale going to satisfy the debt. The lender is usually the successful bidder at the foreclosure sale.

Freddie Mac

Another name for the Federal Home Loan Mortgage Corporation (FHLMC), a quasi-governmental secondary market organization, which offers various mortgage purchase and securitization programs.

Ginnie Mae

Another name for the Government National Mortgage Association (GNMA), a federal agency within the Department of Housing and Urban Development (HUD) who guarantees the timely payment of principal and interest for mortgage-backed securities backed by FHA-insured and VA-guaranteed mortgages.

Graduated Payment Mortgage (GPM)

A type of flexible payment mortgage where the payments increase for a specified period of time and then level off. Usually results in negative amortization.

Guaranteed Loans

A loan guaranteed by VA, the Farmer’s Home Administration, or any other interested party.

Index

A published rate used by lenders to calculate the interest adjustments on ARMs. This index can vary from lender to lender.

Initial Rate

A rate charged to the first interval of an ARM. It is often lower than current fixed rates.

Investor

Any person or institution who invests in mortgages or mortgage-backed securities.

Junior Liens

Liens or claims against a property which are secondary or inferior to the lien of the first mortgage (i.e., a second mortgage).

Late Charge

An additional charge that a borrower is required to pay as a penalty for failure to pay a regular installment when due.

Lien

A legal hold or claim of a creditor on the property of another as security for a debt. Liens are always against property, usually real property.

Liquidation

Conversion of a debt or asset to cash through negotiated settlement or legal proceedings, as the liquidation of a mortgage debt through foreclosures and sale of the foreclosed property.

Loan Administration

A mortgage banking function which includes the receipt of payments, customer service, escrow administration, investor accounting, collections, and foreclosure. Also called ‘servicing’.

Loan Documents

The legal documents evidencing or supporting the debt and legal status of the mortgage (i.e. note, mortgage or trust deed, assignment(s) of mortgage, and mortgage title policy).

Loan-to-Value Ratio (LTV)

The percent of the appraised value of the property that the lender is willing to lend. For example, if a home is appraised at $45,000 and the lender has an 80% loan-to-value ratio, the most you could borrow would be $36,000 (45,000 x .80)

Margin (spread)

The amount added to an index to determine the interest rate on an ARM.

Market Value

The highest price that a buyer and the lowest price that a seller would accept, neither one being compelled to buy or sell.

Modification

The act of changing the terms of a note, such as by reducing payments.

Mortgage

A formal document executed by an owner of property pledging that property as security for payment of a debt or performance of some other obligation; the security instrument.

Mortgage Banker

A firm which conducts mortgage lending activities form its own funds. Newly formed mortgages are sold to investors in the secondary market, providing funds for subsequent lending. The mortgage banker generally continues to service the loans.

Mortgage Insurance Certificate (MIC)

Certificate issued by HUD/FHA as evidence that a mortgage has been insured, and that a contract of mortgage insurance exists between HUD/FHA and the lender incorporating the HUD/FHA regulations identified in the certificate.

Mortgage Title Policy

A policy issued by a title insurance company insuring the mortgagee against loss due to any existing defect in the title to the mortgaged property or to any claim against the property having legal priority over the mortgage existing prior to the issuance of the policy (see ‘Owner’s Title Insurance Policy’).

Mortgagee

The lender in a mortgage transaction.

Mortgage Clause

A clause within a hazard insurance policy naming the mortgagee as a beneficiary of the policy.

Mortgagor

The borrower in a mortgage transaction who pledges property as a security for a debt.

Note

A general term for any kind of paper or document signed by a borrower which is an acknowledgement of the debt, and is, by inference, a promise to pay. When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee.

Notice of Default

(1) A notice recorded after the occurrence of a default under a deed of trust or mortgage; (2) A notice required by an interested third party who has insured or guaranteed a loan (i.e., FHA, VA, or a private mortgage insurer).

Origination

The process of creating both commercial and residential mortgages.

Origination Fee

The lender’s fee charged to a borrower to prepare documents, make credit checks, inspect and sometimes appraise a property. Usually stated as a percentage of the face value of the loan.

Owner’s Title Insurance Policy

A policy issued by a title insurance company insuring the owner against loss due to any defect in his title to real property existing prior to the issuance of the policy.

PITI

Acronym for the items included in a monthly payment principal, interest, taxes and insurance.

Partial Payment

In loan collection, less than the full payment due, usually not credited until the balance is received.

Payoff Figure

Information released to the borrower or to his/her representative giving the unpaid principal balance and interest amounts, to be used for payment in full of the mortgage.

Point

An up-front fee; one point is equal to one percent on the loan amount. Many lenders allow customers the option of paying ‘points’ in exchange for a lower interest rate on the loan.

Principal Payment

A payment applied entirely to the principal balance of the loan; formerly called ‘curtailment’.

Private Mortgage Insurance (PMI)

Insurance written by a private company protecting the mortgage lender against financial loss occasioned by a borrower defaulting on the mortgage.

Rate Guarantee (lock-in)

A guarantee that the rate in effect when you apply will be the final rate when you close your loan. Good for a specific time only.

Real Property

Land and buildings, as opposed to personal property or chattels.

Recorded

The noting in the office of the Recorder (or other public office in a political subdivision who keeps records or transactions affecting real property in the area) of the details of a properly executed legal document such as a deed, mortgage, or satisfaction of mortgage, thereby making it a part of the public record as of a specific date and time.

Refinancing

The repayment of a debt from the proceeds of a new loan using the same property as security.

Reinstatement

The acknowledgement by a mortgagee that a delinquent loan has been brought current by the mortgagor.

Reinstatement Program

A program or schedule of partial payments leading to reinstatement of the loan to a current status. Also called a ‘forbearance plan’.

Release of Liability

An agreement by a lender to terminate the personal obligation of a mortgagor in connection with the payment of a debt. FHA and VA require approval by regulatory agencies for a release of liability.

Satisfaction of Mortgage

The recorded instrument the lender provides to evidence payment in full of the mortgage debt.

Second Mortgage

A mortgage which is subordinate to a first mortgage.

Security

Collateral; personal property pledged to secure repayment of a debt, as the real estate security.

Self-Insurer

A company or organization which chooses not to buy insurance for certain risks but provides for losses either by absorbing them as they occur or by establishing a fund from which they can be paid. Self-insurance is usually undertaken as a cost-savings device where the risks are well diversified. FHA and VA and self-insurers with respect to fire and similar hazards on properties they own.

Servicing

Same as ‘Loan Administration’.

Short Rate

A method of calculating the premium refund on a hazard insurance policy cancelled between anniversary dates. To reimburse the insurance company for the additional administrative work involved in mid-term cancellation, a short-rate refund is less than it would be on a prorated basis.

Short Sale

Payment of less than total indebtness to satisfy debt through sale of property.

Soldiers and Sailors Civil Relief Act

A federal law restricting the enforcement of civilian debts against military personnel whose ability to pay has been severely hampered by entry into military service after the debt was incurred.

Term

The number of years it will take to pay off your loan, making your regular payments.

Third Party Purchaser

A successful purchaser at a foreclosure sale other than the mortgagee or mortgagor or their representatives.

Title

Ownership.

Title Examination

A search of public records to determine the status of a title (i.e., the identity of the current owner and the existence and nature of any liens or claims outstanding against the property).

Title Insurance

See ‘Title Policy’

Title Policy

A policy issued by a title insurance company insuring against loss due to any defect in the title to real property existing prior to the issuance of the policy (see ‘Owner’s Title Insurance Policy’; ‘Mortgage Title Policy’).

Title Search

Verifies that the title to the property you are buying is clear of any claims from other persons.

Underwriting

Guidelines the lender uses to determine if a borrower qualifies for a loan.

VA Guaranty

An undertaking by the Federal government to guarantee the lender, subject to limitations, against loss arising from a default by the borrower.

Veterans Administration (VA)

Warranty Deed

A deed in which the grantor or seller warrants or guarantees that he/she is conveying good title, as opposed to a quit-claim deed which contains no representation or warranty as to the quality of title being conveyed.