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NYRE Finance
NY Real Estate Finance - Chapter 5
| Term | Definition |
|---|---|
| acceleration clause | Term given to the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement. |
| adjustable rate mortgage - (ARM) | A mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. (ARM) |
| alienation clause | Allows the lender to require the balance of a loan to be paid in full if the collateral is sold (also known as a “due on sale” clause). |
| amortization | The process by which a loan principal decreases over the life of a loan. |
| assignment | The method or manner by which a right or contract is transferred from one person to another. |
| balloon mortgage | A mortgage which does not amortize over the term of the note, thus leaving a balance due at maturity. |
| blanket mortgage | A type of loan used to fund the purchase of more than one piece of real property. A blanket mortgage is often used for subdivision financing. |
| bridge loan | A type of short-term loan, typically taken out for a period of 2 weeks to 3 years. |
| buydown | Obtaining a lower interest rate by paying additional points to the lender. |
| construction mortgage | A loan secured by real estate which is for the purpose of funding the construction of improvements or building(s) upon the property. |
| conventional mortgage | A loan secured by real property through the use of a mortgage note. |
| default | The failure to pay back a loan. |
| discount points | A form of pre-paid interest where one point equals one percent of the loan amount. |
| "due on sale" clause | Allows lender to require the balance of a loan to be paid in full if the collateral is sold (also known as an Alienation Clause). |
| FHA/mortgage | Backed loans that usually require a lower down payment and may sometimes have a lower interest rate. |
| grace period | A time past the deadline for an obligation during which a late penalty that would have been imposed is waived. |
| graduated mortgage | A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a desired, final level. |
| home equity loan | A loan secured by equity value in the borrower’s property. |
| inflation | The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. |
| interest and tax | Reductions of the income subject to tax, for various items, especially expenses incurred to produce income. |
| lifetime cap/ceiling | Some mortgages have interest rate ceilings (or limits) which are similar to, and sometimes referred to as, lifetime caps. |
| loan flipping | predatory lending |
| loan to value ratio | A financial term used by lenders to express the ratio of a loan to the value of an asset (property) purchased. |
| margin | The amount of interest a bank charges on a loan over the base rate. |
| mortgage insurance - (MIP) | The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the FHA or to a private mortgage insurance company. |
| mortgage | Legal agreement by which a bank lends money in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon payment of the debt. |
| mortgagor | The borrower, typically a home owner. |
| mortgagee | The lender or bank who provides a loan to the borrower or homeowner. |
| negative amortization | Occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. |
| package mortgage | A method of financing in which the loan that finances the purchase of a home also finances the purchase of personal items such as a washer and dryer, refrigerators, stove, and other specified appliances. |
| pledged account mortgage - (PAM) | Money is placed in a pledged savings account. This fund, plus earned interest, is used to gradually reduce mortgage payments. |
| private mortgage insurance - (PMI) | Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. |
| point | A loan fee equal to one percent of the mortgage amount. |
| predatory lending | The unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. |
| prepayment penalty clause | A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of months worth of interest. |
| primary mortgage market | The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market. |
| promissory note | A signed document containing a written promise to pay a stated sum to a specified person/institution or the bearer at a specified date or on demand. |
| rate cap; payment cap | A payment cap is a consumer safeguard that limits the amount that your monthly payment on an adjustable rate mortgage can change. It ensures that you don't face drastically increased payments on your mortgage. |
| red-lining | The refusal to lend money within a specific area for various reasons. This practice is illegal. |
| Regulation Z | Regulation Z is a law that protects consumers from predatory lending practices. Also known as the Truth in Lending Act, the law requires lenders to disclose borrowing costs so consumers can make informed choices. |
| release clause | A clause found in a blanket mortgage which gives the owner of the property the privilege of paying off a portion of the mortgage indebtedness, and thus freeing a portion of the property from the mortgage. |
| Real Estate Settlement - (RESPA) | A consumer protection statute, passed in 1974. Purpose of RESPA are 1) To help consumers become better shoppers for settlement services and 2) To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services. |
| Procedures Act | |
| reverse annuity mortgage | A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as satisfaction of mortgage. |
| sale-and-leaseback | A transaction where one sells an asset and leases it back for the long-term; therefore, one continues to be able to use the asset but no longer owns it. |
| satisfaction of mortgage | A document acknowledging the pymt of a mortgage debt. |
| shared equity mortgage | Joint ownership of real estate by both lenders and property dwellers. When the property is eventually sold, the owners share in the proceeds, or equity. In the meantime the property occupants benefit from interest and property tax write-offs. |
| State of New York Mortgage Association - (SONYMA) | A mortgage program that assists first-time homebuyers with the purchase of a home in New York State. |
| Association | |
| straight mortgage/term Mortgage | A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. |
| sub-prime loan | Mortgage applicants with poor credit scores and negative items on their credit reports are considered subprime. Whereas, prime borrowers have good credit and a strong financial track record, so the lender offers them a loan at a lower interest rate. |
| usury | On a loan, claiming a rate of interest greater than that permitted by law. |
| VA mortgage | A mortgage loan offer long-term financing to veterans or their surviving spouses (cannot remarry). The VA direct home loan program is to supply home financing to veterans where private financing is not available and to help with no down payment. |
| wrap-around mortgage | A form of secondary financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around the existing in addition to any superior mortgages already secured by the property. |
| secondary mortgage market | The market where mortgage loans and servicing rights are bought and sold between mortgage originators, mortgage aggregators (securitizers) and investors. The secondary mortgage market is extremely large and liquid. |
| Subrogation | Assigning someone else to take over claim/obligation. Right to pursue someone else's claim. |
| Subordination | A legal agreement which establishes one debt as ranking behind another debt. |
Created by:
Dana07
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