Common terminology in the mortgage industry Part II
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| Federal Reserve System | The central federal banking system that regulates and provides services to member commercial banks. Also has the responsibility for conducting federal monetary policy.
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| Chain of title | The chronological order of conveyance of a parcel of land from the original owner to the present owner.
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| Appreciation | The increase in the value of a property that has occurred over time.
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| Amortization | Periodic payments on a loan requiring payment of enough principal and interest to ensure complete repayment of the loan by the end of the loan term.
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| Payment Shock | A sudden large increase in a monthly mortgage payment as a result of an adjustable-rate mortgage or through a refinance with new financing terms.
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| Originator | One who, for a fee or compensation, negotiates, arranges, or offers to negotiate or arrange a mortgage loan between a mortgage lender and one or more individuals; or to place, assist in placing, or find a mortgage loan for one or more individuals.
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| Market Value | The highest price a buyer is willing to pay, and the lowest price a seller is willing to accept for real property. It may be different from the price the property could actually be sold for at a given time.
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| Mortgage Insurance | Insurance that indemnifies the lender against default by the borrower; required when the borrower has less than a 20% equity position in a property.
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| Loan to Value | The relationship between the amount of the mortgage loan and the appraised value of the property or the purchase price, whichever is lower, expressed as a percentage.
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| Initial Cap | A limit on the amount an interest rate can increase during the first adjustment period for an ARM loan.
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| Assets | Total resources/items owned by an individual or business which can be converted into cash, such as property, investments, savings, or real estate.
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| Collateral | Property pledged as security for a debt.
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| Deed restriction | A clause in a deed that limits the use of land.
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| Sales Contract | A legally binding agreement between a buyer and seller detailing the terms and conditions of the sale of real estate.
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| Recording | The process through which documents concerning title to a property are entered into the public records.
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| Conforming loan | A mortgage that meets all requirements and is therefore eligible for purchase by Fannie Mae and/or Freddie Mac.
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| Equity | The difference between the fair market value of a property and the current balances of any liens against the property.
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| Equal Credit Opportunity Act (ECOA) | A federal law that requires lenders to make credit available without discrimination on the basis of race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
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| Federal Housing Administration (FHA) | A division of the Department of Housing and Urban Development. Its main activity is to insure residential mortgage loans made by private lenders, and to set standards and guidelines for underwriting and approving the mortgage loans it insures.
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| Government National Mortgage Association (Ginnie Mae) | A government sponsored enterprise created by Congress to guarantee securities backed by FHA, VA, and RHS loans.
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| Rate Lock | A lender’s guarantee that the interest rate quoted will be valid for a specific number of days.
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| Truth in Lending Act | A federal law that protects consumers by requiring lenders to use uniform standards for disclosing the cost of credit and by requiring truthful advertising of credit.
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