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BWR:
Borrower is the
primary
applicant on a
mortgage
application.
CBWR:
Co-Borrower is
the secondary
applicant on a
mortgage
application.
Fannie Mae:
Federal National
Mortgage
Association, one
of two GSE’s
(Government
Sponsored
Enterprises)
created by
Congress to
increase access
to mortgages.
Mortgages
offered under
Fannie Mae
guidelines are
called
“conforming”
mortgages since
they conform to
Fannie Mae
guidelines.
Freddie Mac:
Federal Home
Loan Mortgage
Corporation, the
second of two GSE’s created by
Congress to
increase access
to mortgages.
Mortgages
offered under
Freddie Mac
guidelines are
also called
“conforming”
mortgages since
they conform to
Freddie Mac
guidelines.
FHA:
Federal Housing
Administration,
the Federal
Government
Agency that
oversees the US
Housing market.
FHA mortgages
are guaranteed
by the Federal
Government and
offered by
banks/lenders.
VA:
Veterans
Administration,
like FHA,
guarantees
mortgages for
the Federal
Government.
However, VA
mortgages are
only available
to members of
the military,
their immediate
family, and
veterans of
military
service.
USDARHS:
United States
Department of
Agriculture/Rural
Housing
Services, like
FHA these
mortgages are
guaranteed by
the Federal
Government.
Ginnie Mae:
Government
National
Mortgage
Association is
the actual
guarantee agency
for Federally
Guaranteed
mortgages by VA,
FHA, RHS, and
PIH. Ginnie
Mae’s MBS’s are
the only MBS’s
that are
actually
guaranteed by
the Federal
Government.
PIH:
Public and
Indian Housing
is the Federal
Agency that,
like FHA,
guarantees
mortgages.
MBS:
Mortgage Backed
Security. These
are the
investment
instruments that
are bundled by
Fannie Mae,
Freddie Mac, and Ginnie Mae for
sale on Wall
Street.
DU:
Desktop
Underwriter is
the automated
underwriting
engine developed
by Fannie Mae
for underwriting
Fannie Mae
eligible
mortgages. DU is
also used for
underwriting FHA
mortgages.
LP:
Loan
Prospector is
the automated
underwriting
engine developed
by Freddie Mac
for underwriting
Freddie Mac
eligible
mortgages. LP
is also used for
underwriting FHA
mortgages.
HUD:
Housing and
Urban
Development is
the Cabinet
Department of
the Federal
Government that
oversees the US
housing market.
All laws that
are passed by
Congress are
administered by
HUD.
LO:
Loan
Officer is the
person that
takes the actual
application for
a mortgage. An
LO can be a
licensed
mortgage broker
or they can work
for a lender and
not be required
to be licensed.
LTV:
Loan-to-Value is
the percentage
of the mortgage
to either the
purchase price
(when
purchasing) or
the appraised
value (when
refinancing an
existing
mortgage)
CLTV:
Combined-Loan-to-Value
is the total
percentage of
all mortgages to
the value of the
property.
TLTV:
Total-Loan-to-Value
is another name
for CLTV.
PMI (or just
MI):
Private
Mortgage
Insurance is
charged on
conforming
mortgages that
are over 80%
LTV.
MIP:
Mortgage
Insurance
Premium is
similar to PMI
but is used for
FHA mortgages.
With FHA
mortgages there
is an upfront
MIP payment as
well as a
monthly MI
payment.
LPMI:
Lender Paid
Mortgage
Insurance is
mortgage
insurance paid
by the lender
instead of the
borrower. This
is accomplished
by the lender
increasing the
mortgage
interest rate.
DTI:
Debt
to Income is the
ratio of the
borrower’s gross
monthly income
to their
consumer and/or
housing debt.
RESPA:
Real Estate
Settlement
Practices Act is
the Federal Law
that regulates
what is
allowable and
not in the
sale/purchase of
residential real
estate.
HUD1:
HUD1 is the
statement that
you receive that
details all the
costs and
expenses
involved in the
actual closing
of a mortgage.
NAMB:
National
Association of
Mortgage Brokers
is membership
organization
that represents
the mortgage
brokerage
industry. In
addition to the
national
association
there are also
about 43 state
associations.
GFE:
Good
Faith Estimate
is one of the
documents that
an applicant(s),
under RESPA
guidelines, is
supposed to
receive within 3
business days of
an application.
The GFE is an
estimate of what
the closing
costs of the
applicant’s
mortgage. The
important fee
section to look
at on a GFE is
the 800 series
fees as those
are
lender/broker
fees.
TIL:
Truth in Lending
is the other
major document
that an
applicant is to
receive within
three business
days of applying
for a mortgage.
The TIL shows
what the
payments are
supposed to be
and also what
the cost of the
mortgage will
be.
API:
Annual
Percentage
Interest is the
interest rate
the borrower
pays for the
mortgage. This
is the rate that
the monthly
payments are
based on.
APR:
Annual
Percentage Rate
calculates the
cost to the
applicant for
the mortgage by
taking the total
amount borrowed
and subtracting
certain fees
from that amount
and then
figuring what
the interest
rate then
calculates out
to without
changing the
payment amount.
APR is an easily
manipulated
number which
makes it
difficult if not
impossible to
compare
different
programs and
products.
ARM:
Adjustable Rate
Mortgage is a
mortgage that
will have a
fixed rate for a
set period of
time and then
the rate is
adjusted. The
fixed period can
be as short as 1
month or as long
as 10 years. The
rate will
normally be
adjusted either
once a year or
twice a year.
There is one
type of mortgage
where the
adjustment
period is
monthly. All ARM’s are based
on an index. The
following are
the common
indexes:
1) 1
year Treasury Bill is the index used for all FHA ARM mortgages and many
conforming ARMs
2) LIBOR: London Interbank Offered Rate is the other major index used on
conforming mortgages. It is also the index that all subprime ARMs are based on.
Subprime mortgages will use the 6 month LIBOR but conforming ARMs can use
anything from the one month LIBOR up to a 1 year LIBOR though they will
generally only use either the 6 month LIBOR or the 1 year LIBOR.
3) COSI: Cost of Savings Index is based on the 11th District Federal Home Loan
Bank in San Francisco. COSI loans are always Option ARM mortgages.
4) CODI: Cost of Deposits Index is similar to COSI except it is only offered by
World Savings to separate themselves from the other Option ARM lenders.
5) COFI: Cost of Funds Index is similar to COSI and CODI.
6) MTA: Monthly Treasury Average is another index that is used strictly by
Option ARM lenders
HELOC:
Home Equity Line of Credit is a revolving line of credit based on
the equity in a property. Generally HELOC's are based on Prime rate. If taken
out at the time of purchase many HELOC's report as a mortgage. If the HELOC is
taken out subsequent to the purchase they will generally report as a revolving
line of credit and will report utilization the same way any other revolving
credit line does.
SIVA:
Stated Income Verified Asset is a type of reduced documentation
mortgage that is more fully explained in another pinned topic, Mortgage
Documentation types.
SISA:
State Income Stated Asset is another type of reduced documentation
mortgage.
NIV:
No Income Verification is usually another name for a No Ratio
mortgage, another reduced documentation type mortgage.
NINA:
No Income No Asset is another type of reduced documentation
mortgage.
YSP:
Yield Spread Premium is what a lender pays a broker for bringing the
mortgage application to them. It will normally be shown as a percentage
initially, and then as a dollar amount on the HUD1.
SRP:
Service Release Premium is similar to YSP except that SRP is usually
not available to brokers but only to direct lenders. In addition, unlike YSP,
SRP is not shown on the HUD1.
IO:
Interest Only is a payment type where none of the required payment
goes towards principal. While the required payment will generally be lower than
an amortizing payment since nothing is going towards principal the amount owed
does not go down. Like a fully amortizing mortgage a borrower is allowed to pay
extra towards principal.
O/O:
Owner Occupied is the mortgagor’s principal or primary residence.
PR:
Primary Residence
NOO:
Non Owner Occupied is a property where the mortgagor does not live
in the property and has it as an investment.
IP:
Investment Property
PPP:
PrePayment Penalty is charged in those states that allow it by
subprime lenders and an occasional conforming lender to assure the lender of
making a profitable mortgage investment. A PPP can be either hard or soft. A
hard PPP means that the borrower will pay a penalty for paying the mortgage off
before a specific time period whether they sell or refinance. Most PPP’s are for
3 years or less and with subprime lenders will generally be the same as the
fixed period of an ARM mortgage. A soft PPP means that the borrower will have to
pay a penalty if they sell or refinance within the first year or refinance
within the remainder of the PPP.
VOR:
Verification of Rent is a form that is sent to the landlord to
verify the timely payment of rent.
VOM:
Verification of Mortgage is a form that is sent to a lender to
verify the timely payment of the mortgage. This is normally used when a mortgage
is not reporting up to date or when it is a private mortgage that doesn’t report
at all.
VOD:
Verification of Deposit is a form sent to the bank/credit
union/savings bank to verify the amount of funds in the account and to provide
an average balance over a specified, usually 60 day, period.
VOE:
Verification of Employment is a form that is sent to the employer to
verify employment. Many times a VOE will be done verbally by the lender just
prior to closing.
W-2:
W-2’s are tax forms provided by the employer to show total year’s
income.
NEG AM:
Negative Amortization occurs when the required mortgage payment
is not sufficient to cover the interest owed on the payment. Option ARMs are
considered to be neg am mortgages because the minimum required payment is less
than IO. The unpaid interest is then added to the principal owed on the mortgage
causing the mortgage to increase. This is the most dangerous of the “exotic”
mortgages available.
FTHB:
First Time Home Buyer is a purchaser(s) that has not had an
ownership interest in a residence within the previous three years.
PITI:
Principal-Interest-Taxes-Insurance is the total housing expense on
a monthly basis. Also includes homeowners association fees, and monthly
mortgage insurance if applicable. |
