Glossary of Terms

The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.

A homeowners’ association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project.

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product.

A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of your credit.

The act of changing any of the terms of the mortgage.

A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.

A mortgage that requires payments to reduce the debt once a month.

A legal document that pledges a property to the lender as security for payment of a debt.

A company that originates mortgages exclusively for resale in the secondary mortgage market.

An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.

A contract that insures the lender against loss caused by a mortgagor’s default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA).

The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

The lender in a mortgage agreement.

The mortgage borrower who gives the mortgage as a pledge to repay.

A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.

Fannie Mae provides financing for multifamily (buildings with five or more units) rental properties through a nationwide network of mortgage lenders.

Properties that provide separate housing units for more than one family, although they secure only a single mortgage.