Glossary Terms Definitions:

Account Number: The number assigned to the loan at the time the application is processed or servicing rights are acquired.

Acquisition: The act of boarding loans onto servicing systems.

Action Code: A two digit number used by the lender to report to the Investor certain actions taken with respect to a loan for example that the borrower has filed for bankruptcy or that the loan has been paid in full.

Action Date: The applicable date of an action code, as reported by the lender to the investor.

Actual/ Actual: Remittance to an investors which requires the servicer to give the investor actual interest (net service fee) and actual principal collected from borrowers.

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.

Amortization Schedule: A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after a payment a made.

Annual Percentage Rate (APR): The percentage relationship of the total finance charge to the amount of the loan. Total finance charges include the interest that will be paid over the life of the loan plus closing costs.

Appraisal: A report made by a qualified person setting forth an opinion or estimate of value.

Appraisal Date: The date fair market value was established for the property.

Appraisal Amount: An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.

Bankruptcy: Court proceedings to relieve the debts of an individual or business unable to pay its creditors.

Basis Point: One hundredth of one per cent

Block Number: Method of grouping loans within an investor by similar characteristics or by special request. Examples are note rate or next change date.

Borrower: An individual or legal entity with a loan

Branch Code: A three digit numeric code indicating the office that originated the loan.

Business Day: Day on which bank or market is open for business or trading; usually excludes Saturdays, Sundays, and legal public holidays.

Buy Down: Money advanced by an individual (buyer, seller, etc.) to reduce the monthly payment for a home mortgages either during the entire term or for an initial period of years.

Closing Cost: Fee paid to effect the closing of a mortgage, such as an origination fee, discount points, title insurance fees, survey fees, and attorney’s fee.

Commitment: Promise of a loan to a specific upcoming sale

Contract: A standardized agreement obligating two parties to a transaction involving a set amount and grade of a commodity, at a price and time specified by an exchange.

Conventional Loan: A mortgage loan not insured by FHA or guaranteed by the VA.

Convertible arm: A type of arm loan that allows the borrower to opt to change the mortgage to a fixed-rate mortgage.

Cost of funds index: An index commonly used to determine interest rate changes for ARM plans.

Credit Rating: A rating given to a person or company that establishes creditworthiness based upon present financial condition, experience, and past credit history. Sometimes called FICO.

Curtailment: Extra payment made by the borrower that reduces the principal part of the loan.

CUSIP number: A unique 9 digit number assigned to securities for identification, usually bonds to facilitate clearing and settlement

Cutoff: A snap shot of information on a loan or several loans for a period of time. Cutoff can vary between Investors and is usually agreed upon at the closing of a deal between the company offering the security and its Investors.

The supplying of financial and/or status information to investors and various outside entities

Cutoff Date: The last date of activity being reported to investor for a reporting cycle.

Cutoff files: Physical files populated and/ or created during cutoff.

Daily Cutoff: Performing Cutoff tasks on a daily basis. (See Cutoff)

Date of Mortgage: The date that the borrower signs loan documents.

Deed in lieu: A deed given by a borrower to a lender to satisfy a debt and avoid foreclosure.

Delinquency: Failure of a borrower to make timely payments under loan agreements.

Department of Veterans Affairs: A cabinet level agency of the federal government. The Servicemen’s Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. One of the benefits is the VA Home Loan Guaranty program, which encourages mortgage lenders to offer long term, low down payment financing to eligible veterans by partially guaranteeing the lender against loss upon foreclosure.

DPA Loan: Down Payment Assistance. A subsidy program for a no-interest or low interest loan to cover the closing costs incurred in securing a mortgage. These are similar to “Seconds” in some ways. Also see Forgiven.

Due Date: Date which the borrower must pay the principal and interest due on his or her mortgage, as stated in the note, as well as any escrow payment.

Escrow: An item of value, money or document, deposited with a third party to be delivered upon the fulfillment of a condition. An example would be a deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due.

Impounded funds deposited with a 3rd party on behalf of a borrower e.g. Escrow Balance, Tax

Escrow Advance: Extra payment made by the borrower to Escrow servicer towards T&I..

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.

Escrow Recovery: Recovering of extra payment made by the Escrow servicer on behalf of borrower for taxes and insurance premiums

Fannie Mae (FNMA): The nation’s largest mortgage investor. Created in 1968 by an amendment to Title III of the National Housing Act. It is a stockholder-owned corporations, a portion of whose board of directors is appointed by the President of the United States, support the secondary market in mortgages on residential property with mortgage purchase and securitization programs.

Fees: Amounts charged or collected on a loan per contractual agreement e.g. Base Service Fee, IO Strip

FHA Loan: Federal Housing Administration: A loan made through an approved lender and insured by the Federal Housing Administration. These loans are limited in size, and are intended to finance moderately priced homes.

Fixed Rate Mortgage: A mortgage in which the interest rate and payments remain the same for the life of the loan.

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: A legal procedure in which a mortgaged property is sold to pay the outstanding debt in case of default.

Forgiven: A loan where no payments are collected. The full amount of the loan plus interest is due only when the property securing it is sold.

Freddie Mac (FHLMC): Created by Congress in Title III of the Emergency Home Finance Act of 1970. It is a stockholder-owned corporation, a portion of whose board is appointed by the President of the United States, supports the secondary market in mortgages on residential property with mortgage purchase and securitization programs.

Funding: Payment of loans money by a lender to a borrower so that he or she can purchase real estate; or, the payment of money by investors to lender in return for mortgages sold to them by the lender.

Funding Date: Date when the purchaser of the mortgage disburses payment to the seller or warehouse lender.

Garnishment: A notice to an employer or other asset holder that money, or wages, or property of debtor must be applied to a specific debt or creditor.

Ginnie Mae (GNMA): Created in 1968 by an amendment to Title III of the National Housing Act. This federal government corporation is a constituent part of the Department of Housing and Urban Development. Among other governmental functions, it guarantees securities backed by mortgages that are insured or guaranteed by other government agencies.

Gross Rate: Interest rate on a mortgage-backed security, including servicing and guarantee fees.

GSE: Government Sponsored Enterprises: Private organizations with government charters and backing. Examples are Freddie Mac and Fannie Mae.

Home Equity Loan: A revolving line of credit based on the equity in the mortgagor’s house. The property is the security for the loan, which is usable for any purpose.

Hybrid Contract: The scheduled payment amount is due the investor if the actual payment has not been made by the borrower within that remittance period.

Insurance: To protect those with a financial interest in a loan from loss. E.g. LPMI, Borrower paid mortgage insurance, Fire Insurance, Hazard Insurance

Interest: Consideration in the form of money paid for the use of money, usually expressed as an annual percentage.

Interest Paid to Date: The current date to which the interest has been paid on a loan.

Interest Rate: The stated rate of interest in a loan agreement.

Interest Rate Ceiling: On a floating rate instrument, the highest the interest rate may go for the life of the loan.

Interest Rate Floor: On a floating rate instrument, the lowest the interest rate may go for the life of the loan.

Investor Contracts: Legal document governing the reporting, remitting and administration of loans, whether originated and or sold to investors, contracts are created to define what obligations each party is responsible for performing e.g. Borrower, Servicing Agreement, Sub-Servicing Agreement

Investor Reference Number: Unique ID that is given by the Investor Accounting Department to a group of loans that belong to a certain Investor.

Issue Date: The date a mortgage-backed security is issued to investors.

Issuer: One who packages mortgages for sale as securities.

Key name: Identifier indicating a collection of investors where common operations (e.g. reporting) are done on all of them

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

Lender: Person or entity that invest or originates mortgage loans, such as a mortgage banker, credit union, commercial bank, or savings and loan.

Lien: A legal hold or claim of a creditor on the property of another as security for a debt.

Line of credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specific borrower.

Liquidation: Paying off a loan by the lender when the borrower has not made any payment. Usually happens when the outstanding balance is equal to zero.

Loan: Agreement between a borrower and lender to borrow (temporarily use) a lump sum of money and to repay the principal plus interest at a certain interest rate.
A debt obligation with contractually defined terms e.g. HELOC, Construction Loan

Loan Administration: A mortgage banking function, that includes the receipt of payments, customer service, escrow administration, investor accounting, collections, and foreclosure.

Loan Contract: Legally binding agreement signed by borrower acknowledging the debt and promise to pay e.g. HELOC Note, Mortgage Note

Loan Counts: IA: The number of loans within a certain grouping of loans. Groupings consist of portfolios, pools, Investors, & Etc.

Loan Event: Any action that affects the history or status of the loan.e.g. Payoff, Short Payoff, Loan Mod, Foreclosure Sale

Loan History: A listing of all payments posted to, and distributions taken from a loan.

Loan Identifier: A criteria by which a loan may be selected or grouped e.g. MERS ID, XREF

Loan Level: IA: Loan information listed by loan. (See Loan)

Loan Origination: Data captured at creation of or about creation of a loan e.g. Origination Date, borrower ID

Loan Movement: All activities that support the need for a loan to change its current investor designation to meet contractual requirements e.g. Forming Securities, Service Release

Loan Product: IA: The different types of loans that the company offering the security agrees to service. Examples are Heloc, Fixed, ARM, and Etc.

Loan Status: Condition of loan at specified time e.g Current, BK, Delinquent

Loss Data: Information regarding the a disposition of a defaulted loan or of that which results in a gain or loss for the Investor, e.g. Sales Proceeds, MI Proceeds

Lockout Code: A numeric code that indicates that certain actions are being taken regarding the loan.

LPMI: Lender Paid Mortgage Insurance. Lenders pay for mortgage insurance coverage and include it in the price of the loan by charging a slightly higher interest rate.

Margin: In an adjustable rate mortgage (arm), the spread between the index and the mortgage interest rate.

Maturity: The date on which an agreement expires: Termination of a mortgage note.

MIP: Mortgage Insurance Program

Mortgage: A pledge of property, especially real property, as security for a debt.

Mortgage Backed Security (MBS): An investment instrument backed by mortgage loans as security. Income from underlying mortgages is used to pay P&I on the securities.

Mortgage Banker: An individual, firm or corporation that originates, sells and/or services loans secured by mortgages on real property.

Mortgage Payment: The mortgagor’s total monthly payment consisting of the principal and interest (P&I), along with the escrow payment amount (T&I).

Mortgage Servicing Rights: The contractual obligations undertaken by one party to provide servicing for mortgage loans owned by another party, typically for a fee.

Mortgagee: The lender in a mortgage transaction.

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

Negative Amortization: The unpaid interest which is added to the mortgage principle in a loan where the principle balance increases rather than decreases because the mortgage payments do not cover the full amount of interest due.

Net Rate: The rate of interest remitted to an investor after servicing and guarantee fees have been deducted from the gross rate.

Non-Advancing Loan: Delinquent S/S loans for which the servicer stops paying all or part of scheduled remittances per contract with investor

Non-Cash: Any adjustment made to the loan that originated by non cash means

Non-Gse: Non Government Sponsored Enterprises:

Note: A general term for any kind of paper or document signed by a borrower that is an acknowledgement of the debt, and is, by inference, a promise to pay.

Note Rate: The interest rate as it appears on the note.

NSF Check: Non Sufficient Funds: A check returned by the bank due to lack of funds.

Odd Due Date: IA: Loans with a due date other than 1st

Origination: Securing a completed mortgage application from a commercial or residential borrower.

Origination Date: Date of the mortgage note.

Origination Fee: The lender’s fee charged 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.

Outsourcing: Hiring contract employees to perform support services rather than using the mortgage company’s own employees.

Partial Payment: Receipt of less than the full payment due.

Participation Percentage: See Percent Owned.

Pass Thru Rate: The contractual Net Rate due an investor.

Payoff: Payment in full of the remaining principal balance, outstanding fees, and the accrual interest associated with a loan.

Percent Owned: The percentage of a loan owned by an investor or investors.

PMI: Private mortgage insurance

Point: An amount equal to one percent of the principal amount stated in the note.

Pool: A collection of mortgage loans grouped by one or more similar characteristics.
A group of loans purchased or the purpose of securitization

Pool Level: IA: Summarize loan information listed by Pool. (See Pool)

Pool Number: Unique ID that is assigned by an Agency to identify an issued security.

Pool to Security: A method of determining the accuracy of the outstanding security balance by comparing it with an adjusted pool balance.

Portfolio: A collection of loans held for servicing or investment. Usually set up by Investors, Loan Products, & Etc.

Portfolio Balancing: The act of balancing portfolios. (See Portfolio & Balancing)

Portfolio Lender: A lender who holds loans in their portfolio and does not sell to investors in the secondary market. The lender usually holds these loans until maturity or until the loans are paid off.

Pre-Funded: A loan in the pipeline or the warehouse already funded by an investor

Prepaid Interest: Mortgage interest that is paid in advance of when it is due to obtain tax advantages.

Prepayment: The payment of all or part of a mortgage debt before it is due.

Prepayment Penalty: A charge the mortgagor pays the mortgagee for the privilege to prepay the loan.

Primary Investor: The investor with the majority interest in a pool or loan.

Prime Rate: The interest rate commercial banks charge their most creditworthy customer for short-term loans. Prime is the yardstick for trends in interest rates, and it is often a baseline for establishing interest rates on high-risk loans.

Principal: The original balance of money lent, excluding interest on a loan. Also the remaining balance of a loan, excluding interest.

Promissory Note: A written promise to pay a specific amount at a specific time.

Product: Characteristic of a debt instrument. E.g. 30 Yr Fixed, GPM, Skip

Property: A defined section of land with or without a structure often used to secure a loan

Purchase: The act of buying financial Instruments (loans).

Redemption: Buying back a foreclosed loan by the borrower paying all the delinquent balances, fees and interest according to various state laws

Reconciliation: The process of comparing one element to another or group and accounting for any differences.

Remittance: IA: The process of sending funds from the company offering the security to their investors due to the collection during the cutoff period of principal, interest, net service fee. This occurs after each individual cutoff and sent to each individual investor.

Distribution of funds to investors, trustees, certificate holders or other contractually specified parties

Reinstatement: The process of putting a defaulted (in delinquency, in foreclosure) loan back on track so that the loan becomes current and the borrower can continue to make regular payments.

REO: Real Estate Owned: Property a lender acquire as the result of foreclosure.

Reporting: The supplying financial an/or status information to investors and various outside entities e.g. Loan Level Reporting, Payoffs

Reporting Type: Code identifying the parameters used to relay the status of loans in a particular portfolio to the corresponding investor reporting methodology. The code can vary per investor.

Repurchase: the process in which the borrower who has defaulted on the house earlier and lost it in foreclosure will be able to purchase it back from the current owner within a stipulated period taking advantage of certain federal concessions

Rules: Specific Requirements mandated by the contract and/or investor guidelines e.g. Interest on Escrow, Remittance Date

Scheduled/Actual: Remittance agreement, which requires the servicer to give the investor the scheduled interest, regardless of actual collections from borrowers, and actual principal collected.

Scheduled Balance: IA: The balance at regular time intervals throughout the life of a loan if principal and interest payment where made when due. The unpaid balance of an amortization schedule.

Schedule/ Schedule: Remittance agreement, which requires the servicer to give the investor the scheduled interest and the scheduled principal due, whether or not payments are collected from the borrowers.

Secondary Investor: The investor with the minority interest in a pool or loan.

Security Balance: The scheduled unpaid principal balance of the underlying loans in an MBS pool as of a given date.

Servicing: See Loan Administration.

Servicer: Organization that administers the loan.

Servicing Released: A stipulation in the agreement for the sale of mortgages in which the seller is not responsible for loan administration.

Servicing Retained: A stipulation in the agreement for the sale of mortgages in which the seller is responsible for the loan administration and is paid a fee for doing so.

Servicing Right: See Mortgage Servicing Rights.

Short Sale: A workout program wherein the lender accepts less than the total payoff amount.

Single Debit: A system of mortgage accounting under which a servicer reports currently paid installments as a single item. The only other item detailed are uncollected installments and collections of anything other than current monthly installments.

SSCRA: Soldiers & Sailors Civil Relief Act. A program by Federal Government in which civilians called into active military duty are eligible for certain concessions in mortgage payment.

Sublease: A lease executed by a lessee to a third person for a term no longer than the remaining portion of the original lease.

Subservicer: Lender that performs the on going servicing activities for the mortgage or pool under the agreement with the contractually responsible servicer.

Subservicing: An investor contracts servicer to service loans and that servicer contracts a “sub-servicer”.

Sub-Serviced Owner: Organization who has purchased financial instruments and servicing rights and has outsourced the servicing of the financial servicing of the financial obligations (for a short term until boarded?) to another servicing company.

Super Lien: A government lien imposed on a property for violation of environmental and public heath and safety rules.

Tax Lien: A claim against property for unpaid taxes.

Term: The period of time between the commencement date and termination date of a note, mortgage, legal document, or other contract.

Term Mortgage: A mortgage in which, for a specific period of time, only interest is paid, after which the principal is due.

Title One: Under the Title I loan insurance program, established by Title I of the National Housing Act in 1934, lenders make loans from their own funds, and HUD insures the lender against loss if the borrower defaults on the loan. Title I loans are made for property improvement or manufactured home and lot purchase. Title I loans are also used as part of state and local community revitalization programs

Transfer: A process in which ownership of loans is transferred from one investor to another. Loans are transferred in bulk or individually.

Trial Balances: A report containing prepaid accounts curtailments, delinquents, paid off loans and loan collection breakdown.

VA: See Department of Veterans Affairs.

VA Loans: Mortgage loan made by an approved lender and guaranteed by the Department of Veterans Affairs. VA loans are made to eligible veterans and those currently serving in the military, and can have a lower down payment than other types of loans.

Variable Rate Mortgage: See Adjustable Rate Mortgage.

Vendor: The seller of personal or real property.

Vendor’s Lien: An unpaid seller’s right to a lien on property until the purchase price is recovered.

Warehouse: Unique grouping for loans that are closed and being serviced but not yet sold to an investor

Warehouse Loans: Loans that are funded and awaiting sale or delivery to an investor.

Warehousing: Short term borrowing of funds by a mortgage banker using permanent mortgage loans as collateral. The money borrowed is used to make additional mortgage loans. This interim financing is used until the mortgages are sold to a permanent investor.

Warning Code: A numeric code used by Loan Servicing to identify loans with certain identifiable problems or requirements.

Workout: An alternative action to foreclosure for the benefit of the lender and the borrower. Includes loan modifications, short sales and various forms of forbearance.

Workout Agreement: A plan between the lender and borrower to bring a delinquent or defaulted mortgage current.

Yield: The ratio of investment income to the total amount invested over a given period of time.

Yield to Maturity: The lender’s percentage of annual return on actual funds loaned, assuming that the loan will be paid in full at maturity.