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Federal
Housing
Administration (FHA): A
division of the Department of
Housing and Urban Development.
Its main activity is the
insuring of residential mortgage
loans made by private lenders.
FHA also sets standards for
underwriting mortgages.
Federal National
Mortgage Association:
(FNMA) also know as "Fannie Mae
A tax-paying corporation created
by Congress that purchases and
sells conventional residential
mortgages as well as those
insured by FHA or guaranteed by
VA. This institution, which
provides funds for one in seven
mortgages, makes mortgage money
more available and more
affordable.
FHA loan: a
loan insured by the Federal
Housing Administration open to
all qualified home purchasers.
While there are limits to the
size of FHA loans ($155,250 as
of 1/1/96), they are generous
enough to handle
moderately-priced homes almost
anywhere in the country.
FHA mortgage insurance
Requires a fee (up to 2.25
percent of the loan amount) paid
at closing to insure the loan
with FHA. In addition, FHA
mortgage insurance requires an
annual fee of up to 0.5 percent
of the current loan amount, paid
in monthly installments. The
lower the down payment, the more
years the fee must be paid.
FHLMC The
Federal Home Loan Mortgage
Corporation provides a secondary
market for savings and loans by
purchasing their conventional
loans. Also known as "Freddie
Mac."
Firm Commitment:
A promise by FHA to insure a
mortgage loam for a specified
property and borrower. A promise
from a lender to make a mortgage
loan.
Fixed
Rate Mortgage: The
mortgage interest rate will
remain the same on these
mortgages throughout the term of
the mortgage for the original
borrower.
FNMA The
Federal National Mortgage
Association is a secondary
mortgage institution which is
the largest single holder of
home mortgages in the United
States. FNMA buys VA, FHA, and
conventional mortgages from
primary lenders. Also known as
"Fannie Mae."e
Foreclosure A
legal process by which the
lender or the seller forces a
sale of a mortgaged property
because the borrower has not met
the terms of the mortgage. Also
known as a repossession of
property.
Freddie Mac:
see Federal Home Loan Mortgage
Corporation
Ginnie Mae: see
Government National Mortgage
Association.
Government National
Mortgage Association
(GNMA): also known as "Ginnie
Mae" , provides sources of funds
for residential mortgages,
insured or guaranteed by FHA or
VA.
Graduated Payment
Mortgage (GPM): A type
of flexible-payment mortgage
where the payments increase for
a specified period of time and
then level off. This type of
mortgage has negative
amortization built into it.
Gross National Product
(GNP): The Gross
National Product is the broadest
measure of the nation's
production. It measures the
market value of all newly
produced goods and services in
the United States. When GNP is
down, it shows a slowing down in
the economy. To counteract this,
the Federal Reserve may loosen
money by lowering interest
rates. Bond Market Moves Up In
Prices.
Guaranty: A
promise by one party to pay a
debt or perform an obligation
contracted by another if the
original party fails to pay or
perform according to a contract.
Hazard Insurance:
A form of insurance in which the
insurance company protects the
insured from specified losses,
such as fire, windstorm and the
like.
Housing
Expenses-to-Income Ratio:
The ratio, expressed as a
percentage, which results when a
borrower's housing expenses are
divided by his/her gross monthly
income. See debt-to-income
ratio.
Impound: That
portion of a borrower's monthly
payments held by the lender or
servicer to pay for taxes,
hazard insurance, mortgage
insurance, lease payments, and
other items as they become due.
Also known as reserves.
Index: A
published interest rate against
which lenders measure the
difference between the current
interest rate on an adjustable
rate mortgage and that earned by
other investments (such as one-
three-, and five-year U.S.
Treasury security yields, the
monthly average interest rate on
loans closed by savings and loan
institutions, and the monthly
average costs-of-funds incurred
by savings and loans), which is
then used to adjust the interest
rate on an adjustable mortgage
up or down.
Industrial Production
Index: The industrial
production index measures the
monthly level of the physical
output of the manufacturing,
mining, and gas and electric
utility industries. When
industrial production is down,
it indicates a slowing of
economic growth and, therefore,
the Federal Reserve is inclined
to allow interest rates to drop
to stimulate the economy. Bond
Market Moves Up In Price.
Indexed rate:
The sum of the published index
plus the margin. For example if
the index were 9% and the margin
2.75%, the indexed rate would be
11.75%. Often, lenders charge
less than the indexed rate the
first year of an adjustable-rate
mortgage.
Interim Financing:
A construction loan made during
completion of a building or a
project .A permanent loan
usually replaces this loan after
completion.
Investor: A
money source for a lender.
Jumbo Loan: a
loan which is larger (more than
$214,600 as of 1/1/97) than the
limits set by the Federal
National Mortgage Association
and the Federal Home Loan
Mortgage Corporation. Because
jumbo loans cannot be funded by
these two agencies, they usually
carry a higher interest rate.
Lien: A claim
upon a piece of property for the
payment or satisfaction of a
debtor obligation.
Leading Economic
Indicators:
This index is a composite of 11
statistics designed to foretell
economic activity 6 to 9 months
hence, (i.e. building permits,
new orders for consumer goods
and materials, the average
workweek, index of consumer
expectations).
Loan-to-Value Ratio:
The relationship between the
amount of the mortgage loan and
the appraised value of the
property expressed as a
percentage.
Lock: Lender's
guarantee that the mortgage rate
quoted will be good for a
specific number of days from day
of application.
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John
Berlowitz
