Fannie Mae (Federal National Mortgage Association/FNMA)
FNMA is one of the major secondary market investors that purchases loans from mortgage
companies and other depository institutions. The company is a private corporation and its stock is
traded on the New York Stock Exchange.
Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC)
A government sponsored agency that is also a publicly traded company on the New York Stock
Exchange that purchases mortgage loans from mortgage bankers and financial depository
institutions. FHLMC is a major secondary market investor.
Federal Housing Administration
A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of
the sale price.
Federal National Mortgage Association
See Fannie Mae.
Federal Reserve Bank
The regulatory agency for certain commercial banks and bank holding companies. Sets monetary
policy for the country and provides liquidity for supervised financial institutions.
Fee Simple
Highest possible degree of ownership of land. The estate allows owners to have unrestricted powers
to dispose of property, and which can be left by will or inherited.
Fiduciary
A person in a position of trust or responsibility with specific duties to act in the best interest of a
client. Real estate brokers and mortgage brokers are fiduciaries.
First Mortgage
Mortgage holding priority over the claims of subsequent lenders against the same property.
Fixture
Personal property affixed to structures or land, usually in such manner that they cannot be
independently moved without damage to themselves or the property housing, supporting, or
pertinent to them. Varies under state laws.
Foreclosure
A proceeding in or out of court to extinguish all rights, title and interest of the owner (s) of a property
in order to sell the property and satisfy a lien against it.
Freddie Mac
See Federal Home Loan Mortgage Corporation.
Full Disclosure
Revealing all known facts which may affect the decision of a buyer or tenant.
Government National Mortgage Association (GNMA/Ginnie Mae))
A government owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA
guarantees the timely principal and interest payments to investors.
Grantee
The buyer, who receives a deed.
Grantor
The seller, who gives a deed.
Hazard Insurance
Insurance on a property against damages caused by fire, wind storms, and similar risks.
Heirs and Assigns
One who might inherit or succeed to an interest in a property under the rules of law applicable when a
property owner dies.
Home Equity Loan
Same as a second mortgage. A loan secured by the equity in your home, which may be tax deductible.
Homeowner's Policy
Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc.
Housing and Urban Development (HUD)
The federal government agency that oversees FHA.
HUD 1
A closing document required by HUD that outlines the settlement cost of a loan. The closing agent generally
prepares the document and buyer receives it shortly after the loan is closed.
Impound Account
Account held by a lender for payment of taxes, insurance or other related expenses. Also known as an
escrow account.
Index
A published rate or benchmark measure of current interest rate levels used to calculate periodic changes in
rates charged on adjustable rate mortgages.
Insured Mortgage
A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the
mortgaged property to satisfy the balance owing plus cost of foreclosure.
Interest Payment Notification (1098)
A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their
mortgage over the last year.
Interest Rate
The percentage of an amount of money which is paid for its use for a specified time.
Investment Property
A property that is not occupied by the owner and in most cases produces income or is held for gains from
appreciation.
Joint Tenancy
An undivided interest in property taken by two or more joint tenants. The interests must equal, accruing
under the same conveyance and beginning at the same time. Upon death of a joint tenant, the interest
passes to the surviving joint tenants rather than to the heirs of the deceased.
Land
In a legal sense, the solid part of the surface of the earth, as distinguished from water; any ground, soil or
earth whatsoever regarded as the subject of ownership and everything annexed to it, whether by nature,
e.g., trees and everything in or on it, such as minerals and running water, or annexed to it by man; e.g.,
buildings, fences, etc.
Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property. The option may run for the length of
the lease or only for a portion of the lease period.
Legal Description
An expanded and unique description of a property that is used on legal documents, such as deeds and
deeds of trust. Recorded documents generally require a legal description.
Lender
A general term encompassing all mortgages, and beneficiaries under deeds of trust.
Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee is interested in property.
Lien
An encumbrance against property for the payment of debt; a lien may be a mechanic's lien, mortgage,
unpaid taxes or judgment.
Listing
A record of property for sale by a broker who has been authorized by the owner to sell. Also used to denote
the property so listed.
Listing Agreement
Agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the
property. If the sale is consummated, the listing broker will be paid a fee.
Loan Discount/Premium Fees
Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the
investor. Loan discount denotes an investor yield requirement higher than the note rate. Loan premium
denotes an investor yield requirement lower than the note rate.
Loan Lock
Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application.
Loan Officer
A person that helps borrowers through the loan selection, processing, and closing of a mortgage loan. Loan
officers can be paid a commission or salary for their services and can work for mortgage brokers, mortgage
bankers, or depository institutions.
Loan Origination Fees
The cost to obtain a loan that is paid to the originating lender or broker.
Loan Ratio
The amount of a loan to the value or selling price of real property.
Loan Servicing
The function of collecting loan payments, managing the property tax and insurance escrows, foreclosing on
defaulted loans and remitting payments to the investor/beneficiary.
Loan-to-Value Ratio
The ratio of the mortgage loan amount to the property's appraised value or selling price, whichever is less.
LTV
See Loan-to-Value Ratio.
Margin
The number of percentage points the lender adds to the index rate to calculate the adjustable rate mortgage
(ARM) interest rate at each adjustment.
Market Value
The most likely price a given property will bring if widely exposed on the market, assuming fully informed
buyer and seller.
Marketable Title
A title that is free and clear of objectionable liens, clouds or other title defects. A title which enables an owner
to sell his property freely to others and which others will accept without objection.
Market Price
The price paid for a property; the amount of money that must be given or which can be obtained at the
market in exchange under the immediate conditions existing at a certain date. To be distinguished from
market value.
Market Value
The highest price estimated in terms of money which a buyer would be warranted in paying and a seller
justified in accepting, provided both parties were fully informed, acted intelligently and voluntarily and,
further, that all the rights and benefits inherent in or attributable to the property were included in the transfer.
Mortgage
A lien or claim against real property given as security for a loan. It is a two party agreement as apposed to
the three-party agreement of a deed of trust.
Mortgage Broker
A professional that helps consumers through the loan selection, processing and closing of a mortgage loan.
Most mortgage brokers have access to a wide range of mortgage products through many mortgage lenders.
Mortgage brokers are paid a fee by the borrower when a suitable mortgage is found and closed.
Mortgage Commitment
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified
amount to enable a buyer to purchase a house.
Mortgagee
The lender of money or the receiver of the mortgage document.
Mortgage Insurance
Insurance required for a loan-to-value ratio above 80.01%.
Mortgage Banker
Financial intermediaries that originate mortgage loans through loan officers or independent mortgage
brokers and sell the mortgages into the secondary mortgage market.
Mortgage Note
The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps
for ARMs, the name of the lender and the borrower, and any other material item required by the lender.
Mortgage Warehousing
A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are
sold to an investor shortly thereafter. The mortgage notes are used as collateral for this interim financing.
Mortgagor
The borrower of money or the giver of the mortgage document.
Multiple Listing Service
A means of making possible the orderly dissemination and correlations of listing information to its members
so that REALTORS may better serve the buying and selling public.
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