MORTGAGE GLOSSARY

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Margin	For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.
Master Association	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. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.
Maturity	The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Maximum Financing	A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.
Merged Credit Report	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 a your credit.
Modification	The act of changing any of the terms of the mortgage.
Money Market Account	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.
Money Market Fund	A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.
Monthly Fixed Installment	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.
Monthly Payment Mortgage	A mortgage that requires payments to reduce the debt once a month.
Mortgage	A legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Banker	A company that originates mortgages exclusively for resale in the secondary mortgage market.
Mortgage Broker	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.
Mortgagee	The lender in a mortgage agreement.
Mortgage Insurance	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). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan. See private mortgage insurance.
Mortgage Insurance Premium (MIP)	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.
Mortgage Life Insurance	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.
Mortgagor	The borrower in a mortgage agreement.
Multidwelling Units	Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
Multifamily Mortgage	A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.
Multifamily Properties	Fannie Mae provides financing for multifamily (buildings with five or more units) rental properties through a nationwide network of mortgage lenders.

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Negative Amortization	A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
Net Cash Flow	The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.
Net Worth	The value of all of a person's assets, including cash, minus all liabilities.
No Cash-Out Refinance	A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).
Nonliquid Asset	An asset that cannot easily be converted into cash.
Note	A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
Note Rate	The interest rate stated on a mortgage note.
Notice Of Default	A formal written notice to a borrower that a default has occurred and that legal action may be taken.

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Original Principal Balance	The total amount of principal owed on a mortgage before any payments are made.
Origination Fee	A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
Owner Financing	A property purchase transaction in which the property seller provides all or part of the financing.

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Partial Payment	A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.
Payment Change Date	The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.
Periodic Payment Cap	For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period.
Periodic Rate Cap	For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
Personal Property	Any property that is not real property.
Piti	See principal, interest, taxes and insurance (PITI) below.
PITI Reserves	A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
Planned Unit Development	See PUD below.
Point	A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
Power Of Attorney	A legal document that authorizes another person to act on ones behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Prearranged Refinancing Agreement	A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.
Preforeclosure Sale	A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor.
Prepayment	Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
Prepayment Penalty	A fee that may be charged to a borrower who pays off a loan before it is due.
Pre-Qualification	The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.
Prime Rate	The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.
Principal	The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. More
Principal Balance	The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
Principal, Interest, Taxes, And Insurance (PITI)	The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
Private Mortgage Insurance (MI)	Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Promissory Note	A written promise to repay a specified amount over a specified period of time.
Public Auction	A meeting in an announced public location to sell property to repay a mortgage that is in default.
Pud (Planned Unit Development)	A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.
Purchase And Sale Agreement	A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Purchase Money Transaction	The acquisition of property through the payment of money or its equivalent.