Mortgage Glossary

ARM or adjustable-rate mortgage:
A mortgage loan with an interest rate that adjusts periodically over the life of the mortgage based on changes in a specified index.

Alt-A mortgage:
Generally, a loan that can be underwritten with lower or alternative documentation than a full documentation mortgage loan but may also include other alternative product features.

Charge-off:
The portion of principal and interest due on a loan that is written off when deemed to be uncollectible.

Conventional mortgage:
A mortgage loan that is not guaranteed or insured by the U.S. government or its agencies, such as the VA, FHA or RHS.

Credit scoring:
A process that uses recorded information about individuals and their loan requests to assess - in a quantifiable, objective, and consistent manner - their future performance regarding debt repayment.

Default:
The failure of a borrower to comply with the terms of a note or the provisions of a mortgage.

Delinquency:
A mortgage loan on which a payment has not been made by the due date.

Fixed-rate mortgage:
A mortgage loan with an interest rate that does not change during the entire term of the loan.

Forbearance:
The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.

Foreclosure:
The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower's loan.

Intermediate-term mortgage:
A mortgage loan with a contractual maturity at the time of purchase equal to or less than 15 years.

Loan servicing:
The tasks a lender performs to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.

Loan-to-value (LTV) ratio:
The ratio, at any point in time, of the unpaid principal amount of a borrower's mortgage loan to the value of the property that serves as collateral for the loan (expressed as a percentage).

Modification:
Any change to the original terms of a mortgage.

Mortgage:
A legal document that pledges property to a lender as security for the repayment of the loan. The term also is used to refer to the loan itself.

Multifamily mortgage loan:
A mortgage loan secured by a property containing five or more residential dwelling units.

Preforeclosure sale:
A procedure in which the borrower is allowed to sell his or her property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower's debt.

Repayment plan:
An agreement between a lender and a borrower who is delinquent on his or her mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.

Reverse mortgage:
A financial tool that provides seniors with funds from the equity in their homes. Generally, no borrower payments are made on a reverse mortgage until the borrower moves or the property is sold. The final repayment obligation is designed not to exceed the proceeds from the sale of the home.

Secondary mortgage market:
The market in which residential mortgages or mortgage securities are bought and sold.

Underwriting:
The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's ability and willingness to repay the debt and the value of the property. ©1998-2008 Fannie Mae