Building on Trust™
Term | Main definition |
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Yield Curve |
A graph that shows, at any given time, how the yield varies with the period
to maturity. Usually, the curve slopes upwards but occasionally it slopes
down or is flat. A flat yield curve means that yields on long-term bonds are
not much higher than those on short-term notes.
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Wrap-around mortgage |
A mortgage on a property that already has a mortgage, where the new
lender assumes the payment obligation on the old mortgage. Wrap-around
mortgages arise when the current market rate is above the rate on the
existing mortgage, and home sellers are frequently the lender. A due-on-
sale clause prevents a wrap-around mortgage in connection with sale of a
property except by violating the clause.
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Worst case scenario |
The assumption that the interest rate on an ARM rises to the maximum
extent permitted in the note. On a one-month ARM with no rate
adjustment caps, for example, the rate would jump to the maximum rate
stipulated in the note in month 2.
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Workout assumption |
The assumption of a mortgage, with permission of the lender from a
borrower unable to continue making the payments.
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Wholesale mortgage prices |
The interest rate and points quoted by wholesale lenders to mortgage
brokers and correspondent lenders.
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Wholesale lender |
A lender who provides loans through mortgage brokers or correspondents. The
mortgage broker or correspondent initiates the transaction, takes the borrower's
application, and processes the loan. As distinct from a Retail lender.
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Warrantable condos |
A condominium project with features that lenders view as protections against
hazards that would threaten the value of condo units. These features include
the project being completed with most units sold rather than rented, no one
party owning more than 10% of them, adequate insurance coverage of common
structures, and an ownership association independent of the developer.
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Warehouse lender |
A firm that lends to temporary lenders against the collateral of closed
mortgage loans prior to the sale of the loans in the secondary market.
Warehouse lenders can call the loans if the loans "in the warehouse" drop
in value.
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Waive escrows |
Authorization by the lender for the borrower to pay taxes and insurance
directly. This is in contrast to the standard procedure where the lender adds
a charge to the monthly mortgage payment that is deposited in an escrow
account, from which the lender pays the borrower's taxes and insurance
when they are due. On some loans lenders will not waive escrows, and on
loans where waiver is permitted lenders are likely either to charge for it in
the form of a small increase in points, or restrict it to borrowers making a
large down payment.
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VA mortgage |
A mortgage with no down payment requirement, available only to ex-
servicemen and women as well as those on active duty, on which the
lender is insured against loss by the Veterans Administration
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Underwriting requirements |
The standards imposed by lenders in determining whether a borrower
qualifies for a loan. These standards are more comprehensive than
qualification requirements in that they include an evaluation of the
borrower's creditworthiness.
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Underwriting |
The process of examining all the data about a borrower's property and transaction to
determine whether the mortgage applied for by the borrower should be issued. The
person who does this is called an underwriter.
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Truth in Lending (TIL) |
The Federal law that specifies the information that must be provided to borrowers
on different types of loans. Also, the form used to disclose this information.
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Transaction-Based Reserves |
Mandatory loss reserves based on the riskiness of individual
transactions. An example is the contingency reserve requirements
applicable to private mortgage insurers.
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Total interest payments |
The sum of all interest payments to date or over the life of the
loan. This is an incomplete measure of the cost of credit to the
borrower because it does not include up-front cash payments, and
it is not adjusted for the time value of money.
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