L

Late Charge

A Penalty assessed for failure to make a payment on time.

 

Lease with Option to Purchase

A lease in which a portion of the agreed upon rent payment is applied to a down payment for the purchase of the property.

 

Lender

The bank, mortgage company, or mortgage broker offering the loan. Many institutions only "originate" loans and then re-sell the obligation to third parties.

 

Lien

A legal claim by one party on the property of another party. In a mortgage, it is used as security for repayment of the loan.

 

Life Cap

The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25 + 6.0).

 

Listing Agreement

An 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 Officer

A qualified individual who helps borrowers through the selection, processing and closing of a mortgage loan. The loan officer may be an employee of a mortgage broker, mortgage banker or other lending institution.

 

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 Ratio (LTV)

The ratio of the mortgage loan amount to the property's appraised value or selling price, whichever is less. For example, a property appraised at $100,000 with a mortgage amount of $75,000 is said to have a 75% LTV.

 

Lock

The act of committing to a mortgage rate. This action, taken by a borrower some time between the application and the closing dates, is sometimes accompanied by a payment by the borrower to the lender.

M

Mandatory Delivery Commitment

An agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.

 

Margin

The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate.

 

Mortgage Insurance (MI)

See Private Mortgage Insurance

 

Modification

Any change to the original terms of a mortgage.

 

Monthly Housing Expense

Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross monthly income to determine affordability.

 

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.

 

Mortgagor

The borrower.

 

Mortgage-Backed Security (MBS)

A Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS security holders.

 

Multi-Family Housing

A building with more than four residential rental units.

N

Negative Amortization

A gradual increase in a mortgage debt that occurs when the monthly payment does not cover the entire principal and interest due. Can create a condition known as being "upside down" in a mortgage.

 

Net Effective Income

Gross income less federal income tax.

 

Non-performing Asset

An asset such as a mortgage that is not currently accruing interest or on which interest is not being paid.

 

Note

A document that shows evidence of a debt, including the amount and terms of repayment.

O

Origination Fee

The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.

 

Owner Financing

A note carried all or in part by an owner selling a property. Also known as a "Seller Carry back".