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a loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index. 244



a loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan. 243-244

amortized loan


a final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized. 243

balloon payment


a mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt. 253-254

blanket loan


a financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, this reducing the monthly payments for a set time. 255



a form indicating the appraised value of a property being financed with a VA loan. 252

certificate of reasonable value (CRV)


Under the act, financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in loa=cal community development and rehabilitation projects; and participate in loan programs for housing, small businesses and small farms. 258

Community Reinvestment Act of 1977 (CRA)


an electronic network for handling loan applications through remote computer terminals linked to various lenders' computers. 258-259

computerized loan origination (CLO)


a short-term loan usually made during the construction phase of a building project. 255

interim financing/construction loan


a loan that requires no insurance or guarantee. 247-248

conventional loan


The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status. 257-258

Equal Credit Opportunity Act (ECOA)


A government-sponsored enterprise established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders. 248

Fannie Mae


an independent federal agency that insures deposits in commercial banks. 240

Federal Deposit Insurance Corporation (FDIC)


The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates. 239

Federal Reserve System (Fed)


a loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHS's regulations. 261

FHA loan


a government-sponsored enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market. 260

Freddie Mac


a government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA and VA loans as collateral. 260

Ginnie Mae


a loan in which the monthly payments increase annually, with the increased amount being used to reduce directly the principal balance outstanding and thus shorten the overall term of the loan.. 245

growing-equity mortgage


a loan (sometimes called a line of credit) under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property. 255-256

home equity loan


an objective economic indicator to which the interest rate for an adjustable-rate mortgage is tied. 244



a mortgage that only requires the payment of interest for a stated period of time with the principal due at the end of the term. 242

interest-only mortgage


the relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral. 247

loan-to-value (LTV) ratio


a premium added to the index rate representing the lender's cost of doing business. 7-10



The FHA insurance that the borrower is charged with a percentage of the loan as a premium. 259

mortgage insurance premium (MIP)


a mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage. 254

open-end loan


a real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances. 253

package loan


the mortgage market in which loans are originated and consisting of lenders such as commercial banks, savings associations, and mutual savings banks. 239-241

primary mortgage market


Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. 261

private mortgage insurance (PMI)


a note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate. 253

purchase-money mortgage (PMM)


The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees. 406-406

Real Estate Settlement Procedures Act (RESPA)