Mortgage Terms

Question 1

Mortgage Servicing Rights (MSR)

Answer 1

MSR refer to a contractual agreement in which the right to service an existing mortgage is sold by the original lender to another party that specializes in the various functions involved with servicing mortgages

• MSR rights are sold by originator of a mortgage to another financial institution, which then takes over the administration of the mortgage, which includes such tasks as collecting payments and forwarding them to the originator
• the original lender pays the servicer fee for performing this work
• nothing changes for the mortgagee except the address to which payments are sent

Question 2

Forbearance

Answer 2

A temporary postponement of mortgage payments. It is a form of payment relief granted by the lender or creditor in lieu of forcing a property into foreclosure. Loan owners and loan issuers may be willing to negotiate forbearance options because the losses generated by property foreclosure typically fall on them.

• the terms of forbearance is negotiated between the borrower and the lender
• the borrower must demonstrate the cause for repayment postponement such as financial difficulties associated with major illness or loss of job
• Fannie Mae is offering assistance for homeowners with a Fannie Mae owned mortgage who are affected by COVID-19

Question 3

Delinquent

Answer 3

Delinquent describes something or someone who fails to accomplish that which is required by law, duty, or contractual agreement, such as failure to make a required payment or perform a particular action.

In finance, delinquency occurs when an individual or corporation with a contractual obligation to make payments against debt, such as loan payments or the interest in a bond does not make those payments on time or in regular timely manner

Some creditors allow a loan to remain delinquent for some time before considering default. The duration lenders allow for delinquency depends on the creditor and the type of loan involved

Question 4

Default

Answer 4

Default occurs when a borrower fails to repay the loan as specified in the original contract.

Question 5

Lump Sum Payment

Answer 5

An often large sum that is paid in one single payment instead of broken up in installments. Also know as a bullet repayment.

Question 6

Deferral

Answer 6

A postponement of mortgage payment (or action or event)