Glossary Of Terms E-H

Earnest Money
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Equal Credit Opportunity ACT (ECOA)
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity
The difference between the fair market value and current amount owed on a given property. Also referred to as the owner’s interest.

Equity Lines of Credit
A line of credit secured by real property. A mortgage is recorded against the borrower’s property for a maximum loan amount. The borrower has the right to borrow funds, as needed, up to the total amount of the credit line.

Escrow
Delivery of something of value by a grantor to a 3rd party for delivery to the grantee upon the happening of a contingent event. In some states, all instruments necessary to the sale are delivered to a 3rd party, with instructions as to their use.

Escrow Instructions
For purchase transactions, instructions signed by both buyer and seller, which enable the escrow agent to carry out the procedures necessary to transfer real property, a business or other assignable interest.

Experian (EXP)
The name of a national credit bureau.

Fair Housing Act (“FHA”)
A Federal act that prohibits discrimination in any aspect related to the sale, rental or financing of dwellings on the basis of race, color, religion, national origin, sex, handicap or familial status.

Fannie Mae
The nation’s largest mortgage investor created in 1968 by an amendment to Title III of the National Housing Act. This stockholder-owner corporation, a portion of whose board of directors is appointed by the President of the United States, supports the secondary market in mortgages on residential property.

Farmers Home Administration (FMHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Bank Board (FHLBB)
The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision.

Federal Home Loan Mortgage Corporation (FHLMC) also called “Freddie Mac”
A quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

Federal National Mortgage Association (FNMA) also known as “Fannie Mae”
A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

Fee Simple Estate
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and under which the property can be left by will or inherited. Commonly, a synonym for ownership.

FHA Loan
A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans (depending on location), they are generous enough to handle moderately priced homes almost anywhere in the country.

FHLMC
The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans by purchasing their conventional loans. Also known as “Freddie Mac.”

FICO
The name given to a numerical score assigned by credit bureaus to measure a borrower’s credit characteristics.

Fixed Rate Mortgage
The mortgage interest rate will remain the same on this type of mortgage throughout the term of the mortgage for the original borrower.

Flood Insurance
Insurance indemnifying against loss by flood damage. Required in federally designated special Flood Hazard Areas. The insurance is private but federally subsidized.

FNMA
The Federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as “Fannie Mae.”

Forbearance
A lender’s act of refraining from taking legal action despite the fact a mortgage is in arrears. It’s usually granted when a mortgagor makes a satisfactory arrangement by which the arrears will be paid at a future date.

Foreclosure
A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner of property in order to sell the property to satisfy a lien against it.

Front-end Debt Ratio
This refers to the debt ratio calculation using only principal, interest, tax and insurance divided by gross monthly income. It’s expressed as a percentage.

Fully Indexed Rate
The fully indexed rate is equal to the rate index plus the loan’s margin and is used with adjustable-rate mortgages. Example: If LIBOR is 6.50% and the margin on the loan is 4.00%, the fully indexed rate is 10.50%.

Funding
Disbursement of loan funds, either by check or by wire transfer from the lender to the loan closing agent.

Gift Letter
A letter to the lender from the donor stating a gift of money has been made to the buyer in order to purchase specific property. The relationship of the donor and donee is stated, as well as the amount of the gift.

Government National Mortgage Association (GNMA)
Also known as “Ginnie Mae”. Provides funds for residential mortgages, insured or guaranteed by FHA or VA.

Grant Deed
A written instrument used to transfer or convey real property. A grant deed contains warranties against prior conveyances or encumbrances.

Grantee
One who received property rights when a grant is made. Generally, the buyer or purchaser of real property.

Grantor
One who grants property or property rights to another

Gross Monthly Income (borrower)
The total amount the borrower earns per month, before any expenses are deducted.

Hazard Insurance
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

Home Mortgage Disclosure Act (HMDA)
This act requires mortgage companies to report selected information to the Federal government about each application received. HUD (US Department of Housing and Urban Development) uses HMDA to detect discrimination and identify trends in lending patterns.

Homeowners’ Association (HOA)
An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. Unpaid HOA dues can become a lien against a property.

Homestead
Status provided to a homeowner’s principal residence by some state statutes; protects a home against judgments up to specified amounts.

HUD-1 (or HUD-1a)
Final statement of the actual settlement costs of the loan and all other disbursements of a loan’s proceeds. A Federal requirement under RESPA.

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