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E-3, Glossary of Fannie Mae Terms: A thru K

Guide Glossary of Fannie Mae Terms (A thru K)

This provides a list of terms used throughout the Guide with associated definitions.


accrual rate

The rate at which interest is calculated. For a particular remittance date for an MBS pool, it is the mortgage interest rate due under the terms of the mortgage note during the period beginning on the second day of the month preceding the remittance date and ending on the first day of the month in which such remittance date occurs, less the lender’s servicing spread.


Automated Clearing House

actual/actual remittance type

A remittance type that requires the lender to remit to Fannie Mae only the actual interest due (if it is collected from borrowers) and the actual principal payments collected from borrowers.

adjustable-rate mortgage (ARM)

A mortgage loan that permits the lender to periodically adjust the interest rate on the basis of changes in a specified index.


accessory dwelling unit

affiliated projects

Condo, co-op, and PUD projects that are under the same master association or share the use of common facilities that are either owned individually or as part of a master association or development are considered affiliated projects. Condo, co-op, or PUD projects that do not meet this criteria, are not considered affiliated projects, even if they are managed by the same management company. 


An attachment to a legal document that is used to insert language or signatures when there is no space for them on the document itself. Frequently used to add endorsements to the mortgage note.


American Land Title Association


Features that enhance the project but are not essential to the project’s use. Examples include, but are not limited to, swimming pools, fitness centers, tennis courts, playgrounds, gardens, or beach access.

American Land Title Association (ALTA)

A national association of title insurance companies, abstractors, and title agents. The association speaks for the abstract and title insurance industry and establishes standard procedures and title policy forms.


area median incomes


Gradual reduction of the mortgage debt through periodic payments scheduled over the mortgage term.

amortization schedule

A timetable for payment of a mortgage that shows the amount of each payment that should be applied to interest and principal and the remaining unpaid principal balance after each payment is applied.


A responsible party may dispute in writing a demand issued by Fannie Mae. The “appeal process” includes both the first and second appeals available to the responsible party.

application date

The date on which receipt of the borrower’s financial information first triggers the federal Truth in Lending disclosure requirements to the borrower in connection with the mortgage loan.


A report that sets forth an opinion or estimate of value.

appraisal waiver

An optional offer to waive the appraisal requirement for certain loan casefiles underwritten in DU. Formerly known as a property inspection waiver or property fieldwork waiver.


adjustable-rate mortgage

ARM Flex

ARM MBS pools that provide interest accruals at a weighted-average pool accrual rate (which is developed by using either a fixed MBS margin or a weighted-average MBS margin). Because the application of the interest rate caps for the mortgage and the pool will coincide, the pass-through rate for a mortgage will not increase on any change date in which the interest rate cap limits the interest rate that is charged to the borrower.

ARM Flex Plus

ARM MBS pools that provide interest accruals at a weighted-average pool accrual rate (which is developed by using a fixed MBS margin) and allow interest rate caps to be applied independently to the individual mortgages in the pool and to the pass-through rate for the pool. This means that the pass-through rate for a mortgage may continue to increase even when no further increases can be made to the borrower’s interest rate.

As Soon As Pooled (ASAP) Plus settlement

A settlement option in which a lender can deliver individual mortgages to Fannie Mae as much as 60 days before they are redelivered for whole loan purchase or allocated to a specific MBS pool.

As Soon As Pooled (ASAP) Sale settlement

An MBS settlement option in which a lender delivers pools of mortgages to Fannie Mae and receives a cash payment for them, with the securities from the delivered pools being used to satisfy a trade with either Fannie Mae or a third party.


As Soon As Pooled Plus


As Soon As Pooled Sale

assignment of rents

A written agreement wherein the owner of a property gives another party, such as the mortgagee or creditor, the right to collect rents, manage the property, pay expenses, and apply the net income toward delinquent mortgage payments.


A transaction in which the purchaser of real property takes over the seller’s existing mortgage; the seller remains liable for the mortgage unless released by the lender from this obligation. The terms describing whether or not the loan is assumable are typically set forth in the security instrument.


ability to repay

Automated Clearing House (ACH)

An electronic drafting system that debits (or credits) an authorized bank account and electronically transfers funds to (or from) another designated account.

automated valuation model (AVM)

AVMs are statistically based computer programs that use real estate information, such as comparable sales, property characteristics, tax assessments, and price trends, to provide an estimate of value for a specific property.


automated valuation model


balances-to-limits ratio

The relationship between the outstanding balance(s) on an individual’s revolving debt(s) to the total credit limit allowed for the revolving debt(s).

balloon mortgage

A mortgage that has level monthly payments that would fully amortize it over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.

balloon payment

The outstanding balance due on a balloon mortgage that must be paid in a lump sum at the end of the mortgage term.


A legal proceeding in federal court in which a debtor seeks to restructure his or her obligations to creditors pursuant to the Bankruptcy Code. This generally affects the borrower’s personal liability for a mortgage debt, but not the lien securing the mortgage.

basis points (bps)

One one-hundredth of one percent. For example, 7½ basis points equal 0.075 percent or 0.00075.

blanket mortgage

A mortgage that is secured by a co-op project, as opposed to the share loans on individual units within the project.

book-entry delivery

An electronic system that allows for the issuance, maintenance, and transfer of mortgage-backed securities on the records of the U.S. Federal Reserve Banks. The system may be accessed through financial institutions that have book-entry accounts at one of the Federal Reserve Banks. Book-entry for Fannie Mae’s securities is available through all of the Federal Reserve Banks.

book-entry delivery date

The actual date that Fannie Mae issues mortgage-backed securities to the designated book-entry account for a financial institution that has such an account with one of the Federal Reserve Banks. The book-entry delivery date and the settlement date for the securities may be the same day.


The person to whom credit is extended. On a mortgage loan, the person who has an ownership interest in the security property, signs the security instrument, and signs the mortgage/deed of trust note (if his or her credit is used for qualifying purposes). See also co-borrower.


broker price opinion


basis points

bridge (or swing) loan

A short-term loan secured by the borrower’s principal residence (which is usually for sale) that allows the proceeds to be used for closing on a new house before the present home is sold.

broker origination

A mortgage loan that is originated under circumstances where a person or firm other than a mortgage loan seller or lender correspondent is acting as a “broker” and receives a commission for bringing together a borrower and a lender. The broker performs some of the loan processing functions (such as taking loan applications; ordering credit reports, appraisals, and title reports; and verifying a borrower’s income and employment), but does not underwrite the loan, fund the loan at settlement, or service the loan. Typically, the mortgage loan is closed in the name of the mortgage loan seller or lender correspondent that commissioned the broker’s services, but may also include so-called “table-funded” mortgage loans where the loan is closed in the broker’s name, but is funded by the mortgage loan seller or the lender correspondent.

broker price opinion (BPO)

A written estimate of the probable sales price of a property performed by a real estate agent or sales person with or without an interior property inspection. Commonly used for quality control and loss mitigation.

business day

A day other than (1) a Saturday or Sunday, (2) a day on which the Federal Reserve Bank of New York (or other agent acting as Fannie Mae’s fiscal agent) is authorized or obligated by law or executive order to remain closed, or (3) a day on which the main offices of Fannie Mae in the District of Columbia are scheduled to be closed. In this Guide, the word “day” without the modifier “business” refers to a calendar day.

buydown account

An account in which funds are held so that they can be applied as part of the mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.



The addition of certain amounts due under the mortgage—such as tax and insurance payments made by the servicer or delinquent interest installments—to the unpaid principal balance of the mortgage, either because the borrower was unable to pay them or the servicer paid them on the borrower’s behalf.

cash back pair-off

A process under which Fannie Mae provides a lender cash back if the lender is unable to meet the terms of a mandatory whole loan delivery commitment and, because of market fluctuations, the applicable whole loan price at commitment is greater than the price at the time of pair-off.

cash-out refinance

A refinancing transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens.

closing costs

Money paid by the borrower to effect the closing of a mortgage loan. This generally includes an origination fee, title exam, title insurance, survey, attorney’s fees, prepaid items such as taxes and insurance escrow payments, and any discount points paid.


combined loan-to-value


For Fannie Mae’s purposes, this term is used to describe any borrower other than the first borrower whose name appears on the mortgage note, even when that person owns the property jointly with the first borrower (and is jointly and severally liable for the note).


unit in a cooperative project


A property insurance provision that penalizes the insured's loss recovery if the limit of insurance purchased by the insured is less than a specified percentage (typically 80, 90 or 100 percent) of the replacement cost value of the insured property.

combined loan-to-value (CLTV) ratio

A ratio that is used for a mortgage loan that is subject to subordinate financing, which is calculated by dividing the sum of (1) the original loan amount of the first mortgage, (2) the drawn portion (outstanding principal balance) of any HELOC from which the borrower has withdrawn funds, and (3) the unpaid principal balance of all other subordinate financing, by the lower of the property’s sales price or appraised value.

commercial space

Space in a condo, co-op, or PUD project or in buildings in which a condo, co-op, or PUD project is located that is used for non-residential purposes. Examples include, but are not limited to, office space, retail shops, or apartment rentals.

common area assessments

Mandatory periodic or regularly charged fees or dues (also referred to as common charges or common expense assessments) assessed against individual unit owners in a condo or PUD project for additional capital to defray the homeowners’ association’s costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

common elements (areas)

Those portions of a building, land, or amenities owned or managed by the homeowners’ association of a condo or PUD project (or by a co-op project’s co-op corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas are defined in the project documents and may include, but are not limited to, swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, and means of ingress and egress. (Also see amenities and common area assessments.)

community facilities districts

Localities that have been empowered by state law to levy special taxes on their residents to fund the capital costs of a wide variety of public improvements (such as roads and sewer services), as well as the ongoing operation and maintenance costs of a limited number of public services (such as schools, police and fire protection services, libraries, etc.) that benefit the community.

Community Seconds

A subsidized second mortgage typically made by a federal, state, or local government agency, a nonprofit organization, a regional Federal Home Loan Bank under one of its affordable housing programs, a federally recognized Native American tribe and its sovereign instrumentalities, or an employer.

compensatory fee

A fee Fannie Mae charges to compensate for damages that maybe incurred as the result of a lender’s failure to comply with a specific policy or procedure or to emphasize the importance Fannie Mae places on a particular aspect of the lender’s performance.


Depending on context, may refer to a determination that a building is not fit for use or is dangerous and must be destroyed, or the taking of private property for a public purpose through an exercise of the right of eminent domain.

conditional project approval

The first stage of Fannie Mae’s approval of a condo, co-op, or PUD project. It is issued after a preliminary review of the project, and it specifies any conditions that must be satisfied before Fannie Mae will issue a final approval for the project.

conditional tender of payment

A procedure whereby a lender offers a borrower an opportunity to “refinance” a mortgage at minimal or no cost through modification of the existing mortgage, endorsement of the mortgage note, and assignment of the original mortgage, rather than by satisfaction of the existing mortgage debt.


unit in a condominium project

Condo Project Manager (CPM)

A Web-based application available to lenders that supports a lender’s Full Review of a condo project by providing key project eligibility questions to assist the lender in determining whether the project meets Fannie Mae’s eligibility requirements. CPM is also used to communicate eligibility decisions made by Fannie Mae.

condominium (condo)

A unit in a condominium project. Each unit owner has title to his or her individual unit, an individual interest in the project’s common areas, and, in some cases, the exclusive use of certain limited common areas.

condominium (condo) conversion

Legal change in the ownership of an existing building (usually a rental project) to the condominium form of ownership through the recording of a declaration or master deed.

condominium (condo) hotel

Any project that is managed or operated like a hotel, motel, resort, inn, or lodge where the individual units are either sold as co-op or condo units.

condominium (condo) unit

A unit in a condominium project. Each unit owner has title to his or her individual unit, an individual interest in the project’s common areas, and, in some cases, the exclusive use of certain limited common areas.

conforming mortgage loan

A conventional mortgage loan that has an original loan amount not exceeding the current Fannie Mae loan limit (“current” refers to when Fannie Mae purchased or securitized the mortgage). If a mortgage was originated prior to the current year, the loan limit that was in effect on the origination date is disregarded.

construction-to-permanent mortgage

A mortgage that provides funds for the acquisition or refinancing of unimproved land and the construction of a residential dwelling on the land.

consumer reporting agency (or bureau)

An organization that is engaged in the preparation of reports that are used by credit grantors to determine the credit and public records history of an individual. The agency obtains data for these reports from repositories of accumulated credit records as well as from other sources.

conventional mortgage

A mortgage that is not insured or guaranteed by a federal government agency—the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), or Rural Development (RD). Conventional mortgages delivered to Fannie Mae must also be conforming mortgages.

converted ARM resale commitment

A type of whole loan commitment to provide coverage for the redelivery of converted ARMs that were originally in an MBS pool that had a take-out post-conversion disposition option.

convertible ARM

A type of adjustable-rate mortgage that includes an option for the borrower to change the mortgage to a fixed-rate mortgage in the early years of the mortgage term.

cooperative (co-op) corporation

A business trust entity that holds title to a co-op project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.

cooperative (co-op) mortgages

Mortgages related to a co-op project. This usually refers to multifamily mortgages covering the entire project.

cooperative (co-op) project

A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.

cooperative (co-op) share loan

A loan secured by a co-op unit that finances (or refinances) the purchase of an ownership interest and the accompanying occupancy rights in a co-op housing corporation. It is secured by an assignment of the occupancy agreement and a pledge of the co-op shares.


Action taken by the lender, typically through delivery of documentation or information to Fannie Mae, that demonstrates that the identified significant defect (i) did not, in fact, exist at the time of loan purchase or securitization; or (ii) has been corrected in the time frame and manner specified in the Lender Contract such that the defect is no longer considered by Fannie Mae to be a significant defect.

correspondent origination

A mortgage loan that is originated by a party other than a mortgage loan seller and is then sold to a mortgage loan seller. A lender correspondent performs the loan processing functions (such as taking loan applications; ordering credit reports, appraisals, and title reports; and verifying a borrower’s income and employment) without the assistance of a broker. The lender correspondent typically underwrites the mortgage loan, but correspondent loans may also include mortgage loans where the correspondent has not received delegated underwriting authority from a mortgage loan seller and, accordingly, did not underwrite the loan. The lender correspondent funds the mortgage loan at settlement, and the mortgage loan is closed in the name of the lender correspondent, which may or may not service the mortgage loan.

cost approach to value

A method of measuring the value of a property based on the cost of producing a substitute residence that has the same use as the property that is being appraised.


Consumer Price Index


Condo Project Manager

credit life insurance

A type of insurance purchased by a borrower to pay off the mortgage debt if the borrower dies while the policy is in force.

credit score

A numerical value that ranks an individual according to his or her credit risk at a given point in time, as derived from a statistical evaluation of information in the individual’s credit file that has been proven to be predictive of loan performance. When this term is used by Fannie Mae, it is referring to the classic FICO score developed by Fair Isaac Corporation.


Collateral Underwriter


Committee on Uniform Security Identification Procedures

CUSIP number

A nine-digit number, which is required for book-entry delivery of mortgage-backed securities, that uniquely identifies the MBS to which it is assigned.

custodial account

A bank account that a lender must establish to hold the funds of others—the borrower and Fannie Mae—as opposed to any account established to hold the lender’s corporate funds.


de minimis correction

Minor amount not to exceed $500 (or such higher amount as the lender and Fannie Mae may agree) that, when remitted, refunded, or otherwise provided, corrects or otherwise resolves an identified significant defect.


Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

debt-to-income ratio

A ratio derived by dividing the borrower’s total monthly obligations (including housing expense) by his or her stable monthly income. This calculation is used to determine the mortgage amount for which a borrower qualifies. This term is used interchangeably with “total debt-to-income ratio” and “expense ratio.”

deed in lieu of foreclosure (or deed-in-lieu)

A transfer of title from a delinquent borrower to the lender in satisfaction of the mortgage debt to avoid foreclosure; also called a voluntary conveyance.


The failure to make a mortgage payment or to otherwise comply with one or more covenants of the mortgage.


A loan-level deficiency that breaches a term contained in the Lender Contract in effect at the time of loan purchase or securitization.

defect rate

The number of loans, expressed as a percentage, reflecting the total loans with defects discovered in the loan review process divided by the total loans reviewed.

delinquency advance

An amount advanced by a lender in respect of interest or principal on one or more mortgage loans, as required by their servicing contract, even though the lender has not collected the actual funds from the related borrowers. A lender may reimburse itself for delinquency advances from subsequent collections in accordance with its servicing contract.

delivery versus payment settlement

Also called “delivery against funds” or “existing issue.” A settlement option for trades of existing MBS under which Fannie Mae will credit the lender’s account at the institution that wires the security to its trading desk as soon as the security is received.


A repurchase or other remedy request issued by Fannie Mae to a responsible party to provide a specific remedy as provided in the Lender Contract.

demand deposit account

A bank account in which the funds are available for withdrawal at any time without penalty.

designated threshold amount

A level of unsecured exposure an “in the money” party will accept before making a margin call on the “out of the money” party.

desktop appraisal

An appraisal assignment for which the scope of work does not include field work by the appraiser and does not include reviewing a recent interior/exterior property data report.

Desktop Originator (DO)

A Web-based application that gives originators access to DU through a sponsoring lender.

Desktop Underwriter (DU)

Fannie Mae’s automated underwriting system.


See physical depreciation.

direct surety bond

A class of bond that is written to afford protection for the direct acts of the principal in the event of a loss caused by the principal’s negligence, lack of ability, or dishonest act.

disbursement date

The date the loan funds are disbursed for the subject mortgage. The disbursement date may occur on or after the note date.


The amount by which the sales price of a note is less than its face value. The purpose of a discount is to adjust the yield upward in lieu of interest.


Desktop Originator

Document Certification

A Web-based application for document custodians to electronically submit whole loan and MBS pool certifications to Fannie Mae and the lender. It also can be used to give a warehouse lender notification about the lender’s wiring instructions.

document custodian

A financial institution that maintains custody of certain mortgage documents on behalf of Fannie Mae.

domestic partner

An unrelated individual who shares, and intends to continue sharing, a committed relationship with a borrower who signs the note.


Debt-to-income ratio


Desktop Underwriter

due-on-sale provision

A provision in a mortgage that allows the lender to demand full payment of the outstanding balance if the mortgaged property is transferred without the lender’s permission.


earnest money deposit

A deposit submitted with a purchase offer to show that the buyer’s offer is being made in good faith.


A Web-based application that supports the servicing of reverse mortgages.

economic obsolescence

See external depreciation.


Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

electronic imaging

A method of reproducing a facsimile of a document or photograph with a computer or another electronic device.

electronic mortgage (eMortgage)

A mortgage for which the promissory note and possibly other documents (such as the security instrument and loan application) are created and stored electronically rather than by using traditional paper documentation that has a pen and ink signature. Most (but not all) eMortgages typically consist of a paper security instrument and an electronic note. The terms “electronic mortgage,” “electronic mortgage loan,” “eMortgage,” and “eMortgage loan” used in this Guide have the same meaning.

electronic record

A contract or other record created, generated, sent, communicated, received, or stored by electronic means.

electronic signature

An electronic sound, symbol, or process, attached to or logically associated with, a contract or other record executed or adopted by a person with the intent to sign the record.

employer-assisted housing mortgage

Any mortgage for which a borrower’s employer is either offering mortgage payment assistance or providing down payment or closing costs assistance (through a grant, an unsecured loan, or a secured subordinate mortgage).

environmental hazard assessment

An evaluation of the environmental soundness of a project development based on information gathered from various sources. A Phase I assessment involves a screening process that focuses on reviewing available documentation, interviewing people knowledgeable about the project, and inspecting the site, the building, and adjoining properties. A Phase II assessment provides a more detailed review of the site (with specific physical sampling for each hazard that was not acceptable under the Phase I assessment) and a review of historical records to determine the presence or absence of specific environmental liabilities or to quantify the extent of an observed or suspected environmental liability.

errors and omissions insurance

Insurance which protects a business or organization against liability as a result of committing an error or omission in performance of professional duties.

escrow account

A trust account that is established to hold funds allocated for the payment of a borrower’s property taxes and assessments by special assessment districts, ground rents, insurance premiums, condo or homeowners’ association or planned unit development association dues and similar expenses as they are received each month in accordance with the borrower’s mortgage documents and until such time as they are disbursed to pay the related bills.


Electronic Signatures in Global and National Commerce Act. A federal law that gives broad legal effect to the use of electronic signatures and records in interstate commerce.

existing issue

See delivery versus payment settlement.

external depreciation (economic obsolescence)

A loss in value that is caused by negative influences that are outside of a property’s site, such as economic factors or environmental changes.


facsimile signatures

A form of signature that is electronically reproduced or copied in another acceptable manner. Such signatures are acceptable under certain conditions as long as they are valid and enforceable in the jurisdictions in which they are used.

factory-built housing

Prefabricated single-family housing (such as panelized, modular, or sectional housing), which is constructed in a factory (and, if applicable, in accordance with the building codes of the state in which the factory is located) and is subsequently joined together at a permanent building site, assumes the characteristics of site-built housing (such as permanent connections to water, electrical, and waste disposal systems), and is legally classified as real property. (Collectively, this term also may refer to HUD code manufactured homes. See the definition of that term for distinctions between the different types of factory-built housing.)

Fair Access to Insurance Requirements (FAIR) plan

A state-run or state-sponsored insurance plan that provides property insurance to property owners who cannot obtain it in the voluntary insurance market.

FAIR plan

See Fair Access to Insurance Requirements (FAIR) plan.

Fannie Mae

Federal National Mortgage Association.

Fannie Mae Connect

A Web-based application that allows lenders to access, view, and download reports on pools and whole loans submitted to Fannie Mae through Loan Delivery.

Fannie Mae losses

Losses, damages, penalties, settlements, liabilities, judgments, claims, counterclaims, defenses, actions, costs, expenses, attorneys' fees, and other legal fees (collectively, “Fannie Mae losses” or “losses incurred by Fannie Mae”).

Fannie Majors

See multiple pool.

Federal Emergency Management Agency (FEMA)

A federal agency that provides assistance in areas that have suffered a major disaster or other emergency. It also maintains flood insurance rate maps that identify the Special Flood Hazard Areas in which Fannie Mae requires flood insurance.

Federal Emergency Management Agency (FEMA) disaster area

A city, county, or parish designated by FEMA as eligible for individual assistance as a result of a natural disaster.

Federal Housing Administration (FHA)

FHA, also a part of HUD, provides mortgage insurance on loans made by FHA-approved lenders.

Federal Housing Finance Agency (FHFA)

The safety, soundness, and mission regulator for Fannie Mae. FHFA replaced the former regulator, the Office of Federal Housing Enterprise Oversight (OFHEO).

fee simple estate

An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condo project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.


Federal Emergency Management Agency


Federal Housing Administration

FHA-insured mortgage

A mortgage by the FHA; may be referred to as a "government" mortgage.


Federal Housing Finance Agency


Federal Home Loan Mortgage Corporation

fidelity bond

See fidelity/crime insurance.

fidelity/crime insurance

Insurance which protects a business or organization against economic loss as a result of fraudulent and dishonest acts committed against them.

final project approval

The eligibility determination that is issued for a condo, PUD, or co-op project to indicate that the project's physical characteristics and marketability are acceptable to Fannie Mae, and that mortgages or share loans on units within the project may be delivered to Fannie Mae for purchase or securitization.

financed mortgage insurance premium

A mortgage insurance premium for which the borrower is not required to make an advance payment from his or her own funds. Rather, the amount required to pay for a lump-sum premium is financed by including it as part of the original mortgage amount.

Financial Institutions Reform, Recovery, and Enforcement Act

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 modified federal laws governing thrift and bank regulation. Title XI of the Act includes real estate appraisal reform amendments.

first mortgage

A mortgage that is the primary lien against a property.

first-time homebuyer

An individual is to be considered a first-time homebuyer who (1) is purchasing the security property; (2) will reside in the security property as a principal residence; and (3) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property. In addition, an individual who is a displaced homemaker or single parent also will be considered a first-time homebuyer if he or she had no ownership interest in a principal residence (other than a joint ownership interest with a spouse) during the preceding three-year time period.

fiscal year

Any 12-month period used for financial reporting and preparation of balance sheets, profit and loss statements, and other financial summaries.

fixed installment

That portion of a mortgage payment that is applied toward principal and interest. When a mortgage negatively amortizes, the fixed installment does not include any amount for principal reduction.

fixed-rate mortgage

A mortgage that provides for only one interest rate for the entire term of the mortgage. Fannie Mae acquires fixed-rate mortgage loans that are fully amortizing.

flood insurance

Insurance which protects the insured against loss or damage to their property resulting from flooding.

Flood Insurance Rate Map (FIRM)

The official map of a community on which FEMA has delineated both the special hazard areas and the risk premium zones applicable to the community.


Willingness to refrain, in full or in part, from pursuing remedies against a delinquent borrower for a period of time (specified or unspecified), but without modification of the loan terms. See also modification .


The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Freddie Mac

Federal Home Loan Mortgage Corporation (FHLMC). A congressionally chartered corporation that purchases mortgage loans in the secondary mortgage market.


fixed-rate mortgage

full payment amount

The monthly payment required, at each interest change date, to amortize the then outstanding principal balance of an ARM at the new interest rate over the remaining mortgage term.

fully amortizing ARM

An adjustable-rate mortgage that has a monthly payment sufficient to amortize the unpaid principal balance-at the interest accrual rate-over the mortgage term.

functional depreciation (obsolescence)

A loss in value that is caused by defects in the design of a structure or by changes in market preferences that result in some aspect of a property being considered obsolete by current standards.



generally accepted accounting principals

general liability insurance

Insurance which protects a business or organization against liability resulting from bodily insurance or property damage.


gross living area

good delivery

The delivery of mortgage-backed securities to Fannie Mae’s trading desk at the parameters agreed on at the time of the trade and in an amount that meets the minimum trade requirements; the delivery of eligible portfolio mortgages that meet all of Fannie Mae’s legal and underwriting criteria and that satisfy the terms of the original cash commitment before the expiration date of the commitment.

government mortgage loan

A mortgage loan that is insured or guaranteed by a government agency. Examples include FHA-guaranteed mortgage loans, VA-insured mortgage loans, and RD-guaranteed mortgage loans.

ground rent

The amount of money that is paid for the use of land when title to a property is held as a leasehold estate, rather than as fee simple.

group home

A residential structure that is or will be occupied by persons with disabilities irrespective of familial relationship.


government-sponsored enterprise

guaranty fee

Compensation that a lender pays Fannie Mae for the right to participate in the MBS program. The amount of the fee will differ depending on whether the lender selects the regular or special servicing option.

guaranty fee buydown

An agreement to reduce the guaranty fee remittance rate for an MBS mortgage below the contractual rate for the applicable servicing option and remittance cycle in return for the lender’s payment of a fee to Fannie Mae.

guaranty fee buyup

An agreement to increase the guaranty fee remittance rate for an MBS mortgage above the contractual rate for the applicable servicing option and remittance cycle in return for Fannie Mae’s paying a fee to the lender.


The Fannie Mae and, as modified, amended, or supplemented from time to time.

gut rehabilitation project

A project that has been developed by rehabilitating an existing building and creating individual units. The building is stripped down to its shell and, as rehabilitated, contains all new mechanical equipment including heating, exhaust, insulation, roofing, plumbing, and electrical. Individual units and common areas have new interiors, fixtures, appliances, and flooring.



home equity combined loan-to-value


home equity line of credit

higher-priced covered transaction

A mortgage loan that meets the corresponding definition under Regulation Z of the Truth in Lending Act, and applies to both principal residences and second homes.

higher-priced mortgage loan

A mortgage loan that meets the corresponding definition under Regulation Z of the Truth in Lending Act. Only principal residences are included in this category.


homeowners' association


Home Ownership and Equity Protection Act of 1994

home equity combined-loan-to-value ratio (HCLTV)

A ratio that is used when a mortgage financing package includes home equity lines that are potential liens; a ratio that is developed by dividing the sum of the original loan amount of the first mortgage, the amount of the HELOC (whether or not there have been any draws), and the unpaid principal balance of all other subordinate financing by the lower of the property’s sales price or appraised value.

home equity line of credit (HELOC)

A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain cash advances at his or her discretion, up to an approved amount that represents a specified percentage of the borrower’s equity in a property.

homeowners’ association (HOA)

An entity formed to manage the day-to-day operation and long term interests of residential dwelling communities, including condo, co-op, and PUD projects. The HOA is typically created and vested with specific roles, responsibilities, and rights by the project’s legal documents in compliance with applicable laws. For Fannie Mae’s purposes, the term “HOA” includes a homeowners’ association, a common interest community association, a cooperative corporation, and other similar entities.

homeowner’s insurance

See property insurance.

HomePath property

A HomePath property is a property that was owned and sold by Fannie Mae through a transaction resulting in the disposition of its real estate owned.


Fannie Mae’s flexible, affordable lending product designed to meet the needs of low- to moderate-income homebuyers and homeowners. HomeReady is a standard product with underwriting recommendations available through DU and manual underwriting.

HomeStyle Renovation mortgage

A mortgage that enables eligible borrowers to obtain financing to renovate, remodel, repair, or upgrade their existing home or a home that they are purchasing.

housing expense ratio

A ratio derived by dividing the borrower’s housing expense by his or her stable monthly income.


Department of Housing and Urban Development


HUD-1 Settlement Statement. See “settlement statement.”

HUD-guaranteed mortgage

A mortgage guaranteed under Section 184 of the Housing and Community Development Act of 1992, which created the Native American Housing Loan Guarantee Fund.



Independent Dispute Resolution

impasse process

An option available to an eligible lender to use to resolve loan-level disputes that were not resolved through the appeal process.

in-file credit report

An objective account, normally computer-generated, of credit and public record information obtained from a credit repository.

inclusionary zoning

A practice by which state or local governments impose zoning restrictions that require a specified percentage of new development in a designated area to be set aside to provide housing for low- and moderate-income persons.

income approach to value

A method of measuring the value of a property based on the market rent or income that the property can be expected to earn.

Independent Dispute Resolution (IDR)

IDR is a process that is available for eligible lenders to use to resolve loan-level disputes that were not resolved through the appeal, impasse, or management escalation processes.


A number used to compute the interest rate for an ARM. The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps on the maximum or minimum interest rate that may be charged on the mortgage, as stated in the note.

index disclosed to the borrower

The value of the selected index for an ARM that is given to the borrower when the mortgage is closed. When subsequent index values differ from this value, it reflects changes in market conditions.

initial interest rate

The original interest rate of the mortgage when it is closed. This rate (which is often referred to as the “start rate”) changes for adjustable-rate mortgages. Also referred to as the initial note rate.

installment debt

Borrowed money that is repaid in several successive payments, usually at regular intervals, for a specific amount and for a specified term (for example, an automobile loan or a furniture loan).

installment land contract

An agreement to transfer title to a property once conditions of the contract have been fulfilled. Also known as a contract or bond for deed.

institutional lender

A financial institution that invests in mortgages and keeps them in its own portfolio.

interest accrual rate

The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

interest rate buydown plan

An arrangement wherein the property seller or any other party deposits money to an account so that it can be released each month to reduce the borrower’s payments during the early years of a mortgage. During the specified period, the borrower’s effective interest rate is “bought down” below the actual mortgage interest rate.

interest rate cap

For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note.

interest rate change date

The date on which the mortgage interest rate changes for an ARM; the date on which interest begins to accrue at a new rate for an ARM MBS pool.

interest rate change interval

The period that elapses between interest rate change dates for an ARM.

interest rate differential

See yield difference.

interest rate shortfall

The interest rate shortage that occurs when Fannie Mae’s return on a mortgage (the net note rate) is less than Fannie Mae’s required yield.

interested party contributions

Costs that are normally the responsibility of the property purchaser that are paid (directly or indirectly) by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property. These persons or entities include, but are not limited to, the property seller, the builder/developer, and the real estate agent or broker (or an affiliate who may benefit from the sale of the property and/or the sale of the property at the highest price possible).

intermediate-term mortgage

A mortgage that amortizes over an original term from 10 to 20 years.

investor-purchased mortgage insurance

Mortgage insurance coverage obtained by Fannie Mae after the purchase of a mortgage; a type of financial backing used for some second mortgages in lieu of borrower-purchased or lender-purchased mortgage insurance.


Internal Revenue Service

issue date

The first day of the month in which MBS backed by an MBS pool of mortgage loans are issued.

issue date principal balance

The principal balance of each mortgage in an MBS pool after crediting the principal portion of any monthly payments due on or before the issue date for the related MBS (whether or not it was actually collected) and after crediting any unscheduled partial payment or other recovery of principal received on or before the issue date (as long as it was not accompanied by payment of an interest amount that represented scheduled interest due for the month after the payment was made).


No Applicable Terms


No Applicable Terms

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