National Community Reinvestment Coalition The National Community Anti-Predatory Lending Comsumer Rescue Fund
National Community Reinvestmet Coalition | The National Community Anti-Preditory Lending Comsumer Rescue Fund
"…in the end, NCRC made the difference. … To Household, you are a prayer answered."

Medford, New York



Adjustable-rate mortgage (ARM) -- Home loan in which the interest rate is changed periodically based on a standard financial index. Most ARMs have caps on how much an interest rate may increase.

Annual percentage rate (APR) -- A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.

Appraisal -- An estimate of market value placed on all real property and mobile homes. There are two kinds of appraisals: mass appraisal, in which a community is valued for tax purposes; and fee appraisal, in which one property is appraised, often in comparison with other properties. Each is accomplished under a different set of rules and guidelines.

Balloon Payments - A balloon payment is a loan payment that can equal all of the remaining loan balance or a large fraction of the remaining balance.

Bankruptcy - A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loans until after two years after declaration and a re-establishment of credit.

Broker - One who finds lenders for prospective borrowers who meet the lenders’ criteria. A mortgage broker does not make the loan, but receives payment for services.

Community Reinvestment Act - A federal law that requires financial institutions to lend in areas where they take deposits, including in poor and minority neighborhoods.
Conventional loan or conventional financing - A mortgage that is not insured or guaranteed by a government agency such as the Federal Home Administration (FHA) or Veterans Administration (VA).

Credit bureau - A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information. The three major national credit bureaus are Equifax, Experian (formerly TRW) and Trans Union.

Credit Insurance - If a borrower dies or becomes unemployed, credit insurance pays the outstanding loan balance. Credit insurance is much more expensive when it is added to the loan amount than when a consumer pays for it on a monthly basis outside of the loan, because interest is charged on the amount.

Default - Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Equity - The value of a homeowner's unencumbered interest in real estate. Equity is the difference between the home's fair market value and the unpaid principal balance of the mortgage and any liens. Equity increases as the mortgage is paid down and as the property appreciates in value.

Escrow account - An account in which money for property taxes and insurance is held until paid; money is added to the account every time a mortgage payment is made.

Fee Packing - The practice of increasing the cost of a loan with unnecessary fees. Also known as "padding."

FHA loan - A residential mortgage from an approved lender and insured by the Federal Housing Administration. The down payment on an FHA loan usually is less than that for a conventional mortgage. The FHA does not lend money, but nominates approved lenders.

Flipping - The practice of repeated loan refinancings with little or no benefit to the borrower. NCRC defines “flipping” as the making of a home loan to a borrower which refinances an existing consumer home loan when the new loan does not have a tangible benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower’s circumstances. Home loan refinancings are presumed to be flippings if the primary tangible benefit to the borrower is an interest rate lower than the interest rate on debts satisfied or refinanced in connection with the home loan, and it will take more than four (4) years for the borrower to recoup the costs of the points and fees and other closing costs through savings resulting from the lower interest rate.

Foreclosure - A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

Forbearance -- Delaying foreclosure, usually because the borrower has arranged to pay the amount in arrears.

Loan-to-value ratio (LTV) - The percentage of the home's price that is paid for by a mortgage. On a $100,000 house, if the buyer makes a $20,000 down payment and borrows $80,000, the mortgage is 80 percent of the price of the house. Therefore, the loan-to-value ratio is 80. When refinancing a mortgage, the loan-to-value ratio is computed using the appraised value of the home, not the sale price.

Mortgage - A legal agreement that uses property as collateral to secure payment of a debt. The legal agreement means that when a mortgage is on a house, the lender can take possession of the house if the borrower stops making payments.

Mortgagee - One who lends for the purchase of property, using the property as collateral to assure payment.

Mortgagor - One who borrows for the purchase of property, using the property as collateral to secure payment.

Note - A legal acknowledgment of a debt and an implicit promise to repay.

Points - Points are broken out on the site for Discount and Origination. The definitions for each are as follows:

Prepayment Penalty - Lenders who impose prepayment penalties will charge borrowers a fee if they repay part or their entire loan in advance of the regular schedule or refinances with another bank. According to the HUD and Department of Treasury Task Force report on sub-prime lending, about 70 percent of sub-prime loans contain prepayment penalties. Only one to two percent of prime loans includes prepayment penalties.

Prime rate - The interest rate a bank charges its best or "prime" customers. Each bank will quote a prime-lending rate. The rate given to consumers on their loans is often based as the prime rate plus a certain percentage, which represents the lender's assessment of the risk in lending, plus its profit margin.

Servicer - An organization that collects monthly mortgage principal and interest payments from homeowners and manages escrow accounts for paying taxes and homeowners' insurance premiums. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

Subprime borrower - A borrower with a less-than-perfect credit report due to late payments or default on debt payments. Lenders often grade them based on the severity of past credit problems, with categories ranging from "A-" on down to "D" or lower.

Subprime mortgage - A mortgage granted to a borrower considered subprime, that is, a person with a less-than-perfect credit report. Subprime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.

Title company -A company that checks a property's title for liens and other obstacles to sale, fixes any clouds to title, supervises the closing transaction, and makes sure that money transfers in a purchase are processed correctly.

Yield Spread Premium - a kickback fee paid by a lender to a broker for selling higher interest rates.



National Community Reinvestmet Coalition
727 15th Street, Suite 900, Washington, DC 20005 P: (202) 628.8866 F: (202) 628.9802
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