Mortgage Broker key terms

A federal law governing residential settlement services. It requires disclosures about settlement costs and escrow accounts, limits escrow cushions, and prohibits paying fees for referrals of settlement business.

A federal consumer credit statute requiring lenders to disclose the true cost of credit in a uniform way, including the annual percentage rate and finance charge, so borrowers can compare offers.

The Consumer Financial Protection Bureau regulation implementing the Truth in Lending Act. It governs disclosure timing and content, advertising rules, high-cost mortgage limits, and ability-to-repay standards.

A standard three-page disclosure a lender must deliver within three business days of receiving a mortgage application, showing estimated loan terms, projected payments, and closing costs.

A standard five-page form delivered at least three business days before consummation that lists final loan terms and actual closing costs, replacing the older HUD-1 settlement statement.

A federal law prohibiting creditors from discriminating against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance income.

A federal law requiring covered mortgage lenders to collect and publicly report data on applications, originations, denials, and borrower characteristics, which regulators use to detect discriminatory lending patterns.

A 2008 federal law establishing minimum national standards for mortgage loan originators, including pre-licensing education, testing, criminal background checks, and registration in a national licensing registry.

A Regulation Z requirement that creditors make a reasonable, good-faith determination, based on verified documents, that a borrower can repay the mortgage, considering income, assets, debts, and employment.

A mortgage meeting federal standards that gives creditors a safe harbor or rebuttable presumption of ability-to-repay compliance, with limits on fees, points, and risky loan features.

A consumer's right to cancel certain refinances and home equity loans within three business days after closing or after receiving required disclosures, whichever is later, with refund of fees.

The four components of a monthly housing payment: principal, interest, property taxes, and homeowners insurance. Lenders use PITI to measure the housing expense when qualifying a borrower.

A percentage found by dividing the loan amount by the property's appraised value or purchase price, whichever is lower. It drives pricing, mortgage insurance, and loan eligibility.

A percentage comparing a borrower's total monthly debt payments, including the proposed housing payment, to gross monthly income. It is a central underwriting measure of repayment capacity.

The schedule by which loan principal is gradually repaid through periodic payments. Early payments are mostly interest, while later payments apply more to principal.

A loan whose interest rate adjusts periodically based on an index plus a margin. It has an initial fixed period, caps on adjustments, and payments that may rise over time.

An optional upfront fee equal to one percent of the loan amount, paid to obtain a lower interest rate. Points are itemized on the Loan Estimate as a cost of credit.

Coverage protecting the lender against loss when a borrower defaults, usually required with small down payments. It may be borrower-paid or lender-paid and can sometimes be canceled later.

An account a servicer uses to hold part of each monthly payment for property taxes and insurance, then pay those bills when due, subject to RESPA cushion limits.

A mortgage insured by the Federal Housing Administration. It allows lower down payments and more flexible credit standards in exchange for upfront and annual mortgage insurance premiums.

The borrower's written promise to repay a loan on stated terms, including interest rate, payment amount, and maturity. It is separate from the security instrument.

A mortgage that meets the loan limits and credit standards of Fannie Mae and Freddie Mac, allowing the lender to sell it on the secondary market.

A submission with at least six pieces of information: borrower name, income, Social Security number, property address, estimated value, and loan amount. It starts federal disclosure timelines.

A lender's written commitment to hold a specified interest rate and points for a set period, sometimes for a fee, protecting the borrower from market movement before closing.

Software that evaluates a mortgage application against investor guidelines and returns an eligibility recommendation along with required conditions, helping lenders make faster, consistent underwriting decisions.

An underwriter's decision that a loan meets core guidelines as long as specified conditions, such as additional documentation or repairs, are satisfied before closing.

A borrower's clear signal to the lender that they wish to continue the loan process, which allows the lender to collect fees beyond the credit report.

Originating loans with abusive or unfair terms that benefit the originator at the borrower's expense, often through excessive fees, steering, or loans the borrower cannot reasonably repay.

An unearned fee or thing of value given in exchange for referring settlement service business. Paying or accepting one is prohibited under RESPA Section 8.

Directing a borrower toward a loan or product that benefits the originator financially rather than one that best fits the borrower's documented needs and qualifications.

Refusing or limiting credit in particular neighborhoods because of their racial or ethnic composition rather than individual creditworthiness. It violates fair lending laws.

An obligation to act in the client's best interest, placing the client's interests ahead of the broker's own, with duties of loyalty, care, and full disclosure.

A single online platform used by state and federal regulators to license, renew, and track mortgage loan originators and companies, and to manage consumer complaints and enforcement records.

The permanent number assigned to a mortgage loan originator through the NMLS, which must appear on applications, business cards, and advertising where required.

A requirement in many states that a licensed mortgage loan originator work under a licensed lender or brokerage whose license and supervision cover the originator's activity.

Annual training required to renew an MLO license, typically covering federal law, ethics, non-traditional lending, and state content, completed through approved providers within deadlines.

A bond a licensee buys that guarantees the state the business will follow the law, providing funds to consumers harmed by violations up to the bond amount.