NM MLO key terms

A three-page disclosure a lender must deliver to a mortgage applicant within three business days of receiving an application, showing estimated loan terms, projected payments, and closing costs. It replaced the Good Faith Estimate and initial Truth in Lending disclosure.

A five-page form the borrower must receive at least three business days before consummation, itemizing final loan terms, payments, and settlement charges. The waiting period lets the borrower compare actual costs with the Loan Estimate.

The integrated disclosure rules under Regulation Z and Regulation X that combine mortgage disclosures into the Loan Estimate and Closing Disclosure, with tolerance limits on cost increases and strict timing requirements for delivery.

A limit on how much a disclosed closing cost may increase before the lender must cure the difference. Costs fall into zero, ten percent cumulative, and unlimited categories depending on whether the lender controls the fee or permits shopping.

An event such as a revised settlement charge, newly discovered information, or a borrower-requested change that permits a lender to issue a revised Loan Estimate and reset cost tolerances, provided the revision is delivered promptly.

The moment a borrower becomes contractually obligated on the credit transaction, generally at signing of the promissory note. It triggers the three-business-day Closing Disclosure review period and starts many disclosure clocks.

A borrower's right to cancel certain refinances and home equity loans secured by a principal residence within three business days after consummation or disclosure delivery, whichever is later, without penalty.

The Regulation Z requirement that lenders make a reasonable, good-faith determination a borrower can repay a mortgage based on verified income, assets, debts, and employment, using documented underwriting standards.

A loan meeting Regulation Z standards that give the lender a safe harbor or rebuttable presumption of compliance with the Ability-to-Repay rule, generally requiring limits on points, fees, and risky features such as negative amortization.

A closed-end loan secured by a principal dwelling whose annual percentage rate exceeds the average prime offer rate by a set margin, triggering mandatory escrow, appraisal, and prepayment protections.

A Regulation Z provision covering high-cost mortgages with rates or points and fees above statutory thresholds, imposing restrictions on prepayment penalties, balloon payments, and late fees, plus pre-loan counseling requirements.

A federal law governing settlement practices for federally related mortgage loans, requiring disclosures, escrow account rules, servicing transfer notices, and prohibiting unearned fees and kickbacks for referrals.

The anti-kickback provision making it illegal to give or accept anything of value in exchange for referrals of settlement service business or for splitting charges when no service was performed.

A relationship in which a settlement service provider refers business to an affiliated company while holding an ownership interest, permitted only with written disclosure of the relationship and an estimate of the charge.

A federal law prohibiting creditors from discriminating in credit decisions based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance income, and requiring adverse action notices.

The regulation implementing the Equal Credit Opportunity Act, setting rules for application processing, record retention, collection of government monitoring information, and notice of credit decisions.

A written notice a creditor must send within thirty days when denying credit or taking other unfavorable action, stating the reasons or informing the applicant of the right to request them.

A federal law prohibiting discrimination in the sale, rental, and financing of housing based on protected classes including race, color, religion, sex, national origin, familial status, and disability, with additional state protections.

A federal law requiring covered lenders to collect and report data about mortgage applications and originations, including borrower demographics, loan purpose, and pricing, to detect discriminatory lending patterns.

The regulation implementing the Home Mortgage Disclosure Act, specifying which institutions report, what data fields are collected, and how the information is disclosed to the public.

A federal law requiring flood insurance for loans secured by improved property located in a special flood hazard area of a participating community, and requiring notice to borrowers before closing.

A written promise by the borrower to repay a specified sum under stated terms, including interest rate, payment schedule, and maturity. It is the evidence of the debt, separate from the security instrument.

A security instrument pledging real property as collateral for a loan. A mortgage involves two parties, while a deed of trust adds a trustee who holds title until the debt is repaid.

The order in which liens against a property are paid from sale proceeds, generally determined by recording date. A first mortgage is paid before junior liens such as second mortgages or judgments.

An agreement by a lienholder to move its claim to a lower priority behind another lien, often required when a borrower refinances a first mortgage while keeping a home equity line in place.

The gradual repayment of principal and interest over the loan term through scheduled payments. Early payments are mostly interest, while later payments apply more toward principal.

The cost of credit expressed as a yearly rate that includes the interest rate plus certain finance charges such as origination fees and mortgage insurance, allowing comparison among loan offers.

Charges used to test whether a loan is high-cost or a qualified mortgage, including origination fees, discount points, mortgage insurance premiums, and certain closing costs, subject to regulatory caps.

An account into which a servicer collects portions of property taxes and insurance premiums with each monthly payment and later disburses them on the borrower's behalf when bills come due.

An annual review of escrow collections and disbursements that determines whether the borrower's monthly escrow payment must be adjusted and whether any surplus or shortage exists.

The loan amount divided by the property's appraised value or purchase price, whichever is lower. A higher ratio signals greater lender risk and often requires mortgage insurance.

The total of all mortgage liens on a property divided by its value, used to evaluate risk when a borrower has a first and second mortgage or a home equity line.

A borrower's total monthly debt obligations divided by gross monthly income, used to judge repayment capacity. Higher ratios generally require compensating factors such as reserves or strong credit.

Strengths such as substantial cash reserves, stable employment, or a low loan-to-value ratio that offset a weakness like high debt-to-income ratio in an underwriting decision.

Software that evaluates application data against investor guidelines and credit models to issue an approve, refer, or deny recommendation, which lenders use alongside manual review.

Coverage a borrower pays for when the down payment is small, protecting the lender against loss if the loan defaults. It is generally required above eighty percent loan-to-value and cancellable at certain thresholds.

An independent, licensed opinion of a property's market value based on recent comparable sales and property condition, used to support the loan amount and required in many transactions.

A statistical tool that estimates property value from public records and market data without an interior inspection, sometimes used for lower-risk loans or portfolio reviews.

A revolving credit line secured by a home, allowing the borrower to draw funds up to a limit during a draw period and repay during a later repayment period, usually at a variable rate.

Directing a borrower toward or away from certain loan products, neighborhoods, or terms based on a protected characteristic rather than the borrower's qualifications, which violates fair lending law.

Origination practices that impose unfair or abusive terms, such as excessive fees, prepayment penalties, or loans made without regard to repayment ability, often targeting vulnerable borrowers.

A legal obligation to act in the client's best interest ahead of one's own, requiring loyalty, disclosure of conflicts, and avoidance of self-dealing in mortgage and real estate transactions.

An unearned payment or thing of value given to someone for referring business, prohibited under RESPA when connected to a federally related mortgage loan settlement service.

A situation in which one agent represents both buyer and seller in the same transaction, requiring informed written consent and careful handling of confidential information because interests may conflict.