NMLS key terms

A federal requirement that a lender make a reasonable, good-faith determination that a borrower can repay a mortgage before approving it, using verified income, assets, debts, and employment.

A loan that meets federal standards for safe, stable features, such as limits on points and fees and no risky payment structures, and therefore receives legal protections for the lender.

A federal law governing disclosures and settlement practices for federally related mortgage loans, including the Loan Estimate, Closing Disclosure, escrow rules, and limits on kickbacks and unearned fees.

A federal law requiring clear disclosure of credit costs, including the annual percentage rate, finance charge, and total payments, and giving borrowers certain rescission rights on refinances of principal dwellings.

The cost of credit expressed as a yearly rate, combining the interest rate with certain finance charges so borrowers can compare loan offers on a common basis.

The dollar amount a borrower pays for credit, including interest and specific loan costs defined by federal disclosure rules, shown on the Loan Estimate and Closing Disclosure.

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

A standard five-page form the borrower must receive at least three business days before closing, listing final loan terms, payments, and closing costs.

A borrower's limited right to cancel certain refinances or home equity loans on a principal residence within three business days after closing, without penalty.

The provision banning kickbacks and unearned fees for business referrals in settlement services, and restricting affiliated business arrangements to disclosed, priced-at-value services.

A relationship in which a settlement service provider refers business to an affiliated company, permitted only with written disclosure of the relationship and the estimated charge to the consumer.

A federal law requiring covered lenders to collect and report data about mortgage applications, originations, and denials to help regulators detect discriminatory lending patterns.

A federal law prohibiting lenders from denying credit or setting different terms based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

A written notice a lender must send when denying an application or taking unfavorable action, stating the reasons and informing the applicant of certain rights.

A federal law governing how consumer credit information is collected and used, including a borrower's right to dispute errors and requirements for permissible purpose before pulling a credit report.

A federal law requiring flood insurance for loans secured by improved property in special flood hazard areas and mandating notice to borrowers before closing.

A zone mapped by FEMA as having a one percent or greater annual chance of flooding, where federally related mortgage borrowers must carry flood insurance.

An account a servicer uses to hold borrower funds collected with monthly payments and to pay property taxes, hazard insurance, and other required items when due.

The percentage of a borrower's gross monthly income consumed by proposed housing payments plus all other monthly debt obligations, used to judge repayment capacity.

The loan amount divided by the property's appraised value or purchase price, whichever is lower, expressed as a percentage and used to measure leverage and risk.

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

Insurance that protects the lender against loss when a borrower's down payment is small, usually required when the loan-to-value ratio exceeds eighty percent.

A charge for government-backed mortgage insurance, such as on FHA loans, typically paid both upfront and annually and collected with monthly payments.

A mortgage insured by the federal government, featuring low down payment requirements, flexible credit standards, and mortgage insurance premiums paid by the borrower.

A mortgage guaranteed by the Department of Veterans Affairs for eligible veterans and surviving spouses, often allowing no down payment and requiring a funding fee.

A mortgage not insured or guaranteed by a government agency, typically conforming to Fannie Mae or Freddie Mac limits, with terms set by the lender.

The maximum loan amount that Fannie Mae and Freddie Mac may purchase, set annually and adjusted for high-cost areas, above which a loan is considered non-conforming or jumbo.

A mortgage that exceeds the conforming loan limit and therefore cannot be sold to Fannie Mae or Freddie Mac, usually carrying stricter underwriting and larger down payments.

A loan whose interest rate changes at scheduled intervals based on an index plus a margin, starting with a fixed period and later adjusting with caps on increases.

Limits on how much an adjustable-rate mortgage's rate may rise, stated as a per-adjustment cap, a lifetime cap, and sometimes an initial adjustment cap.

The interest rate an adjustable-rate mortgage would charge at a given moment, calculated by adding the current index value to the lender's margin.

The gradual repayment of a loan through scheduled payments that cover interest and reduce principal, with early payments mostly interest and later payments mostly principal.

A situation where a loan's scheduled payment is smaller than the interest due, so unpaid interest is added to the balance and the debt grows over time.

The borrower's written promise to repay a mortgage loan, stating the principal amount, interest rate, payment schedule, and consequences of default.

The security instrument that gives a lender a lien on real property as collateral for a loan, allowing foreclosure if the borrower fails to repay.

The process of taking a borrower's application, gathering and verifying documentation, ordering disclosures and appraisals, and shepherding the file to closing.

The lender's evaluation of credit, capacity, capital, collateral, and loan characteristics to decide whether to approve a mortgage and on what terms.

Software that applies lender and investor guidelines to a loan file and returns an approval, referral, or denial recommendation used to guide manual review.

An independent, licensed opinion of a property's market value, ordered by the lender and used to support the loan amount and loan-to-value ratio.

A written notice telling an applicant what information is missing and that the file will be closed if the items are not received within a stated period.

A legal obligation to act in another party's best interest with loyalty, care, and full disclosure, often owed by agents to the clients they represent.

A situation where one agent represents both buyer and seller in a transaction, permitted only with informed written consent because of the inherent conflict of interest.

The ethical duty to protect a client's private information and not disclose it to others without authorization, except as required by law.

A circumstance where a loan originator's personal or financial interests could improperly influence decisions or advice, requiring disclosure or withdrawal from the matter.

A state-issued credential required to take residential mortgage applications, obtained through prelicensing education, testing, background checks, and ongoing continuing education.

A federal law setting minimum national standards for licensing and registering mortgage loan originators, including education, testing, and character requirements.

The online system states and federal agencies use to manage licensing, applications, renewals, and records for mortgage loan originators and companies.

The permanent number assigned to a mortgage loan originator through the national registry, which must appear on loan documents and business communications.

Annual coursework licensees must complete to renew a mortgage loan originator license, covering federal law, ethics, lending standards, and state-specific content.

A fee a lender may charge when a borrower pays off a mortgage early, restricted or banned for many loan types by federal and state rules.

The principle, enforced through several federal laws, that credit decisions and terms must not be based on prohibited characteristics such as race, sex, or national origin.