Mortgage Note Encyclopedia

Abandonment occurs when a borrower vacates a property and relinquishes ownership interest. Early detection is critical for note investors to prevent.

An acceleration clause lets the lender demand full repayment of the loan balance upon borrower default or other triggering event — a key protection for.

Accrued interest is unpaid interest accumulated on a mortgage note. Note investors treat it as potential upside on non-performing loans, not a basis for.

An ACH payment is an automatic electronic bank-to-bank transfer for collecting monthly mortgage payments, reducing delinquency risk and boosting.

Amortization is the gradual repayment of a loan through scheduled payments of principal and interest. Early payments are weighted toward interest.

An amortization schedule breaks down each loan payment into principal and interest over the loan's life. Note investors use it to price loans and.

An amortization table breaks down each loan payment into principal and interest over the full term — essential for modeling note cash flows.

An annuity is a series of fixed payments at regular intervals. In note investing, a borrower's monthly payments form an annuity stream whose present.

APR is a standardized yearly rate reflecting total borrowing cost — note rate plus fees, points, and closing costs. Required by TILA on all loan.

An adjustable-rate mortgage (ARM) has an interest rate that resets periodically based on a benchmark index plus a margin. ARMs are common in secondary.

Arrears is the cumulative total of missed mortgage payments — principal, interest, and escrow. The arrears balance is a key variable in note pricing and.

A balloon mortgage requires a large lump-sum principal payment at maturity after a period of lower monthly payments. Note investors use balloon.

A billing statement is a periodic servicer document showing the borrower's payment due, balance, and escrow activity. Required by Regulation Z for most.

CLTV is the ratio of all liens on a property to its fair market value. It is the critical metric for junior lien note investors because it reveals total.

A commercial mortgage is a loan secured by commercial property such as office buildings, retail centers, or multifamily complexes.

A conforming loan meets Fannie Mae and Freddie Mac guidelines for purchase on the secondary market, setting the benchmark for mortgage terms.

A conventional mortgage is a home loan not insured or guaranteed by a federal agency — the most common loan type in the secondary market.

A convertible ARM is an adjustable-rate mortgage with an option to convert to a fixed rate during a set window. The conversion clause affects loan.

Debt service is the total principal and interest a borrower must pay on loan obligations over a given period. Inability to cover debt service signals a.

A default rate is the higher interest rate triggered when a borrower defaults on their loan, increasing the investor's potential yield on workout.

The debt-to-income ratio (DTI) divides monthly debt by gross income. Note investors use DTI to evaluate whether a proposed loan modification payment is.

A due-on-sale clause lets the lender demand full repayment if the borrower transfers property ownership without consent. Rarely enforced, it enables.

Escrow is a third-party holding arrangement for note purchase funds at closing and an ongoing servicer account for borrower tax and insurance payments.

An escrow account holds funds until conditions are met; an escrow agent administers it. Both secure note purchases and manage borrower tax and insurance.

An escrow analysis is the annual servicer review that reconciles a borrower's escrow account and adjusts monthly payments for upcoming tax and insurance.

An executor manages a deceased person's estate and is the note investor's key contact for resolving a mortgage when the borrower dies.

Face value is the original principal amount of a promissory note, serving as the baseline against which secondary market discounts and investor returns.

Fannie Mae (FNMA) is a government-sponsored enterprise that buys and securitizes mortgages — and a major source of non-performing loan pool sales for.

The FDIC insures bank deposits and resolves failed banks — a key source of bulk non-performing loan sales and call report data used to find distressed.

The FHA insures residential mortgages with low down payments. FHA loans appear often on note tapes with unique assumability and servicing requirements.

A first mortgage is the senior lien on a property with highest repayment priority in foreclosure, offering note investors direct access to the collateral.

A fixed-rate mortgage has a constant interest rate for the full term, producing predictable payments — the most common loan type in secondary market note.

Forced-placed insurance is hazard coverage the servicer buys when the borrower lapses, protecting the lender's collateral at a higher cost charged to the.

A grace period is the window after a mortgage due date — typically 15 days — during which the borrower can pay without incurring a late fee.

A HELOC is a revolving credit line secured by home equity, typically in junior lien position. HELOCs appear often on non-performing note tapes with.

An interest rate is the percentage charged on the outstanding principal of a mortgage note, driving both borrower cost and investor yield.

An interest-only mortgage requires payments covering only accrued interest with no principal reduction, often used in note investing as a loan.

A jumbo loan is a mortgage exceeding the conforming loan limits set by the FHFA for Fannie Mae and Freddie Mac, carrying higher risk and pricing.

A junior lien is a subordinate mortgage paid only after the senior lien is satisfied. Junior notes trade at steep discounts and resolve through borrower.

A land contract is a seller-financed installment agreement where the seller retains legal title until the buyer completes all payments.

A late fee is the penalty charged when a mortgage payment is received after the grace period, typically 4-5% of the monthly payment.

A lien is a legal claim on a property granting the holder the right to force a sale if the debt goes unpaid. Lien type and priority drive note pricing.

Lien position is the priority ranking that determines which mortgage holder gets paid first from sale or foreclosure proceeds — a primary driver of note.

The loan term is the contractual duration of a mortgage from origination to maturity, typically 15 or 30 years for residential loans.

The maturity date is the deadline in a promissory note by which the borrower must repay the remaining balance, including any balloon payment due.

A mitigated loan is one where prior loss mitigation efforts like modifications or forbearance have already failed, signaling the need for new strategies.

A mortgage is a recorded legal instrument that creates a lien on real property to secure a loan, granting the lender the right to foreclose upon default.

Mortgage insurance protects the lender against losses if a borrower defaults on a high-LTV loan, typically above 80%. It affects note pricing and recovery.

Negative amortization occurs when monthly payments don't cover the interest due, causing the unpaid interest to increase the loan balance over time.

Non-conforming loans fail to meet GSE guidelines for size, credit, or documentation — making them the primary source of secondary market note inventory.

An origination fee is a lender charge at closing to cover loan processing and underwriting costs, typically expressed as a percentage of the loan amount.

Points are prepaid interest charges at closing where one point equals 1% of the loan amount, used to buy down the interest rate or pay lender fees.

Prepayment is paying off a mortgage before its maturity date. For note investors, early payoffs accelerate capital recovery and boost annualized returns.

A prepayment penalty is a fee for paying off a loan early, compensating the lender for lost interest. Note investors typically waive it in modifications.

A promissory note is the legal document where a borrower promises to repay a debt. It is the actual asset bought and sold in the secondary note market.

A refinance replaces an existing mortgage with a new loan. For note investors, borrower refinances produce a clean full payoff without foreclosure costs.

A repayment plan spreads a borrower's arrears into installments alongside regular mortgage payments, bringing the loan current without modifying the note.

A reverse mortgage lets homeowners age 62 and older convert home equity into cash without making monthly mortgage payments.

A second mortgage is a subordinate lien on a property that already carries a first mortgage, giving the holder a junior claim.

A senior lien is the first-priority mortgage on a property, meaning it gets paid before all junior liens when the property is sold or foreclosed.

A tax lien is a government claim on property for unpaid taxes that holds super-priority status above all private liens, including first mortgages.

Unpaid principal balance (UPB) is the remaining loan principal owed by the borrower and the standard pricing denominator in note trading.

UPB is the remaining loan principal a borrower owes, excluding interest and fees. Bids in the note market are priced as a percentage of UPB.

A USDA loan is a government-backed mortgage for buyers in eligible rural and suburban areas, often appearing in non-performing note pools at a discount.

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible service members and veterans.

A wraparound mortgage is a secondary financing arrangement where a new loan wraps around and includes the balance of an existing mortgage.