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ADJUSTABLE OR VARIABLE RATE MORTGAGE (ARM OR VRM) - A mortgage loan in which the interest rate varies in accordance with changes in a specified index and may result in changed monthly payments. For further information, refer to the “Consumer Handbook on Adjustable Rate Mortgages.”

ADVERSE ACTION - A denial of a loan in an amount and on terms acceptable to the borrower.

ANNUAL PERCENTAGE RATE (APR)- The actual cost of credit to the borrower including interest and other charges expressed as a yearly rate and calculated over the life of the loan.

APPLICATION - An oral or a written request for an extension of credit. Usually a printed form on which the lender collects credit, income and debt information about a prospective borrower, plus facts about the property being used to secure the loan. A fee may be charged for the application.

APPRAISAL- An inspection of the property to assure that its market value exceeds the amount of the loan. A fee may be charged for the appraisal.

BORROWER - The person sometimes referred to as the mortgagor, who obtains a mortgage loan.

CLOSING - The time and date set for the transfer of the property from seller to buyer.

CLOSING OR SETTLEMENT COSTS - Charged at the closing which include the purchase price of the property, lawyer’s fees, title search and insurance, survey charges and fees to record the deed, mortgage and other documents. For further information refer to the booklet entitled “Settlement Costs and You.”

COMMITMENT LETTER - A lender’s written offer to grant a mortgage loan which will outline the terms, the amount of the loan, the interest rate and any other conditions. It can also serve as a communication of the lender’s decision on the borrower’s application.

COUNTER OFFER - An offer made by the lender to grant credit other than in the amount or terms requested by the applicant.

EQUAL CREDIT OPPORTUNITY ACT - Federal and State Laws that prohibit discrimination in the granting of credit based on race, religion, national origin, sex, marital status, age or whether a person is receiving public assistance or alimony.

ESCROW ACCOUNT - Money collected in advance by the lender, usually on a monthly basis, for the payment of real estate taxes, betterments and/or insurance.

FIXED RATE MORTGAGE - A conventional mortgage loan with a set interest rate and equal monthly payments for the entire term of the loan.

LENDER - The entity or person sometimes referred to as the mortgagee, who offers the mortgage loan.

LIEN - A legal claim, granted by contract or by a court, against property. A mortgage is one kind of lien.

LOAN-TO-VALUE-RATIO (LTV) - The difference between the unpaid principle balance of the mortgage and the sales price or the appraised value of the property, whichever is lower.

MORTGAGE REVIEW BOARD - A voluntary board consisting of an equal number of lenders and community representatives who will review the residential mortgage loans denied by participating lenders where the applicants believe the denial was based on the location of the property.

NOTE - The borrower’s legally binding written promise to repay the debt to the lender on the specified date. POINT- A sum of money, equal to one (1) percent of the principle amount of the mortgage, charged by the lender to cover certain costs of making a loan.

PRIVATE MORTGAGE INSURANCE (PMI) - Protection for lenders against borrower default. Paid by the borrower and usually required when the down payment is less than 20% of the purchase price. RATE

LOCK AGREEMENT OR INTEREST RATE COMMITMENT - A written agreement by which a lender will hold an interest rate on a mortgage for a specific period of time. The terms and conditions of a rate lock agreement vary from lender to lender.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)- A good faith estimate of closing costs required to be given on certain mortgages. RIGHT OF RESCISSION- State and federal laws that allow consumers who refinance first mortgages and certain second mortgages to cancel their contract and receive a refund of all fees. This must take place three (3) business days following the closing, or following the delivery of the required information and rescission forms and disclosure, whichever occur last.

SECONDARY MORTGAGE MARKET - Investors who purchase residential mortgage loans originated by lenders. TITLE INSURANCE- Protection against loss due to defects in the title that were not uncovered in the title search and are not listed on the title report. Both the lender and borrower may purchase title insurance to protect their own interests.

TITLE SEARCH - An examination of legal records to check the validity and completeness of the title to the property. The title search should uncover any liens, overdue assessments or other claims against the property.

TRUTH-IN-LENDING - Federal and state laws that require lenders to provide borrowers with full disclosure of the true cost of a loan and easy to understand information about the interest rate and terms of the loan.

UREA FORMALDEHYDE FOAM INSULATION (UFFI) NOTICE - A state law requiring a borrower or seller to disclose the presence or absence of UFFI and the formaldehyde level in the building.