M-N Terms

M

Margin – For an adjustable-rate mortgage (ARM) or home equity line of credit, the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change. The margin is static and will not change during the life of the loan.

Master Association – A homeowners’ association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a “second-level” association that handles matters affecting the entire development, while the “first-level” associations handle matters affecting their particular portions of the project.

Maturity – The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. At the maturity of a 30-year loan the principal balance will be paid in full.

Maximum Financing – The maximum amount a lender will lend on a specific loan program.

Maximum Rate – The maximum interest rate that can accrue on a variable rate loan

Merged Credit Report – A credit report that contains information from more than one credit reporting agency. When the report is created, the information is compared for inconsistencies and duplicate entries. Any duplicates are combined to provide a summary of a your credit.

Minimum Payment – The minimum amount that must be paid monthly on an account. On the HELOC product, the minimum payment is interest only during the draw period. On the Fixed Rate Second products, the minimum payment is principal and interest.

Modification – The act of changing any of the terms of the mortgage.

Money Market Account – A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

Money Market Fund – A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

Monthly Debt – A borrower’s monthly expenses including credit cards, installment loans, student loan payments, alimony and child support and housing payment expense.

Monthly Mortgage Insurance (MI) Payment – Portion of monthly payment that covers the cost of Private Mortgage Insurance.

Monthly Principal & Interest (P&I) Payment – Portion of monthly payment that covers the principal and interest due on the loan.

Monthly Taxes & Insurance (T&I) Payment – Portion of monthly payment that funds the escrow or impound account for taxes and insurance.

Monthly Payment (P&I) – This is the monthly mortgage payment on a home loan, this includes principal and interest, but excludes any amounts that are applied to taxes and insurance.

Mortgage – A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Banker – A company that originates, sells and services mortgages exclusively for resale in the secondary mortgage market.

Mortgage Broker – An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.

Mortgagee – The lender in a mortgage agreement.

Mortgage Insurance – A contract that insures the lender against loss caused by a borrower’s default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan. See private mortgage insurance (PMI).

Mortgage Insurance Premium (MIP) – The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

Mortgage Life Insurance – A type of term life insurance sometimes bought by borrowers. The amount of coverage decreases as the loan’s principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. See credit life insurance.

Mortgagor – The borrower in a mortgage agreement.

Multi-Dwelling Units – Properties that provide separate housing units for more than one family, although they secure only a single mortgage. Typically a 2-4 unit property.

N

Negative Amortization – An increase in the outstanding balance of a mortgage that occurs when the monthly payment is not large enough to cover the interest due. The amount of the shortfall is added to the remaining balance to create “negative” amortization.

Net Cash Flow – The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners’ association dues, leasehold payments, and subordinate financing payments.

No Closing Cost Loan – A loan in which the fees the borrower(s) are not required to pay cash out-of-pocket at closing for the normal closing costs. The lender typically includes the closing costs in the principal balance or charges a higher interest rate than for a loan with closing costs to cover the advance of closing costs.

Net Worth – The value of all of a person’s assets, including cash, minus all liabilities.

Non-Conforming Loan – See jumbo loan.

Non-Liquid Asset – An asset that cannot easily be converted into cash.

“No Out Of Pocket Cost” Loan – A loan in which the fees the borrower(s) are not required to pay cash out-of-pocket at closing for the normal closing costs. The lender typically includes the closing costs in the principal balance or charges a higher interest rate than for a loan with closing costs to cover the advance of closing costs.

Notary – An official authorized by law to attest and certify certain documents by his or her hand and official seal.

Note – A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note Rate – The interest rate stated on a mortgage note.

Notice Of Default – A formal written notice to a borrower that a default has occurred and that legal action may be taken.