Mortgage Acronyms & Abbreviations (what does PITI mean?)

[ShanetheMortgageMan]

With the help from my good friend Brian Bourjaily (mortgage broker in Tampa, FL), here are commonly used acronyms & abbreviations when it comes to dealing with mortgages.

BWR: Borrower is the primary applicant on a mortgage application.

CBWR: Co-Borrower is the secondary applicant on a mortgage application.

Fannie Mae: Federal National Mortgage Association, one of two GSE’s (Government Sponsored Enterprises) created by Congress to increase access to mortgages. Mortgages offered under Fannie Mae guidelines are called “conforming” mortgages since they conform to Fannie Mae guidelines.

Freddie Mac: Federal Home Loan Mortgage Corporation, the second of two GSE’s created by Congress to increase access to mortgages. Mortgages offered under Freddie Mac guidelines are also called “conforming” mortgages since they conform to Freddie Mac guidelines.

FHA: Federal Housing Administration, the Federal Government Agency that oversees the US Housing market. FHA mortgages are guaranteed by the Federal Government and offered by banks/lenders.

VA: Veterans Administration, like FHA, guarantees mortgages for the Federal Government. However, VA mortgages are only available to members of the military, their immediate family, and veterans of military service.

USDARHS: United States Department of Agriculture/Rural Housing Services, like FHA these mortgages are guaranteed by the Federal Government.

Ginnie Mae: Government National Mortgage Association is the actual guarantee agency for Federally Guaranteed mortgages by VA, FHA, RHS, and PIH. Ginnie Mae’s MBS’s are the only MBS’s that are actually guaranteed by the Federal Government.

PIH: Public and Indian Housing is the Federal Agency that, like FHA, guarantees mortgages.

MBS: Mortgage Backed Security. These are the investment instruments that are bundled by Fannie Mae, Freddie Mac, and Ginnie Mae for sale on Wall Street.

DU: Desktop Underwriter is the automated underwriting engine developed by Fannie Mae for underwriting Fannie Mae eligible mortgages. DU is also used for underwriting FHA mortgages.

LP: Loan Prospector is the automated underwriting engine developed by Freddie Mac for underwriting Freddie Mac eligible mortgages.  LP is also used for underwriting FHA mortgages.

HUD: Housing and Urban Development is the Cabinet Department of the Federal Government that oversees the US housing market. All laws that are passed by Congress are administered by HUD.

LO: Loan Officer is the person that takes the actual application for a mortgage. An LO can be a licensed mortgage broker or they can work for a lender and not be required to be licensed.

LTV: Loan-to-Value is the percentage of the mortgage to either the purchase price (when purchasing) or the appraised value (when refinancing an existing mortgage).

CLTV: Combined-Loan-to-Value is the total percentage of all mortgages to the value of the property.

TLTV: Total-Loan-to-Value is another name for CLTV.

PMI (or just MI): Private Mortgage Insurance is charged on conforming mortgages that are over 80% LTV.

MIP: Mortgage Insurance Premium is similar to PMI but is used for FHA mortgages. With FHA mortgages there is an upfront MIP payment as well as a monthly MI payment.

LPMI: Lender Paid Mortgage Insurance is mortgage insurance paid by the lender instead of the borrower. This is accomplished by the lender increasing the mortgage interest rate.

DTI: Debt to Income is the ratio of the borrower’s gross monthly income to their consumer and/or housing debt.

RESPA: Real Estate Settlement Practices Act is the Federal Law that regulates what is allowable and not in the sale/purchase of residential real estate.

HUD1: HUD1 is the statement that you receive that details all the costs and expenses involved in the actual closing of a mortgage.

NAMB: National Association of Mortgage Brokers is membership organization that represents the mortgage brokerage industry. In addition to the national association there are also about 43 state associations.

GFE: Good Faith Estimate is one of the documents that an applicant(s), under RESPA guidelines, is supposed to receive within 3 business days of an application. The GFE is an estimate of what the closing costs of the applicant’s mortgage. The important fee section to look at on a GFE is the 800 series fees as those are lender/broker fees.

TIL: Truth in Lending is the other major document that an applicant is to receive within three business days of applying for a mortgage. The TIL shows what the payments are supposed to be and also what the cost of the mortgage will be.

API: Annual Percentage Interest is the interest rate the borrower pays for the mortgage. This is the rate that the monthly payments are based on.

APR: Annual Percentage Rate calculates the cost to the applicant for the mortgage by taking the total amount borrowed and subtracting certain fees from that amount and then figuring what the interest rate then calculates out to without changing the payment amount. APR is an easily manipulated number which makes it difficult if not impossible to compare different programs and products.

ARM: Adjustable Rate Mortgage is a mortgage that will have a fixed rate for a set period of time and then the rate is adjusted. The fixed period can be as short as 1 month or as long as 10 years. The rate will normally be adjusted either once a year or twice a year. There is one type of mortgage where the adjustment period is monthly. All ARM’s are based on an index. The following are the common indexes:

1) 1 year Treasury Bill is the index used for all FHA ARM mortgages and many conforming ARMs

2) LIBOR: London Interbank Offered Rate is the other major index used on conforming mortgages. It is also the index that all subprime ARMs are based on. Subprime mortgages will use the 6 month LIBOR but conforming ARMs can use anything from the one month LIBOR up to a 1 year LIBOR though they will generally only use either the 6 month LIBOR or the 1 year LIBOR.

3) COSI: Cost of Savings Index is based on the 11th District Federal Home Loan Bank in San Francisco. COSI loans are always Option ARM mortgages.

4) CODI: Cost of Deposits Index is similar to COSI except it is only offered by World Savings to separate themselves from the other Option ARM lenders.

5) COFI: Cost of Funds Index is similar to COSI and CODI.

6) MTA: Monthly Treasury Average is another index that is used strictly by Option ARM lenders

HELOC: Home Equity Line of Credit is a revolving line of credit based on the equity in a property. Generally HELOC's are based on Prime rate. If taken out at the time of purchase many HELOC's report as a mortgage. If the HELOC is taken out subsequent to the purchase they will generally report as a revolving line of credit and will report utilization the same way any other revolving credit line does.

SIVA: Stated Income Verified Asset is a type of reduced documentation mortgage that is more fully explained in another pinned topic, Mortgage Documentation types.

SISA: State Income Stated Asset is another type of reduced documentation mortgage.

NIV: No Income Verification is usually another name for a No Ratio mortgage, another reduced documentation type mortgage.

NINA: No Income No Asset is another type of reduced documentation mortgage.

YSP: Yield Spread Premium is what a lender pays a broker for bringing the mortgage application to them. It will normally be shown as a percentage initially, and then as a dollar amount on the HUD1.

SRP: Service Release Premium is similar to YSP except that SRP is usually not available to brokers but only to direct lenders. In addition, unlike YSP, SRP is not shown on the HUD1.

IO: Interest Only is a payment type where none of the required payment goes towards principal. While the required payment will generally be lower than an amortizing payment since nothing is going towards principal the amount owed does not go down. Like a fully amortizing mortgage a borrower is allowed to pay extra towards principal.

O/O: Owner Occupied is the mortgagor’s principal or primary residence.

PR: Primary Residence

NOO: Non Owner Occupied is a property where the mortgagor does not live in the property and has it as an investment.

IP: Investment Property

PPP: PrePayment Penalty is charged in those states that allow it by subprime lenders and an occasional conforming lender to assure the lender of making a profitable mortgage investment. A PPP can be either hard or soft. A hard PPP means that the borrower will pay a penalty for paying the mortgage off before a specific time period whether they sell or refinance. Most PPP’s are for 3 years or less and with subprime lenders will generally be the same as the fixed period of an ARM mortgage. A soft PPP means that the borrower will have to pay a penalty if they sell or refinance within the first year or refinance within the remainder of the PPP.

VOR: Verification of Rent is a form that is sent to the landlord to verify the timely payment of rent.

VOM: Verification of Mortgage is a form that is sent to a lender to verify the timely payment of the mortgage. This is normally used when a mortgage is not reporting up to date or when it is a private mortgage that doesn’t report at all.

VOD: Verification of Deposit is a form sent to the bank/credit union/savings bank to verify the amount of funds in the account and to provide an average balance over a specified, usually 60 day, period.

VOE: Verification of Employment is a form that is sent to the employer to verify employment. Many times a VOE will be done verbally by the lender just prior to closing.

W-2: W-2’s are tax forms provided by the employer to show total year’s income.

NEG AM: Negative Amortization occurs when the required mortgage payment is not sufficient to cover the interest owed on the payment. Option ARMs are considered to be neg am mortgages because the minimum required payment is less than IO. The unpaid interest is then added to the principal owed on the mortgage causing the mortgage to increase. This is the most dangerous of the “exotic” mortgages available.

FTHB: First Time Home Buyer is a purchaser(s) that has not had an ownership interest in a residence within the previous three years.

PITI: Principal-Interest-Taxes-Insurance is the total housing expense on a monthly basis.  Also includes homeowners association fees, and monthly mortgage insurance if applicable.