Arbor Financial Group Marketing Engines, Inc.

Glossary of Terms

Mortgage. Real Estate & Insurance

F

FACE AMOUNT (LIFE INSURANCE)
The amount the surviving party will receive in the event of death.
FAIR HOUSING ACT ("FHA")
A Federal act that prohibits discrimination in any aspect related to the sale, rental or financing of dwellings on the basis of race, color, religion, national origin, sex, handicap or familial status.
Fair Market Value
Price at which property is transferred between a buyer and a seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.
Fannie Mae
Term commonly used for the Federal National Mortgage Association (FNMA).
Federal Home Loan Mortgage Corporation (FHLMC)
Quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association (GNMA) bonds to raise funds to finance the purchase of mortgages. Also known as Freddie Mac.
Federal National Mortgage Association (FNMA)
Tax-paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA as well as conventional home mortgages. Also known as Fannie Mae.
FEDERAL TAX LIEN
A lien attaching to a property for nonpayment of a Federal tax. A Federal tax lien differs from other liens in that it's not automatically eliminated by a senior lien holder foreclosing on a mortgage or trust deed recorded before the tax lien.
Fee Simple
Greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one's heirs.
Fee Simple Estate
Unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
Federal Housing Administration (FHA)
Part of HUD. It insures mortgages made by private lenders.
FHLMC
Federal Home Loan Mortgage Corporation.
FICO
The name given to a numerical score assigned by credit bureaus to measure a borrower's credit characteristics. See CREDIT SCORE.
Fidelity Bond
Type of bond that is obtained by an employer to protect against economic loss from dishonest acts of its employees.
Fiduciary
One who acts in a capacity of a trust and confidence for another.
FINAL DISPOSITION
The "end" of the loan application process, which may happen via denial, withdrawal, incompleteness or funding.
FINANCE CHARGE
This is the amount of interest, prepaid finance charges, loan fees and certain insurance premiums the customer will pay over the life of the loan.
Financing Loan
A Financing Loan is secured by personal property. The stock and lease of a co-operative corporation constitute such personal property. Real estate brokers often refer to these financing loans as mortgages, though technically they are not.
First Mortgage
Mortgage that is the primary lien against a property.
FIRST POSITION LIEN
A secured claim against a property that will be the first claim to be repaid should the property owner someday declare bankruptcy or default on the secured loan.
Fiscal Year
Any 12-month period used for financial reporting and preparation of balance sheets, profit and loss statements, and other financial summations.
FIXED INCOME
Income of a specified and consistent value that is received at specified and consistent intervals. Types of fixed income include social security benefits, VA benefits, pension income, permanent disability benefits, welfare/aid income and child support/alimony.
Fixed Payment
Sum total of the housing expense and the recurring charges.
Fixed-Rate Mortgage
Mortgage that provides for only one interest rate for the entire term of the mortgage. If the interest rate changes because of enforcement of the due-on-sale provision, the mortgage is still considered a fixed-rate mortgage.
Fixtures
Fixtures are personal property attached to the land or improvements so as to become part of the real property.
Flip Tax
A Flip Tax is a levy issued on the transfer of ownership by a co-operative corporation or condominium association against either the buyer or seller.
FLOOD INSURANCE
Insurance indemnifying against loss by flood damage. Required in federally designated special Flood Hazard Areas. The insurance is private but federally subsidized.
FLOOR
The lowest an adjustable-rate mortgage rate can ever be during the life of the loan.
FLOOR RATE
The start rate on an adjustable-rate program.
Forbearance
Act of refraining from taking legal action even though the mortgage is in arrears. It is usually granted only when a mortgagor makes satisfactory arrangements to pay the arrears at a future date.
Foreclosure
Legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction, with the proceeds of the sale being applied to the mortgage debt.
FOSTER CARE AGREEMENT
A document that designates an individual as the foster parent of a child. These agreements usually state the income the individual will receive for being a foster parent.
Foundation Endorsement
A foundation endorsement certifies that the project is located within the proper boundaries of the property and that there are no easements or encroachments present. This endorsement is issued by a title company at completion of the foundation work on an OTC loan and is required on properties in states that do not normally require a survey.
FREE AND CLEAR
Real property against which there are no liens, especially voluntary liens.
Frontage
Property line abutting the most important adjacent property, usually a street, lake, river, or ocean.
FRONT-END DEBT RATIO
This refers to the debt ratio calculation using only principal, interest, tax and insurance divided by gross monthly income. It's expressed as a percentage. See also DEBT RATIO.
FULL DISCLOSURE
In real estate, revealing all the known facts that may affect the decision of a buyer or tenant.
FULLY ADJUSTED RATE/FULLY INDEXED RATE
The fully indexed rate is equal to the rate index plus the loan's margin and is used with adjustable-rate mortgages. Example: If LIBOR is 6.50% and the margin on the loan is 4.00%, the fully indexed rate is 10.50%. Same as FULLY ADJUSTED RATE.
Functional Depreciation
Loss of value to real estate due to improvements not providing the same degree of use, utility, or efficiency as a new structure would. It may be curable or incurable.
Functional Obsolescence
Reduction in value caused by changes in taste, overcapacity, or inadequacy. Examples are outdated kitchen fixtures and outmoded room arrangements.
FUNDING
The disbursement of loan funds, either by check or by wire transfer to the title company.