A mortgage originator is a company or individual that assists prospective borrowers through the loan application and funding process. The originator provides the initial loan funding, but may sell the loan to another entity shortly after funding. Mortgage brokers and mortgage bankers can be mortgage originators.
Mortgage par rate
A mortgage par rate is a reference point used by lenders to evaluate a mortgage's value. If a mortgage carries an interest rate higher than the par rate, the lender will pay a premium to purchase that mortgage. If the mortgage's rate is lower than the par rate, the lender will only pay less than face value to purchase the mortgage.
Mortgage pass-through security
A mortgage pass-through security is an investment vehicle that's backed by a pool of mortgage loans, where the investor receives principal and interest payments (less a fee) as payments are made on the underlying mortgage loans.
A mortgage pipeline is the collection of loans that have been approved and locked in by the mortgage originator, but not yet funded. Mortgage loans are taken out of the pipeline if the borrower backs out, or if the loan funds. Upon funding, the loans are either sold on the secondary market, or placed in the originator's portfolio.
A mortgage pool is a group of real estate loans that are used as collateral to support a mortgage-backed security, or MBS. Mortgage pools often contain loans that have similar maturities and terms, but the pool can also be more diversified for complex securities.
Mortgage rate is the percentage used to calculate interest expense on a real estate loan.
Mortgage rate lock
A mortgage rate lock is an agreement between a prospective borrower and lender that the mortgage loan will be available to the borrower at the stated interest rate for a certain period of time. If market rates change before funding, it doesn't affect the locked mortgage loan.
Mortgage rate lock deposit
A mortgage rate lock deposit is a non-refundable amount that a lender will charge a prospective borrower to guarantee a certain interest rate on a mortgage loan, under the condition that the loan funds within a certain timeframe. Once the loan funds, the deposit is credited back to the borrower. Not all lenders charge mortgage rate lock deposits.
Mortgage rate lock float down
A mortgage rate lock float down is a type of deposit that a prospective borrower can put down to fix the interest rate on a mortgage loan. Rate locks are put in place after the loan is approved and before the loan funds. A rate lock with a float down option protects the prospective borrower from rate increases, but also allows the borrower to take advantage of rate decreases that occur prior to funding. This arrangement is more expensive than a conventional rate lock deposit, which merely fixes the rate at a set value.
A mortgage recast is a permanent alteration of a mortgage's payoff structure. Some mortgage loans allow for recasting under certain situations, such as when the borrower is financially distressed. In this case, the maturity could be extended, or the interest rate could be reduced. Mortgages that allow unpaid interest to be added into the principal balance (e.g., option ARMs), have to be recast so that the debt is eventually repaid.
The option to pay off an old loan with a new one. This typically saves the borrowers money in terms of a lower interest rate or lower payments. The borrower may also opt to get cash out of his or her equity.
A mortgage REIT (real estate investment trust) is an entity that invests in real estate property loans. The REIT may act as a mortgage originator, or purchase the loans on the secondary market. Mortgage REITs obtain their equity capital by selling shares to investors who want to participate in the REIT's professionally managed portfolio.
Mortgage risk is the likelihood that the borrower on a real estate property loan will not make the debt payments as promised.
Mortgage servicing is the process of managing the administrative details of a mortgage loan. These details include collecting principal and interest payments, forwarding repayments to the mortgage lender (if the lender is not the servicer), managing escrow accounts, making payments to insurance companies and tax collectors, etc. Mortgage servicers earn a fee. Also, the rights to service a loan can be bought and sold, just as the loan itself can be bought and sold.
Mortgage servicing rights - MSR
Mortgage servicing rights, or MSR, is a claim on the responsibility to administer a mortgage and earn the resulting fee. Mortgage servicing involves collecting principal and interest payments, forwarding repayments to the mortgage lender (if the lender is not the servicer), managing escrow accounts, making payments to insurance companies and tax collectors, etc. Mortgage servicing rights can be bought and sold.