Amortization : Amortization is the process of decreasing, or accounting for, an amount over a

period .

When used in the context of a home purchase, amortization is the process by which your loan principal
decreases over the life of your loan. With each mortgage payment that you make, a portion of your
payment is applied towards reducing your principal and another portion of your payment is applied
towards paying the interest on the loan. An Amortization table shows this ratio of principal and interest
and demonstrates how your loan's principal amount decreases over time.

Amortization is generally known as depreciation of intangible assets of a firm.

What Does Amortization Mean?

1. The paying off of debt in regular installments over a period of time.

2. The deduction of capital expenses over a specific period of time (usually over the asset's life). More
specifically, this method measures the consumption of the value of intangible assets, such as a patent or
a copyright.

Investopedia explains Amortization

Suppose XYZ Biotech spent $30 million dollars on a piece of medical equipment and that the patent on
the equipment lasts 15 years, this would mean that $2 million would be recorded each year as an
amortization expense.

While amortization and depreciation are often used interchangeably, technically this is an incorrect
practice because amortization refers to intangible assets and depreciation refers to tangible assets.

Underwriting : 1. The procedure by which an underwriter brings a new security issue to the investing
public in an offering. In such a case, the underwriter will guarantee a certain price for a certain number of
securities to the party that is issuing the security (in exchange for a fee). Thus, the issuer is secure that
they will raise a certain minimum from the issue, while the underwriter bears the risk of the issue.

2. The process of insuring someone or something.

3. The process by which a lender decides whether a potential credit or is creditworthy and should receive
a loan.

Read more:http://www.investorwords.com/5136/underwriting.html#ixzz0zzyQZ3IP
FICO: Fair Isaac Corporation (NYSE: FICO), is a public company that provides analytics and decision
making solutionsincluding credit scoring[1]--that help financial services companies[citation needed] make
complex, high-volume decisions.[1]

FICO is based in Minneapolis, Minnesota, United States[2] and has offices in North America, South
America, Europe, Australia, andAsia.[citation needed]

What Does FICO Score Mean?

A type of credit score that makes up a substantial portion of the credit report that lenders use to assess
an applicant's credit risk and whether to extend a loan.

FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score.

Investopedia explains FICO Score

Using mathematical models, the FICO score takes into account various factors in each of these five areas
to determine credit risk: payment history, current level of indebtedness, types of credit used ,length
of credit history, and new credit.

A person's FICO score will range between 300 and 850. In general, a FICO score above 650 indicates
that the individual has a very good credit history. People with scores below 620 will often find it
substantially more difficult to obtain financing at a favorable rate.

What Does Home Mortgage Disclosure Act - HMDA Mean?

A federal act approved in 1975 that requires mortgage lenders to keep records of certain key pieces of
information regarding their lending practices. This information includes the number of pre-approvals
made, the number of mortgages granted, loan amounts, etc. The primary purposes of the Home
Mortgage Disclosure Act (HMDA) are to help authorities monitor discriminatory and predatory lending
practices, as well as to ensure government resources are allocated properly.

Investopedia explains Home Mortgage Disclosure Act - HMDA

Federal Regulation C requires lenders to prominently display a poster in every branch office lobby that
provides information on requesting their unique HMDA statistics. These statistics can also be viewed by
the public online for free at www.FFIEC.gov.

While these statistics are of natural interest to potential borrowers, they're also an important research tool
for investors researching banking and lending stocks. By comparing the most recent few years' statistics,
an investor can easily identify whether or not a lender is growing their core business.
What Does FHA Loan Mean?
A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration
(FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large
down payment. FHA loans allow the borrower to borrow up to 97% of the value of the home. The 3%
down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-
time buyers.

Investopedia explains FHA Loan

In addition to traditional first mortgages, the Federal Housing Administration offers a reverse mortgage
program known as a Home Equity Conversion Mortgage (HECM), which helps seniors convert the equity
in their homes to cash while retaining the titles to their homes.

What Does Loan-To-Value Ratio - LTV Ratio Mean?

A lending risk assessment ratio that financial institutions and others lenders examine before approving a
mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if
the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need
to purchase mortgage insurance.

Calculated as:

Investopedia explains Loan-To-Value Ratio - LTV Ratio

For example, Jim needs to borrow $92,500 to purchase a $100,000 property. The LTV ratio yields a value
of about 92.5%. Since bankers usually require a ratio at a maximum of 75% for a mortgage to be
approved, it may prove difficult for Jim to get a mortgage.

Similar to other lending risk assessment ratios, the LTV ratio is not comprehensive enough to be used as
the only criteria in assessing mortgages.

What Does Combined Loan To Value Ratio - CLTV Ratio Mean?

A ratio used by lenders to determine the risk of default by prospective homebuyers when more than one
loan is used. In general, lenders are willing to lend at CLTV ratios of 80% and above to borrowers with a
high credit rating.

nvestopedia explains Combined Loan To Value Ratio - CLTV Ratio

For example, let's assume that an individual is purchasing property valued at $200,000. This individual
takes out two loans for the property, one for $100,000 and another for $50,000. The combined loan to
value ratio would be 75%, (($100,000 + $50,000) / $200,000).
What Does Appraised Value Mean?
An evaluation of a property's value based on a given point in time that is performed by a professional
appraiser during the mortgage origination process. The appraiser is usually chosen by the lender, but the
appraisal is paid for by the borrower.

Investopedia explains Appraised Value

The appraised value of a home is an important factor in the loan underwriting process and plays a role in
determining how much money may be borrowed and under what terms. For example, the loan to value
(LTV) ratio is based on the appraised value.

In general, if the LTV is greater than 80%, the lender will require the borrower to buy private mortgage
insurance. However, if the LTV drops to 78% upon a new appraisal, private mortgage insurance payments
may be eliminated.

Escrow
What Does Escrow Mean?
A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds
are held by the escrow service until it receives the appropriate written or oral instructions or until
obligations have been fulfilled. Securities, funds and other assets can be held in escrow.

Investopedia explains Escrow

An escrow account can be used in the sale of a house, for example. If there are conditions to the sale,
such as the passing of an inspection, the buyer and seller may agree to use escrow. In this case, the
buyer of the property will deposit the payment amount for the house in an escrow account held by a third
party. This assures the seller - in the process of allowing the house to be inspected - that the buyer is
capable of making payment. Once all of the conditions to the sale are satisfied, the escrow transfers the
payment to the seller, and title is transferred to the buyer.

Government-Sponsored Enterprise - GSE

What Does Government-Sponsored Enterprise - GSE Mean?
Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of
capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers
and homeowners.

Investopedia explains Government-Sponsored Enterprise - GSE

GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S.
Government. For this reason, these securities will offer a yield premium over Treasuries. Some consider
GSEs to be stealth recipients of corporate welfare.

Examples of GSEs include: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal Farm Credit Bank and the Resolution Funding Corporation.
Mortgage Electronic Registration Systems (MERS) is a privately held company that operates an
electronic registry designed to track servicing rights and ownership of mortgage loans in the United
States.[1]

MERS serves as the mortgagee of record for lenders, investors and their loan servicers in the county land
records. MERS claims its process eliminates the need to file assignments in the county land records
which lowers costs for lenders and consumers by reducing county recording revenues from real estate
transfers[2] and provides a central source of information and tracking for mortgage loans. [3]