Mortgage Rates

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Number 1. A commission or fee paid by a lender to a mortgage broker in return for origination services.

Correct Answer: Back-end Fee

Number 2. An external index to which a variable rate mortgage may be anchored that is tied to the costs of savings.

Correct Answer: Cost of Savings Index (COSI)

Number 3. A mortgage rider in which a borrower receives a forward commitment or lock-in of an interest rate on a future closing and is granted the ability to accept a lower rate of interest in the event interest rates or an index decline.

Correct Answer: Float-down

Number 4. A form of adjustable rate mortgage (ARM) in which the initial rate is below some external index and is increased to that index value after the initial rate period without caps that constrain increases per period or over the life of the loan.

Correct Answer: Fully Indexed Rate

Number 5. In an Adjustable Rate Mortgage, the interest rate that is charged during the first payment period prior to adjustments.

Correct Answer: Initial Interest Rate

Number 6. The present value of forecast interest payments over the term of a loan or some specified holding period.

Correct Answer: Interest Cost

Number 7. The amount of interest earned by a lender on outstanding loan proceeds at specified interest rates.

Correct Answer: Interest Due

Number 8. The actual payment made on behalf of a borrower on a periodic basis to compensate for the earned rate of interest on an outstanding principal balance.

Correct Answer: Interest Payment

Number 9. In an Adjustable Rate Mortgage, the maximum interest rate that can be charged over the life of the loan.

Correct Answer: Interest Rate Ceiling

Number 10. In an Adjustable Rate Mortgage, the maximum decline in interest rates that will be applied at any single adjustment period or fixed time period.

Correct Answer: Interest Rate Decrease Cap

Number 11. In an Adjustable Rate Mortgage, the minimum interest rate that will be charged regardless of declines in indexed rates.

Correct Answer: Interest Rate Floor

Number 12. In an Adjustable Rate Mortgage, the maximum change in the interest rate that can be imposed in any single adjustment to avoid excessive changes in payments or costs.

Correct Answer: Interest Rate Increase Cap

Number 13. The external benchmark used to periodically reset a mortgage rate in In an Adjustable Rate Mortgage. May also be used in a situation where a borrower pre-qualifies for a loan but does not lock in the interest rate. Ultimately, the rate will be adjusted to account for changes in a specified benchmark.

Correct Answer: Interest Rate Index

Number 14. The points or charges made by a lender as an up-front fee which is generally expressed as points and results in a reduction in loan proceeds at the closing.

Correct Answer: Loan Discount Fee

Number 15. A written statement that documents the agreement between a lender and prospective borrower in terms of the forward commitment of funds at a specified rate and specified terms and conditions.

Correct Answer: Lock Commitment Letter

Number 16. The commitment provided by a lender to a borrower to advance funds in the future at a given or agreed-to interest rate.

Correct Answer: Lock-in

Number 17. The nominal or stated interest rate on a mortgage expressed as a percent of the initial face value of the mortgage before adjustments for fees, discounts or other charges that affect the effective or annual payment rate calculation.

Correct Answer: Mortgage Rate

Number 18. Loan points that are built into an interest rate, creating a higher effective rate than in a typical mortgage. In effect, the lender is compensated for the waiver or reduction of points by receiving a higher interest rate.

Correct Answer: Negative Points

Number 19. The rate a borrower must actually pay per period as opposed to the earned rate based on the contract rate of interest. The payment rate is set lower than the earned rate. The excess or gap is accrued, compounded and added to the outstanding balance. The effect is to create a a negative amortization loan.

Correct Answer: Payment Rate

Number 20. The average daily interest that is due between a closing date and the first scheduled mortgage payment.

Correct Answer: Per Diem Interest

Number 21. The exploiting of a borrower or group of borrowers based on their lack of knowledge or access to prevailing market conditions charging rates or fees that dramatically exceed market rates.

Correct Answer: Price Gouging

Number 22. A shortened phrase for the interest rate that is charged on a mortgage or loan.

Correct Answer: Rate

Number 23. The standard from tables and charts that outline rates and fees which are distributed to loan originators and mortgage brokers.

Correct Answer: Rate Sheets

Number 24. A reduced up front interest rate or payment rate that is offered to induce a borrower to accept a variable rate loan.

Correct Answer: Teaser Rate