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Consumer Credit Protection
OTHER PFR AGENCIES
Advance Fee Loan Scam – A form of fraud in which consumers are asked to pay a fee up front and receive a quick loan of a large size with a very low APR. Consumers are lured to wire funds (oftentimes to
Adjustable Rate Loans– (also known as variable-rate loans), usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; when interest rates fall, your monthly payments may be lowered.
Annual Percentage Rate (APR) – The actual cost of credit to the borrower, including interest and certain other charges, expressed as a yearly rate. Determining the APR’s for two products permits consumers to comparison-shop for credit.
Appraisal - A written estimate, provided by a State licensed Appraiser, of the value of a home.
Balloon Payment – A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date prior to the end of the amortization period.
“Blue Book” Price – the price of a used car as measured by a quality index of many similar vehicles. Various publications (now available for free on the internet) disclose used vehicle values (retail, trade-in, wholesale).
Buy Down: A method of lowering the interest rate on a mortgage, either temporarily or for the entire term of the loan. Permanent Buydowns require the payment of points at closing, while Temporary Buydowns require the payment of a lump-sum interest payment up front which can subsidize the mortgage payments over the first one to three years of the loan.
Buy Here, Pay Here Financing – is usually associated with used car dealers. Installment payments, often made weekly, are paid directly to the dealership, which provides private financing (sometimes at a high cost/APR) for the vehicle.
Buyer's Agent - This is the real estate broker that represents the buyers. They will make appointments to show you properties and help you to negotiate the terms of your home purchase.
Closing or Settlement: The meeting between the seller, buyer and closing attorney when the property legally changes hands, the transaction is legally closed, or both.
Closing Costs or Settlement Fees - Fees paid to effect the closing of a mortgage. (Such as points, title fees, survey fees, etc.)
Closing Statement or Settlement Statement - This is a document prepared by the Title Company that details the final and specific costs involved for both the buyer and seller in a real estate transaction.
Collateral – Property, such as stocks, house, bonds, bank account, or a car, offered to secure a loan and which is subject to seizure if you default; see security.
Combined Loan-to-Value ("CLTV") - The relationship of the outstanding balances of a first and second mortgage to the value of the home used to determine the maximum percentage of value which may be lendable. (1st mortgage amount plus second mortgage amount divided by value or sales price.)
Commitment - An offer to grant a mortgage loan which outlines the terms, the amount of the loan, the interest rate and any conditions that the commitment or approval is subject to.
Conforming Loan - A loan which meets all requirements to be eligible for purchase or securitization by FNMA or FHLMC (Fannie Mae or Freddie Mac) which has a loan amount below the level deemed to be the limit for "Jumbo" loans
Consumer - Any natural person obligated or allegedly obligated to pay a debt incurred for personal, family or household use.
Consummation – The point in time when the contractual relationship between borrower and lender begins.
Cosigner – Another person, not necessarily a relative, who also signs your loan contract and assumes equal responsibility for its repayment.
Conventional Mortgage - A mortgage loan which is not insured or guaranteed by a government agency such as FHA or VA.
Construction Loan - A short-term, interim
loan that provides disbursements to facilitate the construction of a home.
Funds are disbursed at intervals as work progresses.
Credit Bureaus - or “consumer reporting agencies,” are companies that compile credit reports, and supply credit information to businesses upon request.
Credit Card – A plastic card with a magnetic stripe that is used from time to time or over and over again to borrow money or buy goods or services on credit, and which offers the ability to make partial payments toward the balance owed.
Credit Life & Disability Insurance – Insurance offered to loan and credit card customers that will pay the monthly payments on their debt if they become disabled or the balance of their debt if they die before completing their payments. Lenders may not require this coverage as a condition of granting a loan request.
Credit Reports – or “consumer reports,” contain information about your credit worthiness. Information is kept on file with a credit bureau and will display data about past payment history. You have the right to request a free copy of your credit report once a year. Contact the Maine Office of Consumer Credit Regulation at 1-800-332-8529 to order forms.
Credit Score - Credit scores are numerical summaries of your credit-worthiness based on information from credit bureaus. Private companies provide consumer scores to creditors for a fee.
Credit Service Organization - also known as a loan/mortgage broker. Starting in late September 2005 all Credit Service Organizations will be renamed loan brokers; see loan broker.
Cure – To bring your credit account current by paying all past due accounts.
Debit Card – A plastic card, which looks similar to a credit card, that consumers may use to make purchases, withdrawals, or other types of electronic fund transfers. Funds are immediately drawn from the consumer’s checking account directly and simultaneously.
Debt-to-Income Ratio - A measure of creditworthiness computed by dividing the dollar amount of monthly debts by total gross monthly income, then converting the result to a percentage.
Deed - The legal document that is used to transfer the title from one owner to another.
Default – Failure to repay a loan or otherwise meet the terms of your credit agreement. A loan that is one day late is technically “in default”.
Disclosures – Information that must be given to consumers about their financial dealings. Disclosures associated with consumer credit include: APR’s, finance charge, monthly payment amount, total of payments, and the amount of payments.
Discount Points - Amount paid to the lender by the borrower or seller to decrease or "buy down" the borrower's interest rate. One point is equal to one percent of the loan amount.
Divorce Decree – legal ruling by a court which, among other things, assigns obligations for the payment of various debts. Any debts held jointly may be primarily assigned by the decree to one party; however, despite the judge’s order, the other party still remains legally liable on the debt to the creditor.
Escrow Account – An account that serves a specific purpose, which ends when a certain condition is met or a certain event occurs. There are two main types of escrow accounts relevant to consumer credit:
Equity - The difference between the current market value of a property and the total amount of outstanding liens against the property.
Escrow Account – This is an account where a portion of a borrower's mortgage payment is set aside to pay for real estate taxes and homeowner's insurance. The lender then automatically pays municipal taxes and homeowner's insurance directly from this interest-paying account when necessary.
Escrow Account – Borrower's application-related fees (not including third-party fees for appraisals, titles searches and credit reports) must be set aside in the mortgage broker's special escrow/trust account. If the borrower rescinds the transaction, these fees must be returned to the applicant.
Fair Collection Practices Act –
A federal law supplemented by
FHA - Federal Housing Authority, also known as HUD (Department of Housing and Urban Development). The Federal Housing Authority is a federal entity that governs the FHA mortgage program, which is a low down-payment mortgage program with flexible credit and qualifying guidelines.
Finance Charge - The cost of interest and other charges involved in borrowing money.
Fixed Rate Mortgage - A mortgage in which the interest rate and monthly payments of principal and interest remain the same for the life of the loan.
Floating - The process of an applicant deciding against locking-in an interest rate at the time of application and instead electing to float with the market until a later date at which time he/she will request the mortgage company to lock-in the interest rate at the prevailing rate.
FSBO - Acronym for the term "For Sale By Owner." Indicative of a real estate transaction in which the seller is not represented by a real estate broker.
Home Equity Loan – A form of open-end credit in which the home serves as the consumer’s collateral.
Home Inspector - You hire and pay for this individual to analyze the home's physical condition before you buy it.
Identity Theft – The theft of personal and/or financial information that identifies the consumer, and which is often used to apply for credit in their name. For instance, a thief may obtain your name and social security number and open accounts in your name. Consumers who are victims of identity theft have several protections available. See Identity Theft
Index - The factor that a particular interest rate is directly related to, some common indexes are the One Year Treasury Bills, LIBOR, and the prime lending rate.
Interest - The amount paid for the use of money usually expressed as an annual percentage. Also, a right, shares, or title in a property.
Investor - Any person or institution that invests in mortgages or mortgage-backed securities.
Jumbo - A loan that exceeds the statutory size limit eligible for purchase or securitization by either FNMA or FHLMC.
Listing Broker - This is the real estate broker that represents the sellers. They will market the property to bring buyers, which in turn bring offers to the seller.
Loan Origination fees – Fees charged by the lender for processing the loan and which are often expressed as a percentage of the loan amount.
Loan/Mortgage Broker – An organization that provides (or offers to provide) the service of improving your credit record, obtaining a loan for you, or providing advice or assistance with either of these services, in return for payment. See Loan/Mortgage Broker Section.
Loan Term - The period of time between the start date and the termination date of a note or mortgage.
Loan-to-Value Ratios ("LTV") - The ratio of mortgage amount to value or sales price of a home. (Mortgage amount divided by value or sales price.)
Locking Your Interest rate on a mortgage loan request for a specified period of time.
MSHA, Maine State Housing Authority - A mortgage program available only to
first-time homebuyers within the State of
MCCC-1 - Annual notification/reporting form required under Title 9-A M.R.S.A.§6-202 for all
Mortgage – Document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property (a security interest) if the borrower fails to pay off on the loan.
Mortgage Company (Supervised Lender) – A Supervised Lender is any person authorized to make or take assignments of supervised loans either under a license issued by the Bureau, or as a supervised financial organization. Our office only regulates non-bank mortgage companies that are required to be licensed with this office. The Maine Bureau of Financial Institutions regulates supervised financial organizations (banks, credit unions, savings & loans).
Origination Fee - The fee lenders charge to borrowers to prepare documents, process and close the loan. It is usually stated as a percentage of the loan. In some cases, it may be charged to offset the interest rate, also referred to as a point.
PITI - Acronym for items included in a monthly mortgage payment: principal, interest, taxes and insurance.
PMI - Also called Private Mortgage Insurance. Insurance provided to Downeast Mortgage Corporation by private institutions to help lessen the risk of loss on certain loans.
Points and Origination Fees – Fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs. An origination fee covers the lender’s work in preparing your loan.
Prepayment Penalty (Mortgages) - A charge assessed by a creditor when the consumer pays off all or part of the loan before it is due. They are permitted on fixed-rate, first-lien mortgages, but prohibited on adjustable-rate and second-lien loans.
Private Mortgage Insurance (PMI) – protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.
Principal - The original balance of the money lent, excluding interest.
Processor - a person who acts as a liason between your Loan Officer and the Underwriter to help facilitate the flow of paperwork which takes you from loan application to loan closing. Verifies info in the file, orders appraisals, title searches, flood certifications, collects loan approval conditions, coordinates the closing instructions with the Title Company.
Rescission – The cancellation, or “tearing-up,” of a contract. Some consumer loans (home mortgages) feature a 3-day right of rescission during which the borrower can cancel the loan without penalty.
Recording Fees - Charged by the Registry of Deeds for the filing of documents or details of a legal document to make them a matter of public record. Usually requires the witnessing and notarizing of the documents to be recorded.
Refinance - The repayment of a debt from the proceeds of a new loan using the same property as security.
RD - Rural Development. The "Rural Development" mortgage program is governed by the USDA and is designed to promote homeownership in rural areas.
Security Interest – The creditor’s right to take property or a portion of property offered as security.
Supervised Lender - A person authorized to make or take assignments of most consumer loans and residential mortgages, either under a license issued by the Administrator (section 2-301), or as a supervised financial organization (bank or credit union)(1-301, subsection 38).
Telemarketing Fraud – Unsolicited telephone call from a criminal who tries to trick the consumer into disclosing personal information (bank account number, credit card number, or social security number.)
Third Party Fees – a fee that you pay up front for a mortgage broker to pay to another party, such as to obtain a credit report, order an appraisal, or to do a title search.
Title - The right to ownership in real estate, which is transferred by a deed. Evidence of ownership in real estate.
Title Insurance - A contract by which the insurer (commonly referred to as a "Title Company") agrees to pay the insured a specified amount for any loss caused by defects of title to real estate.
Title Search - The process of checking records relating to the title to see that it doesn't have any liens, mortgages, encumbrances or other claims against it that would keep it from being transferred
Underwriting - The analysis of the risk involved in making a mortgage loan to determine whether the risk is acceptable to the mortgage company. Underwriting involves the evaluation of the property as outlined in the appraisal, the borrower's ability to repay the loan, the borrower's creditworthiness and the application of criteria specified by investors to whom the mortgage company might sell or transfer mortgages.
VA - The Department of Veterans Affairs. (VA) will insure certain government mortgages that are provided to Veterans of the U.S. Military, thereby allowing these loans to be written with more relaxed underwriting criteria than might be required otherwise. VA does not guarantee a mortgage approval, though. The applicant still is required to qualify based upon his/her overall picture of creditworthiness.
Variable-Rate Loans – See Adjustable rate Loans
Loan Officer Information
Educational Requirement Section
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