Glossary and Acronyms "L"
Loan Application Fee
A fee the buyer pays to a lender when applying for a mortgage.
Loan Discount Points
Prepaid interest on the mortgage loan. The more points paid, the lower the interest rate. Typically, borrowers can pay for 0-4 points.
A formal notification from a lender stating that the borrower’s loan has been conditionally approved and specifying the terms under which the lender agrees to make the loan.
Loan Estimate (LE)
Disclosure to help consumers understand the key loan terms and estimated costs of a mortgage before they make a complete application. After a consumer submits 6 key elements: name, income, social security number, property address, estimated property value and desired loan amount, the lender is required to provide this form. All lenders are required to use the same standard loan estimate form to make it easier for consumers to compare and shop for a mortgage. (Ref: The Loan Estimate "LE")
Changes to one or more of the terms of a loan.
The process by which a mortgage lender makes a home loan and records a mortgage against the borrower’s real property as security for repayment of the loan.
Loan Origination Fee
A fee charged by a lender to cover the administrative costs of making a loan.
Loan Servicing / Administration
The process by which a company collects interest, principal, and escrow payments from a borrower. (Ref: What is a Mortgage Servicer?)
Loan-to-value ratio (LTV)
The ratio between the unpaid principal amount of your loan, or your credit limit in the case of a line of credit, and the appraised value of your collateral. Expressed as a percentage. For example, if you have an $80,000 first mortgage on a property with an appraised value of $100,000, the LTV is 80% ($80,000 / $100,000 = 80%). (Ref: What factors are considered when calculating Loan to value ratios and how is it calculated?)
A guarantee that the lender will deliver a specific combination of interest rate and points if the mortgage closes by a specific date. (Ref: What is an Interest Rate Lock)
The amount of time prior to closing that you can secure an interest rate for your loan. Lock periods typically range from 30 days to more than 90 days. Generally, the longer the lock period, the more you pay in points or interest.
A mortgage application interest rate that is established and guaranteed for a specified period.
Large capitalization (Cap)
A reference to either a large company stock or an investment fund that invests in the stocks of large companies.
A fund that invests primarily in large-cap stocks.
Stocks of companies with a large market capitalization. Large caps tend to be well-established companies, so their stocks typically have less risk than smaller caps, but they also offer less potential for dramatic growth.
An annuity that makes periodic payments only for the life of one individual. Also known as a single life annuity.
A fund designed to provide varying degrees of long-term appreciation and capital preservation based on your age or target retirement date. As you get older or closer to retirement, a lifecycle fund’s mix of asset classes becomes less focused on growth and more focused on income. Also known as target date retirement or age-based funds.
A fund that maintains a predetermined risk level and generally uses words like “conservative,” “moderate” or “aggressive” in its name to indicate the fund’s risk level. Used interchangeably with target risk fund.
The ease that an investment can be converted into cash. If a security is very liquid, it can be bought or sold easily. If a security is not liquid, it may take additional time and/or a lower price to sell it.
The risk that you will live longer than expected and run out of retirement money.
Low Down Payment Feature
A feature of some mortgages, usually fixed-rate, that helps you buy a home with a low-down payment.
An Act of Lending.
An asset that is readily convertible into cash, such as marketable security, a note, or an account receivable.
Line of credit
An agreement by a lender to extend credit up to a maximum amount for a specified time. In a home equity line of credit, the line of credit is secured by the borrower’s home.
Lifetime Rate Cap
For an Adjustable Rate Mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the mortgage.
Lifetime Payment Cap
For an Adjustable Rate Mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.
An individual or entity that has placed a lien on real property.
The legal claim of a creditor on a borrower’s property, to be used as security for a debt.
Liability Insurance provides the insured party with protection against claims resulting from injuries and damage to people and/or property. Liability Insurance policies cover both legal costs and any payouts for which the insured party would be responsible if found legally liable. Intentional damage and contractual liabilities are generally not covered in these types of policies. See Homeowners Insurance Liability Section
A person’s debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.
Lease Purchase Option
A rent-to-own purchase plan under which the buyer takes possession of the property with the first payment and takes ownership with the final payment. Such a lease is usually treated as an installment sale. Under a capital lease, the lessee is responsible for paying taxes and other expenses on the property.
An additional fee assessed on a debt when a payment is not received by the due date
A person or entity from which money is borrowed.
Land Safe Appraisal Risk Analysis
Loss given Default
Loan Held for Sale
Loan Level Pricing Adjustments
Lender Paid Mortgage Insurance
LQI FNMA Loan Quality Initiative
LTV is a ratio used by the lender that divides the amount of money borrowed by the appraised value of the home expressed as a percentage for example, a borrower may purchase a home appraised at dollar 200,000 with a down payment of dollar 40000. This means he has a loan to value ratio of 80 percent.
Lower of cost or market