General Information

CalSTRS Home Loan Program Glossary

Glossary of acronyms used in this report.

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80/17 Program

This previously offered program consisted of an 80 percent loan-to-value first mortgage and a 17 percent second mortgage that was deferred for the first five years of the 30-year mortgage term. The borrower would pay the remaining 3 percent of the purchase price at closing.


95/5 Program

This previously offered program consisted of a 95 percent loan-to-value first lien mortgage with a 5 percent deferred second mortgage. The program provided 100 percent financing with no down payment requirement.

A


ALT-A

A category of mortgages which have a risk potential that is greater than prime but less than subprime. The interest rate offered on these mortgages is usually between the prime and subprime levels. The reason for the increased risk is usually not the borrower’s credit history, but rather something specific about the mortgage.

B


Basis Point

One hundredth of one percent; .01 percent in yield and .0001 in decimal form.


Benchmark

An index that is used as the standard for comparison in measuring the performance of a given portfolio.


Board

The California State Teachers’ Retirement System Board of Trustees.

C


California Housing Finance Agency (CalHFA, f.k.a. CHFA)

California agency with responsibility for supporting the needs of renters and first-time homebuyers by providing financing and programs that create safe, decent, and affordable housing opportunities for low and moderate income Californians.


Conforming Loan

A mortgage that meets the qualifying criteria set by Fannie Mae and Freddie Mac that make it eligible for purchase. One such requirement is that the loan must be equal to or less than the conforming loan limit set by Fannie Mae or Freddie Mac. A conforming loan carries a lower interest rate and generally more favorable terms than a jumbo loan.


Conventional Loan

A mortgage in which the interest rate does not change during the entire term of the loan. Also, a mortgage that is not insured or guaranteed by the government, thus the lender bears more risk and generally has higher standards for qualification. For comparison, a loan guaranteed by the Veterans Administration (VA) or insured by the Federal Housing Administration (FHA) would not be a conventional loan.


Correspondent Agreement

The contract between CalSTRS and a private financial institution that originates and services loans and which describes the respective duties of each party.


Correspondent Lender

The private financial institution that originates and, in some cases, services home loans for CalSTRS borrowers.

D


Default

A participant is in default when the principal and interest payment due on a loan has not been remitted for 120 days.


Deed In Lieu

A deed instrument in which a mortgagor (borrower) conveys all interest in a real property to the mortgagee (lender) to satisfy a loan that is in default and avoid foreclosure proceedings. A deed in lieu has a lesser negative impact on a borrower’s credit score than a foreclosure.

F


Federal Housing Finance Authority (FHFA)

An independent federal agency charged to supervise, regulate and oversee the Government Sponsored Enterprises (GSEs). FHFA was appointed as the government conservator controlling Fannie Mae and Freddie Mac since they were bailed out in 2008.


Federal National Mortgage Association / Federal Home Loan Mortgage Corporation Guidelines

The specifications required by the Federal National Mortgage Association (FNMA, Fannie Mae) or the Federal Home Loan Mortgage Corp. (FHLMC, Freddie Mac), in order to be eligible for guarantee as to principal and interest payments. FNMA and FHLMC are private corporations, federally chartered to provide financial products and services that increase the availability and affordability of housing for low-, moderate-, and middle-income Americans.

G


Government Sponsored Enterprise (GSE)

Typically the term refers to Fannie Mae, Freddie Mac and Ginnie Mae.

H


Home Affordable Foreclosure Alternatives Program (HAFA)

A component of the federal government’s Making Home Affordable® Program (MHA). HAFA was created to assist homeowners who can no longer afford to stay in their home, but want to avoid foreclosure and transition to more affordable housing through a short sale or deed-in-lieu of foreclosure.


Home Affordable Modification Program (HAMP)

A component of the federal government’s Making Home Affordable® Program (MHA). HAMP is designed to enable borrowers that meet eligibility requirements avoid foreclosure by modifying loans to a level that is affordable for borrowers and sustainable for the long-term. This initiative is targeted at delinquent borrowers and those facing imminent risk of default with loans originated prior to January 1, 2009. The goal is a reduction in the borrower’s mortgage payments to 31 percent of monthly income.


Home Affordable Refinance Program (HARP)

A component of the federal government’s Making Home Affordable® Program (MHA). HARP is designed to allow borrowers who meet eligibility requirements refinance their first mortgage into a more affordable mortgage. Among the requirements, the borrower must be current with payments, and the mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. HARP does not apply to second mortgages.


Housing and Urban Development (HUD)

United States Department of Housing and Urban Development. A Cabinet-level department in the Executive Branch of the federal government. HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.

I


Interest-Only Loan

A loan in which interest is payable at regular intervals (usually monthly). Does not require amortization.

J


Jumbo

Any single mortgage loan in an amount that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac. Jumbo mortgages are not backed by Fannie Mae or Freddie Mac and carry greater risk. They therefore require the borrower to pay a higher interest rate than a conforming loan. Jumbo mortgages are a specific category of non-conforming loans that exceed the conforming size limitation.

L


Loan Rate

The cost of using money, expressed as a rate per period of time.


Loan-To-Value Ratio (LTV)

The ratio of the loan amount to the appraised value of the property. Example: A property with a loan of $80,000 and an appraised value of $100,000 results in a loan-to-value of 80 percent.

M


Making Home Affordable (MHA)

A federal government plan to stabilize the housing market and help Americans reduce their monthly mortgage payments to more affordable levels.


Mortagee

The creditor or lender in a mortgage agreement.


Mortgage Insurance

Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.


Mortgage-Backed Security (MBS)

A security that is issued by a federal agency, such as the Federal Home Loan Mortgage Corporation, or the Federal National Mortgage Association, that is backed by mortgages. Payments to investors are received out of the interest and principal of the underlying mortgages.


Mortgagor

The borrower in a mortgage agreement.

N


Neighborhood Assistance Program (NACA)

A non-profit, community advocacy and homeownership organization with the goal of building strong, healthy neighborhoods nationwide through affordable homeownership.


Non-Conforming

A loan not eligible for guarantee as to principal and interest by FNMA or other federally chartered housing agency, based upon the borrower’s qualifying ratios and/or loan amount.

P


Prime

The group of borrowers deemed to be the most credit-worthy, indicated by a FICO score of 660 or above (per FHFA, OCC, & OTC).

R


Recast

A feature in some types of mortgages where the remaining scheduled principal and interest payments are recalculated based on a new amortization table. Most often, a recast is associated with a negative amortization mortgage which must recast at some point so that the mortgage will be paid off by the end of its scheduled term.


Repayment Penalty

A monetary penalty assessed against the borrower, designed to inhibit the borrower’s ability to refinance.

S


Servicing Agent

An institution with the capacity of a master servicer and the ability to originate mortgage loans and to provide administrative support for a residential mortgage lending program.


Shadow Inventory

According to real estate data provider First American CoreLogic, Inc., it is a measure of pending supply; specifically, real estate owned (REO) properties as a result of foreclosures and other actions, such as deeds in lieu, as well as real estate that are at least 90 days delinquent. The term is generally used to encompass the segment of real estate properties that are either in foreclosure and have not yet been sold as well as homes that owners are delaying putting on the market until prices improve. Shadow inventory causes reported data on housing inventory to understate the actual amount of inventory in the market.


Subprime Mortgage

A mortgage loan for borrowers with less than excellent credit history.

U


Underemployment

A situation in which people in the labor force are employed at less than full-time or jobs or positions compensated below their level of skill and experience.


Underserved Areas

Housing and Urban Development (HUD) Definition: A census tract in a metropolitan area is classified as an underserved area if median income for the tract is no greater than 90 percent of median income for the metropolitan area, or if minorities comprise at least 30 percent of the tract’s population and tract median income is no greater than 120 percent of area median income. A similar definition, based on counties, is employed for nonmetropolitan areas. HUD is the mission regulator for Fannie Mae and Freddie Mac, and has set a goal of at least 31 percent of the dwelling units financed by each Government Sponsored Enterprise’s mortgage purchases should be for units located in underserved areas.


Underserved Markets

Borrowers at or below 140 percent average median income in California, or properties located in underserved areas.

W


Whole Loans

A secondary mortgage market term which refers to an investment in an original mortgage loan, versus a loan which participates in a secured pass-through security.

Commands