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In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient incurs a debt and is usually liable to pay interest on that debt until it is repaid as well as to repay the principal amount borrowed.
A reverse mortgage is a mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments. Borrowers are still responsible for property taxes or homeowner's insurance. Reverse mortgages allow older people to immediately access the home equity they have built up in their homes, and defer payment of the loan until they die, sell, or move out of the home. Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower is generally not required to repay any additional loan balance in excess of the value of the home.
A payday loan is a short-term unsecured loan, often characterized by high interest rates.
The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate. Those terms have formal, legal definitions in some countries or legal jurisdictions, but in the United States:
Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 2006 audit report from the office of inspector general of the US Federal Deposit Insurance Corporation (FDIC) broadly defines predatory lending as "imposing unfair and abusive loan terms on borrowers", though "unfair" and "abusive" were not specifically defined. Though there are laws against some of the specific practices commonly identified as predatory, various federal agencies use the phrase as a catch-all term for many specific illegal activities in the loan industry. Predatory lending should not be confused with predatory mortgage servicing which is mortgage practices described by critics as unfair, deceptive, or fraudulent practices during the loan or mortgage servicing process, post loan origination.
A home equity line of credit, or HELOC, is a revolving type of secured loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the borrower's property. Because a home often is a consumer's most valuable asset, many homeowners use their HELOC for major purchases or projects, such as home improvements, education, property investment or medical bills, and choose not to use them for day-to-day expenses.
A credit history is a record of a borrower's responsible repayment of debts. A credit report is a record of the borrower's credit history from a number of sources, including banks, credit card companies, collection agencies, and governments. A borrower's credit score is the result of a mathematical algorithm applied to a credit report and other sources of information to predict future delinquency.
Second mortgages, commonly referred to as junior liens, are loans secured by a property in addition to the primary mortgage. Depending on the time at which the second mortgage is originated, the loan can be structured as either a standalone second mortgage or piggyback second mortgage. Whilst a standalone second mortgage is opened subsequent to the primary loan, those with a piggyback loan structure are originated simultaneously with the primary mortgage. With regard to the method in which funds are withdrawn, second mortgages can be arranged as home equity loans or home equity lines of credit. Home equity loans are granted for the full amount at the time of loan origination in contrast to home equity lines of credit which permit the homeowner access to a predetermined amount which is repaid during the repayment period.
The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
Credit is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately, but promises either to repay or return those resources at a later date. In other words, credit is a method of making reciprocity formal, legally enforceable, and extensible to a large group of unrelated people.
A shared appreciation mortgage or SAM is a mortgage in which the lender agrees to receive some or all of the repayment in the form of a share of the increase in value of the property.
A home equity loan is a type of loan in which the borrowers use the equity of their home as collateral. The loan amount is determined by the value of the property, and the value of the property is determined by an appraiser from the lending institution.
Also known as the "Sum of the Digits" method, the Rule of 78s is a term used in lending that refers to a method of yearly interest calculation. The name comes from the total number of months' interest that is being calculated in a year. This is an accurate interest model only based on the assumption that the borrower pays only the amount due each month. The outcome is that more of the interest is apportioned to the first part or early repayments than the later repayments. As such, the borrower pays a larger part of the total interest earlier in the term.
Payment protection insurance (PPI), also known as credit insurance, credit protection insurance, or loan repayment insurance, is an insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabled, loses a job, or faces other circumstances that may prevent them from earning income to service the debt. It is not to be confused with income protection insurance, which is not specific to a debt but covers any income. PPI was widely sold by banks and other credit providers as an add-on to the loan or overdraft product.
Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds. For mortgages, there is a specific mortgage origination process. Loan servicing covers everything after disbursing the funds until the loan is fully paid off. Loan origination is a specialized version of new account opening for financial services organizations. Certain people and organizations specialize in loan origination. Mortgage brokers and other mortgage originator companies serve as a prominent example.
A line of credit is a credit facility extended by a bank or other financial institution to a government, business or individual customer that enables the customer to draw on the facility when the customer needs funds. A line of credit takes several forms, such as an overdraft limit, demand loan, special purpose, export packing credit, term loan, discounting, purchase of commercial bills, traditional revolving credit card account, etc. It is effectively a source of funds that can readily be tapped at the borrower's discretion. Interest is paid only on money actually withdrawn. Lines of credit can be secured by collateral, or may be unsecured.
The Real Estate Settlement Procedures Act (RESPA) was a law passed by the United States Congress in 1974 and codified as Title 12, Chapter 27 of the United States Code, 12 U.S.C. §§ 2601–2617. The main objective was to protect homeowners by assisting them in becoming better educated while shopping for real estate services, and eliminating kickbacks and referral fees which add unnecessary costs to settlement services. RESPA requires lenders and others involved in mortgage lending to provide borrowers with pertinent and timely disclosures regarding the nature and costs of a real estate settlement process. RESPA was also designed to prohibit potentially abusive practices such as kickbacks and referral fees, the practice of dual tracking, and imposes limitations on the use of escrow accounts.
A mortgage loan or simply mortgage, in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property through a process known as mortgage origination. This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure. A mortgage can also be described as "a borrower giving consideration in the form of a collateral for a benefit (loan)".
Forbearance, in the context of a mortgage process, is a special agreement between the lender and the borrower to delay a foreclosure. The literal meaning of forbearance is "holding back". This is also referred to as mortgage moratorium.
Bank regulation in the United States is highly fragmented compared with other G10 countries, where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. Depending on the type of charter a banking organization has and on its organizational structure, it may be subject to numerous federal and state banking regulations. Apart from the bank regulatory agencies the U.S. maintains separate securities, commodities, and insurance regulatory agencies at the federal and state level, unlike Japan and the United Kingdom. Bank examiners are generally employed to supervise banks and to ensure compliance with regulations.
References
- ↑ Revolving Credit ""
- ↑ PART 226—TRUTH IN LENDING (REGULATION Z) Subpart C—CLOSED-END CREDIT " "FDIC: FDIC Law, Regulations, Related Acts - Consumer Protection". Archived from the original on 2006-09-02. Retrieved 2006-08-29."