Key Terms Glossary

A TILA requirement that lenders make a reasonable good-faith determination that a borrower can repay a loan before originating it. Requires verification of 8 factors including income, assets, employment, and credit history.

A RESPA-permitted arrangement where a settlement service provider refers business to a company in which they have an ownership interest. Requires written disclosure, free consumer choice, and no per-referral payment.

The true annual cost of credit, including the interest rate and certain fees spread over the loan term. Always equal to or greater than the note rate.

A denial of credit, a counteroffer, or any action taken that is unfavorable to a credit applicant. Requires a written notice with specific, actionable reasons within 30 days.

The illegal practice of inducing homeowners to sell by suggesting that property values will decline because members of a protected class are moving into the neighborhood.

A valid event that allows a lender to issue a revised Loan Estimate with updated fees. Valid examples: borrower-requested changes, natural disasters, new flood zone designations. Lender errors are NOT valid.

A TRID document replacing the HUD-1 that must be received by the borrower at least 3 business days before closing. Shows final actual costs.

The ratio of all liens on a property to its appraised value. Texas Section 50(a)(6) caps CLTV at 80%.

A BSA-required report filed within 15 days for cash transactions exceeding $10,000 in a single business day.

The percentage of gross monthly income used for debt payments. Back-end DTI includes all monthly debts. QM maximum is 43%.

A fair lending theory where a neutral policy has a disproportionate adverse effect on a protected class, even without discriminatory intent.

Intentional discrimination — treating similarly situated borrowers differently based on a protected class characteristic.

Fannie Mae's automated underwriting system (AUS). Not to be confused with Freddie Mac's Loan Product Advisor (LPA).

An FHA-protected class: having children under 18 in the household. Protected by the Fair Housing Act but NOT by ECOA.

The predecessor to the Loan Estimate, replaced by TRID in October 2015.

The predecessor to the Closing Disclosure, replaced by TRID in October 2015.

Home Ownership and Equity Protection Act. Targets predatory lending. Three independent tests — any ONE triggers high-cost status with prohibited features including balloon payments, negative amortization, and prepayment penalties.

Federal law requiring PMI cancellation at 80% LTV (upon request) and automatic cancellation at 78% LTV, based on original purchase price and original amortization schedule.

A conventional mortgage that exceeds the FHFA conforming loan limit. Cannot be sold to Fannie Mae or Freddie Mac. Requires stricter qualifying standards.

A TRID document replacing the GFE. Must be received by the borrower within 3 business days of a complete application (all 6 elements). Starts the tolerance clock.

Freddie Mac's automated underwriting system (AUS). Not to be confused with Fannie Mae's Desktop Underwriter (DU).

The ratio of the loan amount to the appraised value. PMI required when LTV exceeds 80%.

A written agreement where one settlement service provider pays another for marketing services. Scrutinized by CFPB for disguised kickback arrangements.

A loan feature where monthly payments are insufficient to cover interest, causing the loan balance to increase over time. Prohibited in HOEPA and QM loans.

Nationwide Multistate Licensing System. The central database for all MLO license and registration information. Consumer Access portal is publicly available.

Foreclosure without court involvement. Texas permits non-judicial foreclosure, but SCRA requires court orders for active servicemembers.

Prepaid interest. 1 point = 1% of the loan amount. Counted toward QM's 3% points-and-fees cap and HOEPA's 5% trigger.

Where mortgage loans are originated — the direct transaction between lenders and borrowers. MLOs work in the primary market.

Insurance protecting the lender when LTV exceeds 80%. Required by conventional lenders. Cancellable under the HPA at 78% LTV.

A mortgage meeting specific CFPB standards that provides a legal safe harbor against ATR claims. Max 43% DTI, 3% fees, 30-year term, no balloon, no negative amortization.

A written borrower request to a loan servicer regarding loan servicing. Must be acknowledged in 5 business days and responded to substantively within 30 business days.

The illegal practice of refusing to lend in geographic areas based on the racial composition of those communities. Detected through HMDA data analysis.

The implementing regulation for ECOA, covering fair lending in credit transactions.

The implementing regulation for HMDA, covering mortgage data collection and reporting.

The implementing regulation for RESPA, covering settlement procedures and kickbacks.

The implementing regulation for TILA, covering credit disclosures, APR, trigger terms, ATR, QM, and the LO Compensation Rule.

A TILA right giving borrowers 3 business days to cancel refinances, HELOCs, and home equity loans on a primary residence. Extended to 3 years if proper notice not given at closing.

Secure and Fair Enforcement for Mortgage Licensing Act. Created the NMLS system and established minimum standards for MLO licensing. Requires 20 pre-licensing hours, background checks, and the NMLS exam.

Servicemembers Civil Relief Act. Caps interest at 6% on pre-service debts during active duty — excess permanently FORGIVEN. Prohibits non-judicial foreclosure during service and 1 year after.

Where already-closed loans are bought and sold by investors. Fannie Mae and Freddie Mac operate in the secondary market.

Texas constitutional provision governing home equity lending: 80% CLTV cap, 3% fee cap, 12 calendar day wait, professional closing location, no prepayment penalty, one loan at a time.

The illegal practice of directing borrowers toward or away from neighborhoods or loan products based on their protected class status.

Deliberately breaking cash transactions into smaller amounts to avoid BSA CTR filing requirements. A federal crime regardless of whether underlying funds are legitimate.

A BSA-required report filed within 30 days of detecting suspicious activity. Cannot be disclosed to the subject (tipping off is a separate federal crime).

Texas Department of Savings and Mortgage Lending. Regulates non-bank mortgage companies and MLOs in Texas. Maximum penalty: $25,000 per violation per day.

TILA-RESPA Integrated Disclosure. The 2015 rule combining the GFE and HUD-1 into the Loan Estimate and Closing Disclosure.

Specific numbers in mortgage advertising (rate, payment, amount, down payment, closing costs) that require all 5 TILA disclosures to appear in the same ad.

Unfair, Deceptive, or Abusive Acts or Practices. CFPB enforcement authority. Any ONE of the three is sufficient for a violation.

TRID category for fees that cannot increase at all from LE to CD without a valid changed circumstance: origination charges, points, transfer taxes, and required services where borrower cannot shop.