50 Fun Facts About Mortgage

The word 'mortgage' comes from a Law French term meaning what?

Mortgage comes from the Law French mort gage, a death pledge: the pledge 'dies' either when the debt is paid or when the borrower defaults and loses the property.

A buyer who puts 20 percent down has a mortgage with what loan-to-value ratio?

Loan-to-value is the loan divided by the price, so 20 percent down leaves an 80% LTV; above 80% in the US or Canada, mortgage insurance is usually required.

In the early years of a standard amortising mortgage, most of each payment goes toward what?

Interest dominates the early payments because it is charged on the large outstanding balance; the split flips over time until the last payments are almost entirely principal.

What is the most common mortgage type in the United States?

The 30-year fixed rate is the dominant US product, chosen by the large majority of American homebuyers; its monthly payment never changes over the full three decades.

What is a mortgage nicknamed when its balance falls due long before its payment schedule ends?

Such a loan is a balloon mortgage: payments follow a long amortisation schedule, but the remaining balance falls due early. Before the FHA existed, most American mortgages were short balloon loans with big down payments.

Which mortgage type became closely tied to the mid-2000s subprime lending boom?

Interest-only loans let borrowers pay nothing toward principal for years, so they count on selling or refinancing before the whole balance comes due; they spread widely in the subprime boom.

Why can observant Muslims not use a conventional mortgage?

Sharia law forbids paying or receiving interest, known as riba, so one workaround has the bank buy the house outright and act as landlord while the buyer pays it off.

What does mortgage insurance protect?

Mortgage insurance covers the lender against borrower default: it is typically required on loans above 80 percent loan-to-value and reimburses the lender's loss after a foreclosure.

In mortgage jargon, one 'point' equals what?

A point is 1% of the loan amount, so one point on a $300,000 mortgage costs $3,000; borrowers pay discount points up front to buy a lower rate.

A mortgage escrow account is used to pay which two costs?

Property taxes and insurance premiums are collected in monthly instalments alongside the loan payment and held in escrow, so the servicer can pay the tax and insurance bills when they fall due.

The word 'escrow' derives from an Old French word for what?

Escrow comes from Old French escroe, a scroll or scrap of parchment: the deed was written on it and held by a third party until the transaction was complete.

On an ARM, what is the 'teaser'?

The teaser is a cheap introductory period with a below-market rate, often lasting one to five years; after it ends, caps limit how often and how far the rate can move.

Outside the United States, what is an ARM more commonly called?

Abroad the product is a variable-rate or tracker mortgage, because the rate follows an index such as a central-bank base rate or, historically, LIBOR.

How old must a borrower be to take out an FHA-insured HECM reverse mortgage in the US?

Borrowers must be at least 62 to take a HECM. The first one went to Marjorie Mason of Kansas in 1989, a year after the programme was signed into law.

When was the Federal Housing Administration created?

The National Housing Act of 1934 set up the FHA to insure private lenders' loans; it joined the newly created HUD in 1965.

What minimum down payment did the FHA set for its insured loans in January 2009?

The 3.5% floor took effect in January 2009 under the Housing and Economic Recovery Act of 2008, replacing the earlier 3 percent minimum investment.

Which 1968 law outlawed the redlining that FHA appraisal standards had encouraged?

The Fair Housing Act, Title VIII of the Civil Rights Act of 1968, banned discrimination in the sale, rental and financing of housing; FHA guidance had once told appraisers to avoid 'inharmonious racial groups'.

The New Deal's HOLC, created in 1933, existed mainly to do what?

The Home Owners' Loan Corporation was set up to refinance defaulted mortgages for owners facing foreclosure, making about a million loans by 1936; it also drew the colour-coded 'residential security' maps synonymous with redlining.

Fannie Mae was founded in which year as part of the New Deal?

Founded in 1938 as the Federal National Mortgage Association, it bought FHA-insured loans from lenders; it was converted into a shareholder-owned company in 1968.

Freddie Mac was created in 1970 for what purpose?

Congress chartered the Federal Home Loan Mortgage Corporation to compete with Fannie Mae and to give savings and loans a buyer for their conventional mortgages, widening the secondary market beyond government-insured loans.

Which regulator placed both Fannie Mae and Freddie Mac into conservatorship in September 2008?

The FHFA, the Federal Housing Finance Agency created only weeks earlier by the Housing and Economic Recovery Act, took control on 7 September 2008 in one of the most sweeping interventions in private financial markets in decades.

Which government agency created and guaranteed the first mortgage-backed security in 1970?

Ginnie Mae, the Government National Mortgage Association, guaranteed the first pass-through mortgage-backed security in 1970; its securities carry the full faith and credit of the US government.

VA home loans were created by which 1944 law?

The GI Bill, formally the Servicemen's Readjustment Act of 1944, created the VA loan guarantee, which allows eligible veterans to buy with no down payment and no private mortgage insurance in exchange for a funding fee.

What is the range of a classic FICO credit score?

Classic FICO scores run from 300 to 850; Fair, Isaac and Company introduced them in 1989, and the three bureaus launched rival VantageScore in 2006.

Which three national credit bureaus supply the data behind US mortgage credit checks?

Experian, Equifax and TransUnion are the three national bureaus; mortgage lenders usually pull a tri-merge report from all three and underwrite on the middle of the three scores.

The world's first building society was founded in 1775 in which English city?

Ketley's Building Society was founded in Birmingham in 1775 by Richard Ketley, landlord of the Golden Cross inn; members pooled subscriptions to build houses for one another.

A building society differs from a bank in that it is owned by whom?

A building society is a mutual owned by its members, the savers and borrowers, rather than by shareholders; Abbey National kicked off the UK demutualisation wave when it converted to a bank in 1989.

In It's a Wonderful Life, George Bailey runs what kind of institution in Bedford Falls?

George runs a building and loan, the Bailey Brothers' Building and Loan; Frank Capra's Christmas classic has James Stewart talking a panicked crowd out of a run on it while Mr. Potter circles.

In Monopoly, how much does the bank pay you when you mortgage an unimproved property?

The mortgage value printed on each deed is half its purchase price, so Mediterranean Avenue's $60 price mortgages for $30; any houses on the colour group must be sold back before a property can be mortgaged.

What surcharge does Monopoly add when you lift a mortgage?

Lifting a mortgage costs the mortgage value plus a 10% charge, so a property mortgaged for $100 takes $110 to redeem, and its owner may not collect rent on it until it is lifted.

Between what years did the American subprime crisis unfold?

The crisis ran from 2007 to 2010, beginning when subprime lenders such as New Century failed in early 2007; subprime loans had grown from 5 percent of originations in 1994 to 20 percent by 2006.

By roughly how much did the price of a typical American house rise between 1997 and the 2006 peak?

Case-Shiller data show the typical American house rose 124% in price between 1997 and the 2006 peak, far outpacing household incomes and rents over the same years.

What did the acronym NINJA stand for in the crisis-era loans?

NINJA stood for no income, no job, no assets: approval rested on little more than a credit score, with no verification of the borrower's means at all.

Which major Wall Street firm filed for bankruptcy in September 2008?

Lehman Brothers filed for Chapter 11 on 15 September 2008, the largest bankruptcy in US history; Bear Stearns had warned of trouble a year earlier when two of its mortgage hedge funds imploded.

Which 2010 law was signed to address the causes of the mortgage crisis?

The Dodd-Frank Act, signed by Barack Obama in July 2010, created the Consumer Financial Protection Bureau and the Financial Stability Oversight Council to police lenders and systemic risk.

How many properties did lenders begin foreclosure proceedings on in 2007?

Lenders began foreclosure proceedings on nearly 1.3 million properties in 2007, a 79 percent jump on 2006; the figure climbed to 2.3 million in 2008 and 2.8 million in 2009.

In 2010, roughly one in how many US homes received a foreclosure filing?

RealtyTrac counted foreclosure filings on about 2.9 million properties in 2010, roughly 2.2 percent of housing units or one in 45; banks repossessed more than 800,000 homes the following year.

A foreclosure carried out under a deed of trust's power-of-sale clause is called what?

A nonjudicial foreclosure lets the trustee sell the property after public notice, with no lawsuit, under the power-of-sale clause in the deed of trust; it is the usual route in California and Texas.

Who plays hedge-fund manager Michael Burry in the 2015 film The Big Short?

Christian Bale played Burry and earned a Best Supporting Actor nomination; Adam McKay's film, from Michael Lewis's book, won the Oscar for Best Adapted Screenplay.

In The Big Short, which actress explains subprime mortgages from a bubble bath?

Margot Robbie, playing herself, explains subprime mortgages from a bubble bath; Anthony Bourdain and Selena Gomez also pop up as themselves to explain CDOs and synthetic bets.

Rocket Mortgage began life in 1985 under what name?

Dan Gilbert founded the Detroit brokerage as Rock Financial in 1985; after selling it to a software company in 1999, he and partners bought it back in 2002, and it took the Rocket Mortgage name in 2021.

Which software company bought Dan Gilbert's mortgage brokerage in 1999?

Intuit, maker of Quicken and TurboTax, bought the brokerage in 1999 to sell loans online under its Quicken brand; Gilbert and partners bought the business back in 2002 and kept the Quicken Loans name.

In civil-law countries, what alternative name is given to a mortgage?

A hypothec, from the Greek hypotheke, is the civil-law security over property that stays in the borrower's possession; French hypothèque and German Hypothek carry the same name.

In Roman law's fiducia cum creditore, what did the borrower transfer to the lender?

Under fiducia cum creditore the debtor conveyed full ownership of the thing to the creditor by mancipatio, with a pact that it be reconveyed once the debt was paid; the simpler pledge, pignus, later displaced it.

What does English law call a mortgagor's right to recover land by paying the debt late?

The equity of redemption, developed by the Court of Chancery in the seventeenth century, lets a mortgagor recover the land by paying the debt even after the legal due date; foreclosure is the lender's way to extinguish it.

Under which theory, used in most US states, does a mortgage borrower keep legal ownership?

Under lien theory the mortgage is only a charge on the property and the borrower keeps legal title; a minority of states follow title theory, under which the lender holds legal title until the loan is paid off.

What is the most common mortgage in Canada?

Five-year fixed closed mortgages are the Canadian standard: the rate is locked for a five-year term, typically amortised over 25 years, and the loan must then be renewed or refinanced.

In which year was the Central Mortgage and Housing Corporation, Canada's housing agency, created?

Founded on 1 January 1946 as the Central Mortgage and Housing Corporation to house returning veterans, it was renamed Canada Mortgage and Housing Corporation in 1979 and provides mortgage insurance and housing research as the national housing agency.

Which building society's 1997 demutualisation created a bank that later became part of Lloyds?

Halifax floated on the stock exchange in June 1997, merged with Bank of Scotland to form HBOS in 2001, and was taken over by Lloyds TSB in January 2009 during the financial crisis.

In a UK endowment mortgage, how is the principal eventually repaid?

The capital is repaid with a life insurance policy, an endowment, funded alongside payments that cover only the loan's interest and meant to mature with enough to clear the debt; many fell short, producing a mis-selling scandal.