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P & I (Principal and Interest)
Refers to regularly scheduled payments or prepayments on mortgage securities.
Package Provision
An optional mortgage clause that allows the borrower to finance chattels such as major household appliances, carpeting, drapery and equipment under the original home mortgage and make a single monthly payment for the entire package.
PAM (Pledged Account Mortgage)
A type of mortgage loan in which the borrower's payments are supplemented by payments from a savings account pledged as additional collateral for the loan. The savings account is established with part of the downpayment.
Paper Profit
An increase in the value of property or a security still held. Paper profits become realized profits only when the property or security is sold.
Par
A price equal to the face amount of a security, as distinct from its market value. On a debt security, the par or face value is the amount the investor has been promised to receive from the issuer at maturity.
Parity Clause
A provision in a mortgage contract stating that all notes are equally secured and that no holder of the collateral will receive preferential treatment in the event of default or foreclosure.
Partial Claim
A loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring his or her mortgage payments up to date.
Partial Payment
An insufficient monthly payment on a mortgage; can be allowed under extenuating circumstances.
Partially Amortizing Loan
A loan in which the periodic payments cover all of the interest charges but only part of the principal, therefore leaving an unpaid principal balance when the loan matures.
Participation
(a) Ownership by two or more lenders or investors of all or a portion of a single mortgage or a package of mortgages. (b) The cooperative origination by two or more lenders of a single (usually large) mortgage loan.
Participation Certificate
A document setting forth the description of a package of loans and the share of the package that is being bought or sold.
Paying Agent
An entity responsible for making the payment of interest and principal to bondholders on behalf of the bond's issuer.
Payment Change Date
The date on which a new payment amount will take effect on an adjustable rate mortgage (ARM) or graduated payment mortgage (GPM). Will normally happen in the month following the interest rate adjustment date.
Payment Date
The date that actual principal and interest payments are paid to the registered owner of a security.
Perfect Title
Title to property that is free of defects and that will legally be accepted without objection. Also known as marketable title, clear title, and good title.
Perfecting a Title
The elimination of any claims against a title.
Period of Redemption
The period during which a mortgagor may reclaim the title and possession of his or her property by paying the debt the property secures.
Periodic Payment Cap
The limit by which payments can increase or decrease, within an adjustment period, for an adjustable rate mortgage whose interest rate and minimum payment fluctuate independently.
Periodic Rate Cap
A limit on an adjustable rate mortgage by which the interest rate can increase or decrease within one adjustment period.
Permanent Loan
A long-term loan of not less than 10 years that is fully amortized and made to purchase, rather than to construct, real property.
Personal Property
Any property that is not real property. While state laws vary on the definition of personal property, it is generally thought of as the movable items that a person owns. They can be tangible, such as furniture and other merchandise, or intangible, such as stocks and bonds.
Pipeline
An expression referring to loan applications in process up until closing or until the mortgage is sold. What's in the pipeline is taken into account when analyzing mortgage loan inventory and commitments on new mortgages.
PITI (Principal, Interest, Taxes, and Insurance)
The four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
PITI Reserves
The amount, in cash, that a borrower must maintain after making his or her down payment and closing cost payments.
PLAM (Price-Level-Adjusted Mortgage)
A form of home loan in which payments are adjusted for inflation not by changing the interest rate but by changing the amount of outstanding principal. The loan is fully amortized, meaning the principal is repaid in a fixed number of years. Initial payments are low because the real rate of interest -- typically between 3 and five percent -- does not include a factor for inflation. Instead, inflation or deflation increases or decreases the amount of outstanding principal, and correspondingly, the amount of the monthly payment. The payment is adjusted each month based on a predetermined index, such as the Consumer Price Index. It is assumed that the value of the home and the borrower's income increases or decreases in tandem with fluctuations in the amount of unpaid principal. A PLAM offers monthly payments that are substantially lower and less volatile than mortgages with adjustable interest rates, while assuring the lender will be repaid all the principal, plus interest, plus whatever inflation eats away.
Planned Amortization Class
See collateralized mortgage obligation.
Planned Unit Development (PUD)
A type of residential, commercial, or industrial land development that provides more planning flexibility than traditional zoning and lot layout. Buildings are often clustered on smaller lots, permitting the preservation of natural features in common areas or open park-like areas. The development maintains the same or slightly greater density than is permitted by conventional zoning methods. Individual properties are owned in fee with the common areas owned jointly or deeded to the local government.
Plat
A map that shows land subdivided into lots with streets, boundaries, easements and dimensions drawn to scale.
Pledged Account Mortgage (PAM)
A type of mortgage loan in which the borrower's payments are supplemented by payments from a savings account pledged as additional collateral for the loan. The savings account is established with part of the downpayment.
Pledged Loan
A mortgage loan that has been identified and set aside as security for borrowing by the holder of the mortgage; particularly a loan that has been pledged as security for an advance from a Federal Home Loan Bank.
PMI (Private Mortgage Insurance)
Privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
PMSR (Purchased Mortgage Servicing Rights)
The right, acquired from another, to service a mortgage and collect a fee. The value of that right is listed on the books as an intangible asset. See mortgage servicing.
Points (Mortgage Discount)
The amount paid by the borrower to increase the yield of a mortgage to the lender. Sometimes called points, loan brokerage fee, or new loan fee. The discount is computed on the amount of the loan, not the selling price of the property.
Pool
A collection of mortgage loans assembled by an originator or master servicer as the basis for a security. Ginnie Mae, Fannie Mae or Freddie Mac pass-through securities are identified by a number assigned by the issuing agency.
Power of Attorney
A document that authorizes one person to legally act as the agent for, or in place of, another person in performing various actions under specified conditions. Full power may be granted, or authority may be limited to certain functions.
Pre-Approval
Lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
Preexisting Use
A land use that existed prior to and does not comply with a newly established zoning classification.
Pre-Foreclosure Sale
Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.
Premium
An amount paid on a regular schedule by a policyholder who maintains insurance coverage.
Pre-Paids
All expenses that are paid before their due dates, on a prorated basis at closing (such as taxes, assessments, and insurance).
Prepayment
Payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty.
Prepayment Penalty
A fee assessed by a lender on a borrower who repays all or part of the principal of a loan before it is due. The prepayment penalty compensates the lender for the loss of interest that would have been earned had the loan remained in effect for its full term.
Prepayment Risk
Risk that the mortgages underlying the security are repaid faster or slower than expected.
Pre-Qualification
A lender informally determines the maximum amount an individual is eligible to borrow.
Price
The dollar amount to be paid for a security, stated as a percentage of its face value or par in the case of debt securities.
Price-Level-Adjusted Mortgage (PLAM)
A form of home loan in which payments are adjusted for inflation not by changing the interest rate but by changing the amount of outstanding principal. The loan is fully amortized, meaning the principal is repaid in a fixed number of years. Initial payments are low because the real rate of interest -- typically between 3 and five percent -- does not include a factor for inflation. Instead, inflation or deflation increases or decreases the amount of outstanding principal, and correspondingly, the amount of the monthly payment. The payment is adjusted each month based on a predetermined index, such as the Consumer Price Index. It is assumed that the value of the home and the borrower's income increases or decreases in tandem with fluctuations in the amount of unpaid principal. A PLAM offers monthly payments that are substantially lower and less volatile than mortgages with adjustable interest rates, while assuring the lender will be repaid all the principal, plus interest, plus whatever inflation eats away.
Primary Dealer
A securities firm that makes a market in government debt securities, acting as a principal in the trades. Federal Home Loan Bank System discount notes are sold through a group of primary dealers.
Primary Mortgage Market
The market in which lenders make mortgage loans directly to borrowers, as opposed to the secondary market in which the original lenders sell those mortgage loans to investors.
Prime Rate
The interest rate charged by leading banks to their best, most secure customers. It tends to be a yardstick for general trends in interest rates.
Principal
The amount borrowed from a lender; doesn't include interest or additional fees.
Principal Balance (Remaining Balance)
The portion of a loan not yet repaid, exclusive of interest or other charges.
Principal, Interest, Taxes, and Insurance (PITI)
The four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
Prior Lien
A mortgage that ranks ahead of another.
Private Mortgage Insurance (PMI)
Insurance policies written by private companies insuring lenders against loss resulting from defaults on mortgages.
Promissory Note
A written promise to pay a stipulated sum of money to a specified party under conditions mutually agreed upon. Also called a note, promise, or bond.
Property
Something that is owned or possessed. Property may be real (land), personal, tangible (touchable), or intangible (such as the interest in a play or other creative work).
Property Assessment
The determination of the value of real property upon which taxes will be imposed.
Prorations
Charges and credits allocated at a real estate sale or loan closing.
PSA Prepayment Speed
Measure of the rate of mortgage loan repayments; allows the mortgage-backed securities industry to make consistent assumptions.
Public Auction
A public meeting to sell property or repay a mortgage in default.
PUD (Planned Unit Development)
A type of residential, commercial, or industrial land development that provides more planning flexibility than traditional zoning and lot layout. Buildings are often clustered on smaller lots, permitting the preservation of natural features in common areas or open park-like areas. The development maintains the same or slightly greater density than is permitted by conventional zoning methods. Individual properties are owned in fee with the common areas owned jointly or deeded to the local government.
Purchase Agreement
A signed document stating the purchaser's agreement to buy and the seller's agreement to sell a specified property under stated terms and conditions.
Purchase Money Mortgage
A mortgage given to the seller, with the mortgage constituting all or part of the compensation received for the sale of property. Such a mortgage is used when the seller is also the lender. Most purchase-money mortgages are one or two years in length or, in some cases, up to five years.
Purchase Money Transaction
Acquiring property by paying money.
Purchase Option
A clause in a lease granting the lessee an option to purchase the leased property on or before the lease termination date, usually at a specified price.
Purchased Mortgage Servicing Rights (PMSR)
The right, acquired from another, to service a mortgage and collect a fee. The value of that right is listed on the books as an intangible asset. See mortgage servicing.
Put
A contract giving the holder the right to sell a specific security at a specified price during a designated period. A put is purchased by someone who thinks the price of the underlying security will go down and who wants to lock in a higher selling price. Opposite of call.
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