Industry Terms & Acronyms

INDUSTRY TERMS

CASH OUT REFINANCE

Cash being taken out and being put in hand at the close of the refinance (these monies can be used to satisfy reserve requirements).

CREDIT EVENTS

Foreclosure, Bankruptcies, Notice of Default (NOD), Deed in Lieu (DIL) (typically we need 2-4 year + on these, Multiple events in a 7-year period will likely be a decline).

DELAYED FINANCING

Borrower Paid cash for the property in the last 6 months and looking to get their cash back out.

DSCR

Debt Service Coverage Ratio (rent/mortgage payment).

GROSS DSCR

Using gross lease amounts to create the DSCR (not backing out expenses).

LTV

Loan to Value (loan/value) (typically our max is 80% on purchase and rate and term refinancing and 75% on cash out refinances transactions subject to score and property type).

NET CASH FLOW DSCR

Using gross lease amount and backing out operating expenses to create the DSCR (used to qualify properties for our 10+ unit products).

NOTE TYPES: INTEREST ONLY

Only obligated to pay back interest during the agreed upon term of the loan.

NOTE TYPES: AMORTIZING

Only obligated to pay back principal and interest within the agreed upon term of the loan.

PAYMENT QUALIFICATION METHODS: ITIA

Using just interest payment, insurance, and taxes to qualify (commonly used to make the DSCR meet out min requirements since this provides for a lower payment obligation for the borrower).

PAYMENT QUALIFICATION METHODS: PITI

Using principal payment, interest, taxes, and insurance to qualify.

PORTFOLIO LOANS

Loan blanketing multiple property types into single loan (we can do up to 25 1–4-unit properties under 1 blanket loan).

PREPAY TYPES: DECLINING

Percentage of the loan amount penalty declines as the years succeed (5%,4%,3%,2%,1%).

PREPAY TYPES: FIXED

Percentage of the loan amount remains fixed for the entire prepayment period (5%,5%,5%,5%,5%).

PREPAYMENT PENALTIES

Option to select 0-5 years, longer the prepay the better the rate/price.

RATE AND TERM REFINANCE

No cash being taken out, only refinancing the existing loan for a new a new rate and term.

RESERVES

Amount of post-closing of the loan cash the borrower will have in all available bank/investment accounts. (we generally need 3-12 months depending on transaction and nationality).

SEASONING

How long the borrower/Sponsor has had ownership of the property (we generally need 6 months to use the new value).

SINGLE ASSET LOANS

Loan encompassing a single property into a single loan.

SPONSOR

Borrower.

YIELD MAINTENANCE

Entire duration of prepay interest is due at time of payoff. So, if 5-year yield maintenance prepay and they pay off in 3 years then we collect 2 years or 24 months of interest payments to bridge through to the 5th year.

INDUSTRY ACRONYMS