Negative Amortization
This arises when the borrower’s monthly payments are not large enough to pay all the interest due on the loan. Sometimes referred to as “deferred interest”, this unpaid interest is added to the unpaid balance of the loan. As a result, the homebuyer ends up owing more than the original loan amount.
Negative amortization cap
The maximum permissible amount of negative amortization on an ARM, ordinarily expressed as a percentage of the original loan amount (such as 110%). If the borrower reaches the cap it will trigger an automatic increase in the payment, usually to the fully amortizing payment level and will override any payment increase cap.
Negative Homeowners Equity
The circumstance of owing more on the house than its actual value.
Negative points
Points that are paid by a lender for a loan with a rate above the rate on a zero point loan. As an example, a wholesaler may quote the following prices to a mortgage broker: 8%/0 points, 7.5%/3 points, 8.75%/-3 points. Mortgage web sites usually refer to negative points as “rebates” as they are used to reduce a borrower’s settlement costs. When a mortgage broker retains such negative points, they are referred to as a “yield spread premium”.
Net branch
A facility offered to mortgage brokers by some lenders where in law the brokers become employees of the lender but in fact they retain their independence as brokers.
Net jumping
A bad faith practice of utilizing a broker’s time and expertise to become informed and creditworthy and subsequently circumventing them by obtaining a loan through the internet.
Niche
See Market niche
Nichification
Propagation in the quantity of loan, borrower and property characteristics used by lenders in setting mortgage prices as well as underwriting requirements.
No change scenario
The assumption that the value of the index to which the rate is tied on an ARM does not change from its initial level.
No-cost mortgage
A mortgage wherein all settlement costs except per diem interest, escrows, homeowner’s insurance and transfer taxes are paid for by the lender and/or the home seller.
NOHO
A person who lives from paycheck to paycheck, and is therefore not deemed as having the requisite stability to become a homeowner.
Non-conforming mortgage
A mortgage that does not meet the Fannie Mae and Freddie Mac purchase requirements. It may exceed the Federal limits for purchase or may not comply for other reasons such as inadequate credit or incomplete documentation.
Non-Permanent resident alien
A foreign national without a green card who is employed in the US. Unlike a permanent resident alien with a green card and who lenders do not distinguish from US citizens, non-permanent resident aliens are subject to more restrictive lending qualification requirements than US citizens.
No asset loan
A documentation requirement wherein the applicant’s assets remain undisclosed.
No Fee Mortgage Plus
A program for home purchasers instituted by Bank of America eliminating all lender fees except points and all third party fees.
No income loan
A documentation requirement wherein the applicant’s income remain undisclosed.
Non-warrantable condo
A condominium, which does not meet lender requirements.
No-Surprise adjustable rate mortgage
An ARM that has a preset graduated payment combined with variable term.
Nominal interest rate
A interest rate quote that is neither adjusted for intra-year compounding, or for inflation. A 6% quoted rate on a mortgage, as an example, is nominal. Adjusted rates are known as “effective”.
No ratio loan
A documentation requirement wherein the applicant’s income is disclosed and verified but is not used in qualifying the borrower. Therefore, the conventional maximum ratios of expense to income are not applied.
Note
A legal document evidencing a debt and a promise to repay, which obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
