Mortgage Glossary P

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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 their mortgage payments up to date.

Partial Payment

A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

Payment Rate

The interest rate used to calculate the payment, which is usually but not necessarily the interest rate.

Payment-to-Income Ratio

The ratio of housing expense to borrower income, which is used (along with the total expense ratio and other factors) in qualifying borrowers. Also see qualification requirements.

Payoff Month

The month in which the loan balance is paid down to zero. It is the same as the term on most loans.

Permanent Loan

A long-term mortgage, usually ten years or more. Also called an "end loan."

Personal Property

Any property that is not real property.

Pipeline Risk

The lender's risk that between the time a commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling the loan.

PITI

This stands for principal, interest, taxes and insurance. Payments of principal and interest go directly towards repaying the loan. 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 if you have an "impounded" loan. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.

PITI Reserves

A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD)

A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.

Plat

A map of a piece of land showing boundary lines, streets, actual measurements and easements.

Pledged Account Mortgage (PAM)

Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

Points

The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

Power of Attorney

A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval

A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. See also pre-qualification

Pre-Foreclosure Sale

Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Premiums

See "points".

Prepaid Expenses

Expenses that can include taxes, hazard insurance, private mortgage insurance and special assessments that are paid in advance and put into an escrow account.

Prepayment

Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty

A fee that may be charged to a borrower who pays off a loan before it is due.

Pre-Qualification

This usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

Primary Mortgage Market

Lenders, such as savings and loan associations, commercial banks, and mortgage companies, who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to the secondary mortgage markets such as to FNMA or GNMA, etc.

Prime Rate

The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.

Principal

The amount borrowed or remaining unpaid. Also, the part of the monthly payment that reduces the remaining balance of a mortgage.

Principal Balance

The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. Also remaining balance.

Principal, Interest, Taxes, and Insurance (PITI)

The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

Private Mortgage Insurance (PMI)

Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

Processing

What the lender does with your loan application. Processing involves compiling and maintaining the file of information about the transaction, including the credit report, appraisal, verification of employment and assets, and so on. The processing file is handed off to underwriting for the loan decision.

Promissory Note

A written promise to repay a specified amount over a specified period of time.

Public Auction

A meeting in an announced public location to sell property to repay a mortgage that is in default.

Planned Unit Development (PUD)

A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Purchase Agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Transaction

The acquisition of property through the payment of money or its equivalent.

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