The ABC's of Real Estate: Decoded

Posted by West + Main Homes on Thursday, May 17th, 2018 at 12:38pm.

The real estate sales, appraisal, and valuation worlds can seem like a sea of alphabet soup, acronyms that nobody really understands floating through the air, gone before you can fully grasp their meaning.

House Canary gathered some of the most common real estate acronyms, then spelled them out and explained what they are. (And if you already recognize everything on this list, then you can consider yourself a full-fledged real estate expert.)

AMC — Appraisal Management Company

An AMC is an enterprise that contracts with appraisers to appraise properties on behalf of mortgage lenders. The Interagency Guidelines (IAG), Uniform Standards of Professional Appraisal Practice (USPAP), and Home Valuation Code of Conduct (HVCC) require a “barrier” between the appraiser and the person or entity requesting the appraisal. Many lenders use AMCs to navigate this barrier: the lender hires the AMC to complete an appraisal, and then the AMC contracts with the appraiser to complete the task.

ARM — Adjustable-Rate Mortgage

An ARM is a type of mortgage where the interest rate fluctuates over time. The ARM interest rate is periodically adjusted to reflect credit-market activity, so it’s possible for ARM rates to go either up or down, or both, during the lifetime of the loan.

APR — Annual Percentage Rate

An APR is the annual interest rate (calculated as a percentage of the outstanding loan amount) that borrowers must pay on a loan. APRs are used in credit cards, home loans, and many other credit and loan activities.

AVM — Automated Valuation Model

An AVM generates a real estate property valuation by using data, algorithms, and sometimes artificial intelligence to calculate the property’s value. All AVMs compare property information to public record data, and some AVMs use comparable properties (commonly known as “comps”) near the subject property to help calculate the value. The most advanced AVMs use regression models to predict how small differences between properties influence a property’s value.

BPO — Broker Price Opinion

A BPO is an official home sales value opinion outlined by a real estate broker or another qualified real estate professional. BPOs are frequently used in foreclosures, short sales, or other real estate transactions to determine a home’s value without ordering a full appraisal.

CC&R — Covenants, Conditions, and Restrictions

CC&Rs are limits or rules placed on homeowners, typically by a homeowner’s association (HOA). CC&Rs must be acknowledged and signed by buyers who want to move into a home in an HOA. Members of the HOA can also contest the CC&Rs in hopes of changing them.

CFPB — Consumer Financial Protection Bureau

The CFPB was established in 2011 in the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its purpose is to write and enforce regulations for financial institutions, including banks, credit unions, mortgage lenders, mortgage servicers, debt collectors, and more. The CFPB also collects and monitors consumer complaints, documenting them and placing complaints online for public viewing, and issues enforcement actions against companies and institutions that it believes are not fully complying with regulations.

DTI — Debt-To-Income

DTI is a metric that lenders analyze when considering whether to issue a loan to a specific borrower. Usually expressed as a ratio, DTI calculates the total amount of debt that the borrower has against his or her income in order to assess the borrower’s ability to repay a loan.

FDIC — Federal Deposit Insurance Corporation

The FDIC was established in 1933; its purpose is to provide deposit insurance to people who deposit funds into banks in the United States. The FDIC also supervises financial institutions and manages receiverships, among other duties.

FEMA — Federal Emergency Management Agency

FEMA was implemented in 1979 as part of the U.S. Department of Homeland Security. FEMA’s primary directive is to coordinate the federal response to natural disasters and emergencies, and it also manages the National Flood Insurance Program (NFIP).

FHA — Federal Housing Administration

FHA was launched in 1934 to set mortgage loan underwriting and home construction standards. It also insures mortgage loans for lenders, allowing buyers who borrow an amount within FHA limits from an FHA-approved lender to pay less than 20% of a property’s value as a down payment (FHA requires borrowers to put 3.5% down). FHA then insures the loan, and typically for a more affordable rate, especially if the borrower is high-risk.

FHFA — Federal Housing Finance Agency

FHFA was established in 2008 to oversee the government-sponsored enterprises (GSEs) and the Federal Home Loan Bank System, which collectively comprise the secondary mortgage market. It’s responsible for supervising and regulating Fannie Mae, Freddie Mac, the Office of Finance, and the 11 Federal Home Loan banks. It also oversees the conservatorship of Fannie Mae and Freddie Mac, which has been in place since 2008.

FIRREA — Financial Institutions Reform, Recovery and Enforcement Act

FIRREA was implemented in 1989 in the wake of the Savings and Loan Crisis. It created boards, offices, and corporations that monitor and regulate banks and savings institutions. FIRREA also established the Federal Financial Institutions Examination Council (FFIEC) to oversee state appraiser regulation and certification programs. States must follow certification and regulation standards set by the Appraisal Standards Board and USPAP guidelines. FIRREA also established the precedent for the first IAG (Interagency Appraisal and Evaluation Guidelines).

FRM — Fixed-Rate Mortgage

A fixed-rate mortgage is a popular type of home loan wherein the borrower locks in the interest rate at the beginning of the loan and continues to pay back the loan at that interest rate, regardless of inflation or credit-market activity.

FSBO — For Sale By Owner

An FSBO (pronounced “fisbo”) property is a property that’s being sold directly by the owner without the help of a real estate agent.

 

And that's just A-F...read the full post on House Canary, and if you have other questions about real estate lingo or anything else, contact us

 

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