Home Loan Glossary – F

Fair Credit Reporting Act

This is a consumer protection law that regulates the use of consumer credit information. This law lets consumers get copies of their credit reports and correct any errors on them, and it establishes regulations for credit reporting agencies to follow.

Fair Market Value

Fair market value is the price a buyer is willing to pay and a seller is willing to accept for a property, when neither of them is compelled to buy or sell.

Fannie Mae (Federal National Mortgage Association — FNMA)

Fannie Mae is a New York-based, publicly traded company. The largest non-bank financial services company in the world, it operates in accordance with a federal agreement and is America's biggest source of funding for home loans. Similar to Freddie Mac, Fannie Mae contributes liquidity to the home loan market by investing in mortgages throughout the country.

Federal Housing Administration (FHA)

The primary function of the FHA is to increase opportunities for homeownership by insuring residential mortgage loans written by private lenders. The FHA sets guidelines for loan financing and construction, but it does not act as a lender itself, nor does it plan or construct housing. The FHA is an agency of the U.S Department of Housing and Urban Development (HUD).

Fee Simple Estate

Fee simple is a term used to describe the most common—and absolute--form of real estate ownership. It is usually the most complete ownership interest that an individual can have in a property. In the event of the real estate existing in a condominium project, the owner of the unit owns only his or her unit, and is an owner in common with respect to the estate and other shared pieces of the property.

FHA Coinsured Home Loan

Under FHA Section 244, an FHA Coinsured Home Loan is a loan for which the Federal Housing Administration (FHA) and the original lender are jointly responsible for the risk of loss, should the borrower default on the loan payments.

FHA Home Loan

Also referred to as a "government loan", an FHA Home Loan is a mortgage loan that is insured against default by the Federal Housing Administration (FHA).

Firm Commitment

A firm commitment is an agreement by a lender to make a loan to a particular borrower on a particular property. While the commitment typically includes conditions, it is considered binding when the conditions are fulfilled.

First Mortgage

A first mortgage, also referred to as a home loan, is the type of loan used to purchase or refinance a home. It is the primary lien or claim against a property as collateral for the loan.

Fixed Installment

This is the fixed payment that a borrower must make on a fixed rate mortgage loan each month. A fixed installment payment includes both principal and interest amounts.

Fixed Period ARM

This is an Adjustable Rate Mortgage which features a fixed rate for the first 3, 5, 7 or 10 years of a loan's life. Following this period, and for the remainder of the loan term, the rate is adjusted each year based on a financial index.

Fixed Rate Loan

This is a type of mortgage in which the interest rate remains unchanged throughout the life of the loan. It also features a fixed principal and interest payment monthly, making budgeting very easy for homeowners.

Fixture

A fixture is an item of personal property that becomes classified as real property when it is permanently connected to real estate (such as a lighting fixture or a spa).

Flood Insurance

Flood insurance covers home owners against physical damage to their property as a result of flooding. It is a type of insurance that home lenders require if public records show that properties are in known flood zones.

Foreclosure

Foreclosure is the legal procedure a lender follows to repossesses a borrower's mortgaged property, due to the owner's inability to comply with the home loan agreement. This is the lender's final remedy when the borrower has defaulted and collection efforts have failed. Money to repay the mortgage debt is usually generated through the sale of the foreclosed property.

Forfeiture

Forfeiture is a borrower's loss of finances, property, privileges or rights as a result of a breach of a legal commitment.

401(k)/403(b)

This employer-sponsored investment enables individuals to allocate tax-deferred earnings to retirement and emergency funds. Employers that are private corporations offer 401(k) plans, while 403(b) plans are offered by employers that are not-for-profit organizations. Certain 401(k) and 403(b) plan administrators permit loans against the funds accumulated in these plans, but loan amounts must be repaid in order to avoid incurring severe financial penalties.

Freddie Mac (Federal Home Loan Mortgage Corporation)

Similar to Fannie Mae, Freddie Mac is a stockholder-owned corporation but operates in accordance with a federal agreement. It was established by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases mortgages from lenders and packages them into securities that are sold to investors.